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Paul Song: Values and Value Permeate “High Tech” ARIS

Paul Song is president and CEO of ARIS, a 9-year-old company that develops enterprise solutions for medium to large size companies. ARIS has developed and implemented technology systems to manage finances, manufacturing and inventory control, human resources, and sales.

Born in Seoul, Korea, Song received a bachelor’s degree in electrical engineering from General Motors Institute, and a master’s degree in computer science from MIT. After working with General Motors and Oracle Corporation, he founded ARIS in 1990. ARIS has grown rapidly, from 3.5 million in revenues in 1993 to $116 million in 1998, with over 800 employees and offices in 15 cities throughout the U.S. and abroad.

Both ARIS and Song have received numerous honors. ARIS was twice listed in Inc. Magazine’s Inc. 500, the fastest growing private companies in America (1996, 1997). After becoming a publicly traded company on the NASDAQ in 1997, ARIS appeared near the top of several 1998 key lists: Washington Technology Fast 50, Forbes 200 Best Small Companies in America, and Business Week’s list of Hot Growth Companies.

In 1997, Song won the Ernst and Young ‘Northwest Entrepreneur of the Year’ Award in the service category. In 1998, he was awarded the Rising Sun Award from the Asian Management Association. In 1999, Song was appointed by President Clinton as one of three business leaders to represent U.S. business interests to APEC (Asian-Pacific Economic Cooperation).

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Ethix: How has ARIS been changing as you have grown through the Nineties?

Paul Song: Our traditional focus has been on enterprise solutions for companies. Today, with the emergence of the Internet, the “enterprise” is expanding beyond the company to include its customers and suppliers. For example, at Amazon.com or Dell computers customers can actually enter their own orders — self-service. The supply chain can also be tied in, as Microsoft does, so that all purchase orders and invoices are entered on an Internet site rather than by sending any paper. This is where the industry is going. We’re trying to help companies get closer to both their customers and their suppliers by extending their enterprise systems to include these partners.

How do you deal with changes in your company’s size and focus as you grow? How do you keep everyone clear on “this is what ARIS is all about”?

That’s always a challenge. Up to a certain size you can develop a culture, both formal and informal, by walking down the halls. Once you expand beyond your local office you’re no longer so sure what culture is developing. It takes a lot of communication. You need to make sure your managers and people in leadership positions share your values and commitments.

In 1995, we sat down and put together a mission and values statement to formalize what we thought was important to our company. Our mission statement describes what we do: we’re a professional services firm helping our clients maximize their use of technology. Our values statement says that we fulfill this mission by adhering to (1) mutual respect, (2) honesty, (3) uncompromising integrity, and (4) fiscal responsibility — resulting in long-term relationships with people (we view our customer as the people within companies).

I’m pretty much a left brain analytical thinker so when we started talking about a mission statement I wanted to know what practical value it would have. I’ve seen too many flowery, nice statements just hanging on walls! We decided to require every one of our managers to memorize our statement, to be able to quote it. We intend this statement to help guide decisions. If it doesn’t impact action it has no value. As we grow, the challenge is to make sure that our mission and values permeate all levels of the company and that we have some consistency in how we portray ourselves to our customers as well as our employees.

Federal Reserve Chairman Alan Greenspan commented recently that technology must be given much of the credit for the extraordinary growth of the economy in the 1990s — but that it is hard to measure its impact precisely. How do your enterprise solutions help business productivity?

Much of the recent technology has focused around providing information to the customer. For every manufacturing worker or business there are dozens of others who help get the product to the consumer. Brokerages, for example, provide information and research about companies, and then transact purchases of securities. Travel agencies don’t deliver any transportation — they just help book transportation.

Technology is increasing productivity primarily because it increases the speed of communication. A lot of today’s businesses add value to the customer by providing product information or accessibility, but in the future will they continue to add value? Will brokers really continue to add value if I can get my research directly? Will we need travel agents if we can call the airlines and book our own tickets just as easily? We’re not quite there yet, but when technology gets us there we’re going to have to find new ways to add value or we will no longer be in business.

Do you see any downside to all this technology — or is it all good?

Everything is a two-edged sword! When I considered getting a cell phone, for example, I thought: ‘That’s great. I will be able to leave work a half-hour earlier, be productive doing my calls while commuting, and then spend more time with my family!” The reality is that I am now expected to have my phone with me and I get calls evenings, weekends, whenever.

