In the first interview in this series, which kicks off PwC’s 2018 CEO Survey, chief executive Safra Catz explains the broad culture shift brought on by AI and cloud technologies.

1. strategy+business
ONLINE JANUARY 12, 2018
At Oracle,
Great Technology
Is Not Enough
In the first interview in this series, which kicks off
PwC’s 2018 CEO Survey, chief executive Safra Catz explains
the broad culture shift brought on by AI and cloud technologies.
BY ART KLEINER

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Art Kleiner
kleiner_art@strategy-business.com
is editor-in-chief of
strategy+business.
Since its founding in 1980, the Oracle company has been known for its
prowess at innovation, for its protean array of enterprise software and database
products, and for its influential leadership, starting with the three individuals at
the top of the company. Founder and board chairman Larry Ellison and CEO
Mark Hurd are among the most visible figures in the technology industry. In
their company, it would be easy to be overlooked — but not if you’re Safra Catz.
In recent years, Catz — also Oracle’s CEO, as well as CFO and a member of
the board of directors — has been one of Silicon Valley’s most prominent voices
on the maturation of digital technology and its effect on global industry. This in
part reflects her standing as one of the most highly placed women in business,
and her experience executing Ellison’s vision for Oracle’s transformation into a
cloud- and platform-oriented company. She is also credited with shifting the
company’s growth strategy in 2003 from one that rarely involved mergers and
acquisitions to one that has used inorganic growth to great advantage.
Catz was born in Israel and raised, after age 6, in the Boston area. Be-
fore coming to Oracle in 1999, she was an investment banker at Donaldson,
Lufkin & Jenrette. In 2011, she was named co-president of Oracle, and took the
CEO position in 2014. She served on the board of directors for HSBC Holdings
from 2008 through 2015, and will join the Disney board in 2018. Strategy+
business visited her in early December 2017, at Oracle’s headquarters in Red-
wood City, Calif., to discuss the challenges facing CEOs today and their chang-
ing strategic priorities.

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S+B: The world seems to be crossing a threshold of digital maturation, with arti-
ficial intelligence, blockchain, sensors, and the Internet of Things all coming to-
gether. What’s the most significant aspect of this shift?
CATZ: Everything is important, but I think the most critical is the fact that
AI is finally here. What is AI? It’s making decisions based on very large amounts
of data. I’ve been hearing about AI for 30 years...but it was always a future prom-
ise. What’s different now? First, the underlying compute capability is so much
faster, meaning systems can crunch through a deluge of data almost instanta-
neously. Two, the ability, through software, to manage and analyze that data is
so much better.
Do you remember the days when position-sensing elevator technology came
at an exorbitant price? It cost millions to put that in your building. Now, your
smartphone can tell what floor you’re on. It’s measuring barometric pressure.
It’s measuring if you’re standing or sitting down. Your Waze app measures not
only how fast your car is traveling, and where the other cars are around you, but
your acceleration and deceleration. Your watch knows your heartrate. All this
technology used to be incredibly expensive. Now, you get advanced computing
capability at commodity prices.
The world has seen explosions of data in the past, and each time, enterprises
have tried to manage it in one way or another. But this time, it’s accompanied by
much faster and more accessible computing capability. All this data is instant-
ly rendered usable and actionable, and that creates an unprecedented opening
for artificial intelligence. Of course, we have heard about AI for decades in the

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software industry. It was always a promise of the future. The programs were
based on running rules with inputs that included far less data, and less process-
ing power. But now, the underlying computing capability is much faster, mean-
ing it can crunch through huge amounts of data. And the software technology
is far more advanced than it was. The systems can not only augment decisions,
but can make them better and faster — freeing up employees and consumers
to do more interesting things. As your car drives you to work, you can be read-
ing your briefing for your first meeting, and your car may very well be a better
driver than you are. In computing, the system will see anomalies, detect security
threats, and fix the problems faster than an individual could.
S+B: How does that affect the day-to-day business of a typical company?
CATZ: The main task of AI is to improve decisions. If executives have a clear-
er view of the patterns in the data, they can make better decisions themselves,
or delegate decisions with confidence that they would otherwise have to make
themselves. This represents a natural evolution for the software industry. In-
creased computer power leads to an ability to manage huge amounts of data
simultaneously, and bring it all together. It also means increased speed: Histor-
ically, if you had to wait a long time for an answer, it was not worth asking the
question. Now you get your answer quickly. And finally, scalability: If you can’t
handle huge amounts of data across large distances, you can’t get a complete an-
swer. All of this adds up to a step change in information.
“The effects of AI — speed,
scale, security — release resources
and people to do much higher-
value things. We’re starting to see
enormous productivity increases.”