It’s a rat race. A new technology makes things more convenient and provides an advantage; but after some period of time that technology becomes the norm, another thing that you have to do. We can’t go anywhere today without cell phones, pagers, and laptop computers. The expected level of performance and productivity has gone higher. I don’t know if that’s a good thing or a bad thing.

When you work with a client company, do you ever warn them about these possible side effects or negative consequences of technology?

It’s not our place to tell a client whether they ought to use technology to reach their customers or whether they ought to lay off people in their accounting department because we can make their financial reporting so much more efficient than traditional manual approaches. The wheels of progress don’t slow down and if a company doesn’t respond and do those things they’re going to get left behind and they’ll be less competitive. It endangers the entire enterprise. It’s kind of like the old arms race — not necessarily a good thing but you can’t afford fall behind your competitors.

When we go to a client we ask “what is it that you’re trying to do?” in terms of business functions. Are you trying to be more efficient? Provide better customer service? Reduce costs by consolidating purchasing and procurement processes? Get better feedback from customers on product functionality? Then we ask how we can use technology to do this better and more efficiently. Our role is not to say whether society in general is getting too technological; we’re there to solve a problem.

From a strictly business point of view, is it ever the case, that adding technology doesn’t really add the value that you seek? Or, that the negative costs override the benefits?

One of the things that makes ARIS unique is that we not only have a consulting division (similar to Andersen Consulting and IBM Global Services), but also a training division. An enterprise solution is not just technology but people and process. Our training division focuses on behavioral change while our other consultants implement the technology. You can have the best technology, but if people are not willing to embrace it, the technology won’t be effective. Most systems fail, not because they don’t work or the programs don’t run correctly, but because people won’t change their process and behaviors to effectively use the new systems. I see it a lot: technology is supposed to bring certain gains, but because of culture, beliefs, habits, and practices, it never brings forth the things that people anticipated.

Of course, there are some research and development professor types who love to implement technology for technology’s sake. They don’t really have a pragmatic business problem-solving orientation. The business people I deal with need to increase sales, improve response time to customers, reduce the cost of information and so on. They are not of the “Gee, this is interesting technology! Let me figure out where I can use this” orientation.

It seems that you are in a very strategic position where you can bring together the business, technology, and people values in one equation for your customers. In my domain of university education it seems that many of our leaders are very short-sighted about the business and financial side of their decisions — but they are even more naive about the relations between technology and its proposed users, both faculty and students. And yet, the impacts on both teaching and learning are far-reaching and profound.

Technology is increasing productivity primarily because it increases the speed of communication.
Remember that the telephone and other technologies had a dramatic effect on social relationships. Society needs time to adapt to a technology. In our era, the pace of technological change has vastly accelerated — while the ability of people to absorb and adapt to those changes hasn’t improved at all. People are as resistant to change as they were a hundred years ago; people don’t like change. There is a point at which technological change is slowed down mainly by the fact that people can’t figure out how to adapt to it or use it effectively. It may take almost a generation before some of those fears and inhibitions about technology are put aside.

These are really interesting questions but most of our business is dealing with other businesses rather than consumers. We try to create efficiencies in businesses so they can be more competitive, bring better products out at lower prices, and provide better value. That’s what we do. We don’t think about business’s societal impact so much because we’re not dealing directly with the consumer.

But what about your own business? You have some nine hundred people; the technology that you use to get your own work done becomes obsolete every two years; you have to upgrade and get your systems to work together; people have to be trained and retrained. Here, the people impacts are inescapable for you.

I have a very bright person who runs all of our internal information technology systems: my wife. She has done a very good job making sure that we are not the “cobbler’s kids without shoes.” Our revenue has almost doubled each year: $116M in revenues in 1998, $55M in 1997, $27M in 1996, $15M the year before that, and $7M the year before that. We didn’t get there without a decent IT infrastructure. I can be anywhere in the world, log onto our systems and know exactly what’s going on. We make sure that we manage our own business through leveraging technology. It’s a constant challenge: if we’re standing still, we’re falling behind. We must continuously improve and update our technology just to stay even, and make an even bigger investment if we want to stay ahead.

What is it that makes ARIS a good place to work?

ARIS has had a professional staff turnover rate that is roughly half the industry average, 15-20% instead of 35%. People stay here — in an industry where turnover is almost epidemic. There’s a huge skills shortage and people are sometimes lured away. It’s always a challenge to try to keep people here. What we do to try to keep people is what we call the “4 C’s” of retention; career, content, culture, and compensation.
It’s a constant challenge: if we’re standing still, we’re falling behind. We must continuously improve and update our technology just to stay even, and make an even bigger investment if we want to stay ahead.
We provide people with career opportunities. We’ve been pretty good about promoting from within. So ARIS employees get opportunities to expand their careers within the company. That’s obviously a big incentive. Second, we provide content. Technical professionals often tend to be as loyal to the technologies that they work with as to the company they work for. They want to work on the latest and greatest. That’s what they’re passionate about. We work on leading edge technology, not legacy systems, mainframe, COBOL programming, or Y2K remediation. We work on Internet products, on Oracle and Microsoft products, things that are appealing and interesting. Good content draws the top talent.

Third is culture. We respect individuals; we believe that they are our key asset. One of the major performance measurements for our managers is turnover; they understand this is important. And finally, compensation. In this day and age you have to be competitive.

Let me go back to an earlier topic for just a moment. Technology is enabling a whole lot more self-service, and some of that is eliminating redundant activity, saving a step or two. Do you see any limit to this self-service concept, where maybe there remains a role for travel agents to help people?

Yes, I think there is a role. I’m not saying that all travel agencies are dead, but that they have to think about the value they add in travel bookings. Why does a person go there? As the industry is changing, does that value continue to exist out into the future? If the value proposition goes away, they have a problem; they don’t have a viable business long-term. Everything that you look at, in every business, that question must be asked. What’s the value I bring to my customers? Better service (Nordstrom)? Better prices (Walmart)? Proximity and convenience (7-11)? You have to ask why customers come. Then you have to ask if that value eroding.

Let’s think about a convenience store. People come because it’s open all hours. It’s close, just down the block, even though it is more expensive. What happens when a “homegrocers.com” launches, delivering grocery orders to anyone, anywhere, 24 hours a day? Well, that’s a problem. The point is, if your value, the reason why you’re in business and why customers come, gets chinked away, you had better find some other way to provide value or your customers aren’t going to keep coming. This goes for travel agents, bank tellers, for all businesses.

Perhaps human contact with airline ticket agents and bank tellers doesn’t really benefit me. But I’m not so sure the same is true of my teacher, minister, or therapist. Even if technology places the world’s libraries within a few key strokes on my computer screen, even if I surround myself with the world’s greatest preachers on video, even if I get a great program called “My Personal Therapist,” I’m doubtful that I will gain the same value that I would from the presence of a living teacher, of real fellow students, and so on.

When I go to the bank, it is not because I want to talk to the bank teller. It is to withdraw or deposit money. That’s the reason. Now, is there some additional value to interacting with that bank teller? Most people would say “probably not.” Therefore, replacing the teller with an ATM gives you the same functionality but hasn’t necessarily detracted from the experience. I would contend that travel agencies are similar. Unless there’s somebody I really like there that I enjoy talking to, I just make my reservations and get out.

They may know something that you would never think to look for.

That could be. Why do I go in person to Mariners’ games when I could have a much better view of the action on television? Because I want to be out in the ballpark. There’s a value to the experience that can’t be electronically recreated. Some things you just can’t replicate: dinner with your wife, a ballgame with your son, going to church, interacting and socializing with your friends over a game of cards.

I believe you go to college as much for the social experience and learning as the academic learning. It’s a whole process. In a school where developing character is as important as learning calculus or physics — you can’t replicate those experiences with distance learning. Again, what value does a university provide to its students?

In this sense, today’s technology options may force universities and churches to ask what distinctive values they offer to people. If people can’t tell the difference between a church service and a televangelist program, maybe the church has forgotten something that once made it distinctive and valuable. If a professor is just standing up and mechanically reading through old notes, students might as well stay home and watch a videotape of some famous lecturer. If the school doesn’t promote personal mentoring relationships of students by faculty, we might as well all convert now to distance learning.