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S+B: Why is that important?
CATZ: Because all those effects — speed, scale, security — release resources
and people to do much higher-value things. And that’s what’s happening now.
We’re starting to see enormous productivity increases. I’m not sure how econo-
mists measure productivity in this country, but no one can deny that our capa-
bilities have increased enormously.
S+B: Speak to this from your background as a finance executive. What kinds of
things can companies do now that they couldn’t do before?
CATZ: Historically, finance sat in the back seat, looking in the rearview mirror.
“Where have we been? How much money did we make? What changed from
last quarter?” The job of finance was to answer questions like those.
With modern systems, looking backward is much easier, but so is looking
forward. The systems calculate what happened in a very accurate way. Finance
now rides shotgun; it is the navigator of the car. Yes, the line of business is driv-
ing, but finance is looking forward, suggesting routes to try out, and modeling
new possibilities. You don’t just extrapolate from the past; you are free to see
what else is going on. This is a totally different job, partnered up with the lines
of business.
Are all finance people up to the task? Maybe not. And we still have to get the
backward-looking numbers correct. But these days, I rarely see the line-of-busi-
ness leaders without their finance people, and it builds a kind of collaboration
that advances the business, in ways that weren’t possible before.
This role for finance goes beyond asking “what if” questions. Analytics are
built in. You know at any minute what your contracts are worth, where your
sales are going. This allows you to layer in additional possibilities. What are your
competitors doing? What happens with pricing differences?
Computers could do these kinds of analyses before, but slowly, and at enor-
mous cost. Now, you can make better decisions and make them much sooner.
You don’t have to wait and see how everything turns out; you now have a good
idea about how the decision will turn out before you make it.

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S+B: Do you see businesses doing anything differently as a result?
CATZ: Listen. Change is hard, but many businesses are just starting to em-
brace it.
Interestingly, the finance people are often leading the charge of change. You
might think that they would be saying, “Whoa, I know my existing job, I prefer
it the way it was.” But when I speak publicly about this, it’s the finance people
in the audience who are saying, “When can we get started?” They want to help
their companies. They can’t wait to get into this. All of a sudden, they realize
that there are modern tools they can use to really help the business.
That’s why many new software products have analytics built in, and why
they’ve moved into the cloud. In the legacy world, companies were locked into
their on-premises systems. It took them six months to two years to upgrade to
the coolest technology. In the cloud, it just shows up. All of a sudden, you have a
new feature you didn’t have before. It doesn’t require a long implementation.
Overcoming Internal Inertia
S+B: How does this change the way companies grow?
CATZ: It changes the speed at which they make decisions. They understand their
customers better. They can tailor their value proposition on the fly. Or they see
there’s a market they would otherwise have missed for their products, and they
need to hire more people.
As far as I know, nobody in business can just rest on their laurels right now.
Competition is brutal. Who would have anticipated what’s happening in retail,
in telecommunications, in media? Name one industry where people are saying,
“I’m going to pass on this change. I don’t have to worry about competition. I’m
going to go slow. I like slow.” They all want to go faster. They know that CEOs
are turning over, being let go. Investors have no patience at all.
The companies have to make some hard choices; they’ve got to show some
courage. People want to love change, but they hate change. It’s terrifying.
In any employee base, there’s a small group in the front who say, “I’m in. This
change is going to be awesome.” There’s a small group in the back who think
they’ll never accept it; it will happen over their cold, dead body. And there is a