Universities have to ask “why do students come here?” If it is just to hear lectures, and that’s all, there are a lot more efficient ways to deliver that information. But if people come for x, y, and z, and we then carefully figure out how best to deliver x, y, and z, then we are competitive. It’s very possible that the lecture component will be augmented with distance learning a few years from now, with every university providing some of their materials on-line. Does that mean universities go away? Absolutely not. But universities must identify the value they provide to students. Some of this value may be assisted by technology, others may not. It’s not an all-or-nothing proposition, not “on-line distance education” vs. “on-campus education.” Education will be some hybrid of technological means used where appropriate, effective, and accepted by the people — and traditional means where those are most effective.

Let me ask you about your own career. You’ve been presiding over this booming company for nine years. How do you keep your own life balanced and your priorities straight in this hectic world of rising expectations, increasing speed, and so on? How do you stay healthy as a human being?

Who says I’m healthy?

You cannot double the amount of energy that you put into your business or the hours in your day. You can’t just continually take more and more away from your family or from exercise. How do you set limits?

I think that it’s very important to start with the big question: why am I doing what I’m doing? Is it about money? Fame and recognition? Ego? I have to come to grips with what drives me and what I’m trying to accomplish. I don’t believe that twenty years from now people are going to care or remember “what Paul Song did” with ARIS or otherwise. The people who are going to remember me will be my friends and family.

I recently spent a day flying to Tokyo with Jack Smith, the CEO of General Motors, on his private jet — a once in a lifetime experience! Here is a guy who leads the world’s largest manufacturing company, #1 on the Fortune 500 list, a guy who has a half million employees and $170 billion in annual revenues, which would probably place GM’s economy somewhere like the tenth largest nation in the world. We were talking about retirement.
In our era, the pace of technological change has vastly accelerated — while the ability of people to absorb and adapt to those changes hasn’t improved at all. People are as resistant to change as they were a hundred years ago; people don’t like change.
I asked him what he would like to do after GM. Well, he said, he’s got this house down in Florida, but he grew up in Boston and he’s got a little house over on the Cape. Maybe he’ll start a small business with his son. It struck me that here’s this very powerful person, who controls billions, whose business decisions can make or break small companies like mine. And yet, as soon as he steps down, most people aren’t going to care about him anymore because he will no longer be in a position to influence business matters that impact them. And what he wants to do is something with his family!

This really hit home with me; when I’m no longer in a position to influence other people’s livelihoods and businesses, most people are not going to care about me. Right now they care about me to the degree that I can help them, hurt them, or impact them to some degree. It only lasts for a while and then it’s somebody else’s turn.

As I think about it, I work hard because I am committed to the people that helped me build this company. They are friends of mine, people that I care about. This keeps me going. The second thing is that I’m very competitive, I hate to lose. I’ve played sports all my life. Those are the things that drive me internally. I work hard and sacrifice, but at the same time, I don’t view my work as work but more like a hobby! It’s something I do that I enjoy. It’s not always fun, but usually it is.

At the same time, my faith tells me that we’re just passing through here. What matters, what lasts, is how we impact other people’s lives, the friendships we develop. That’s what matters because in the end when I’m sitting there on my deathbed I’m not going to be saying, “Gee, we could have made one more sale.” Instead, I’m going to be thinking about whether I had an impact, whether I inspired and motivated some people, whether I helped make their lives better.

Those are the things that matter. In this industry, it’s very easy to get really full of yourself. There are a lot of very young, successful people. You have people telling you that you are great because they want something — your business, a job, something. Pretty soon you might start to believe it! It’s a scary thing. It’s been great to have my wife with me in this business because she always knows how to put me back in my place!
Not everything that counts can be counted, and not everything that can be counted counts. Albert Einstein

Would you ever use the word “calling” or “vocation” about your work? Martin Luther argued that the shoemaker or magistrate or baker ought to have a sense of vocation to their work just as much as any priest or minister is expected to have.

Yes, I believe at this time this is what and where I’m called to be. I have a tremendous opportunity to positively impact and influence many people’s lives, beginning with our eight or nine hundred employees and their families — plus investors, customers, and countless others I interact with. How we conduct business, how we portray ourselves, how we act, individually and corporately, says something. It’s so easy to talk about values; it’s so much harder to live them. I don’t pretend to live it all the time, but this is my calling and opportunity.

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