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gigantic group in the middle who will go with whichever side is winning. They
want answers to their questions: “What’s in it for me? Why is this good for my
group? Why is this good for the company?”
You answer them by saying, “Look. You can have a report today that you
used to wait three weeks for. Or try these alternative approaches.” You support
their capabilities and give them information — data they can act on. If you start
building momentum, the giant group in the middle goes from, “Hmm, let’s see
how this works out,” to, “Hey, what about me? I’m in.” And even some of the
over-my-dead-body group goes, “You know what? I’m not so afraid anymore.”
S+B: This could be said about any change, not just a technological one.
CATZ: I wish I could say that your success in change depends only on technology.
It doesn’t. It also depends on sociology, on the people. Sure, if your technology
isn’t good, that could be fatal. But great technology is not enough. There has to
be leadership, supporting the changes and saying, “We’re doing this.” There’s
going to be a lot of inertia — people wanting to do it the old way.
S+B: You’re credited as having led this type of transformation yourself.
CATZ: I can honestly tell you that is untrue. Larry Ellison led the transformation
to the cloud, and before that our transformation to the Internet. It was in 1999.
Imagine the courage it took. We were at the height of the software bubble. Ev-
erything was fabulous. There was no emergency driving us to change.
But he said we had to shift to a single global enterprise. We had to bring all
the data together from around the world, so we could run our company better
and spend less doing it.
We thought we were global, but we were only international. Being interna-
tional means selling in a lot of countries. Being global means having the same
high standard everywhere. Customers know what to expect. It means simplify-
ing your system, and your business. And in our case, we saved [US]$1.2 billion.
S+B: How does a company accomplish that kind of thing?
CATZ: There are two main factors. First, when you do things more simply,
you have far less duplication of effort. Second, you need to put your target out

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publicly. For example, shortly after I joined Oracle in May 1999, Larry said,
“We’re going to save a billion dollars by switching our systems.” We had only $9
billion in revenue at the time.
When a CEO makes an announcement like that, executives either embrace
the change or they start hearing rumors about their replacements. You can no
longer duplicate one another’s efforts when you cut that much. You can’t waste
money on projects that don’t make you more competitive.
We still see companies spending an absolute fortune on financial systems and
HR systems that don’t do much for their business. What customer of theirs says,
“Oh yeah. I love your IT installation. It’s fantastic”? How does it make you a
better retailer, a better manufacturer, a better bank? It doesn’t.
Reasons for Economic Optimism
S+B: There seems to be a high level of confidence in economic growth, especially
in the United States, these days. What do you attribute this to?
CATZ: The optimism in the United States is very, very high. The response to
reduction in regulations, which eat up an enormous amount of business invest-
ment in paperwork and compliance, is immediate. That downward trajectory
[in regulations] is allowing investment in other areas. Even though the tax bill
hadn’t yet been signed when your survey was conducted, there was a clear path
in view. It would reduce regulation, reduce taxes, and free up capital.
In my opinion, the most important type of tax cut is the one that goes to

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the middle class, because we live in a consumer-based economy. And when con-
sumers have more money, they spend it. That’s good for every type of company.
The consumer spends more at Target, Target buys another forklift, and the fork-
lift maker buys a newer IT system. This type of cycle is making leaders more
optimistic.
S+B: At the same time, we know many executives who feel uncertain about their
own company’s prospects.
CATZ: That’s because they’re watching digital disruption unfold. In financial ser-
vices, new fintech companies are competing. They aren’t banks; they’re technol-
ogy companies. But the transactions are migrating to them, and it’s making the
banks wonder what just happened. Media companies are shifting just as fast.
Once, if you made a movie or TV show, you’d call the distributors. Now you put
it on the Internet and people watch it through their smartphone. That library
of old movies you had carefully assembled, as a media company, may need to
be monetized a different way. We’re not ready for this. You can’t be calm when
everything around you is changing.
Customers Demand Collaboration
S+B: With the emergence of cloud-based industrial platforms, how do you see the
industry evolving?
CATZ: Historically, Microsoft and Oracle were archenemies. We still compete.

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We also compete fiercely with Amazon. But both Microsoft and Amazon are
Oracle customers. Why do we work together? Because our customers demand it.
Our underlying philosophy is that every customer will have multiple clouds.
It’s their choice, and it brings us back to our initial history. In our earliest days,
we were competing with so many databases: DB2, RDB, Adabase, etc. What
was so unique about us? We didn’t decide what hardware platform you used. An
Oracle database would run on any computer: Digital Equipment, IBM, Data
General, Wang, Prime, and even on the new personal computers of that time.
(I’m dating myself a little.) We said, “Go run on whatever you want. It’s the cus-
tomer’s call.”
Today, we have our own cloud system, but we don’t require you to use it. You
can bring your Oracle licenses to someone else’s cloud. But we work very hard to
make sure that we will run Oracle better, faster, more securely, and cheaper than
anyone else.
Ultimately, I believe that most of our customers will have a minimum of
three or four clouds for their different needs. One of them will be Oracle.
S+B: So you all have to compete on quality instead of locking people into a single
system with high switching costs.
CATZ: This is the most exciting time because there is a lot of change and oppor-
tunity. All the CEOs I know are working very hard. Even the most successful
among them, like Larry Ellison, come to work every day for that reason. The
opportunity is great, but there is no resting on your laurels. +

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