 Aloha, and welcome to Business in Hawaii with Reg Baker. We broadcast live every Thursday from 2 to 2.30 from the downtown studios of Think Tech Hawaii in beautiful Halaululu, Hawaii. We are a location that does not have wildfires or mudslides, so we've got a very nice environment and good weather this week anyways. And Happy New Year. This is the first show of the new year 2018, and we're kicking it off right. We have the Chief Innovation Officer for State of Hawaii here joining us today. And we're going to learn a little bit about some of the different challenges and projects and the things that he has going on here. But Todd Nakapoi, nice to have you here today. Thank you. Nice to be here. I know you're wild crazy right now and getting ready for 2018. They just had this thing called tax reform, I guess, that just happened. And so there's a lot of changes, I guess, innovations that's going to have to be done over this next three to six months, if not longer. But before we jump into some of that, can you give us a little background about who you are and you were born and raised here right here? Yes. I was born and raised here in Hawaii. I grew up in Wailua on the north shore of Oahu. I went to Wailua High School, graduated there, and then was fortunate enough to travel to the mainland and go to Seattle University. I graduated from there with a finance degree, but not anywhere close to IT or anything like that. Really? I was going to say, you know, in Seattle, there's a lot of technology over there, too, but you went to finance route. I was in the finance route. My senior year of college, I was in Boeing's management program, so they actually paid for my senior year of school and I was going down that finance route. And then I actually got a call from one of the individuals that was in my hall. I was an RA, a resident assistant, and, you know, every Friday night I would have to watch the floor and kind of hang out, and there was an individual there. His name was Jeff, and he wanted to play computer games, and so he and I would spend Friday nights playing computer games, and one day while I was at Boeing, I got a call from him saying, hey, Todd, you know, we got 30 million in seed money to start a dot-com. Do you want to come and work for me? Well, that's an enticement, and I had no idea, and that was very early in the dot-com world. I had no idea what a dot-com was and what that meant, but I said, hey, I was willing to try something new, and, you know, launched my IT career, and that's very good. And so you've done that with a finance degree. You never had to go back and get anything else, huh? Well, in our world, there's certifications, yes. I carried certain technical certifications like the MCSE and so forth, but not official schooling to go back and be, you know, an IT engineer. So for people who maybe have already started their career with some kind of a degree that's not quite technology, there are ways that they can actually get into it by going through the certification process. So what we're finding as we go through this, and what I encourage a lot of the interns that come over to us to do is really have a finance and accounting degree. They need to understand how to speak the business language. A lot of times when they graduate with comp style or computer science or information technology as their background, they're very engaged with the technology, especially the guys coming out today. They're very engaged with cybersecurity and heads down in that world, but they need to understand the finance side. They need to understand the analytics side, the data side of the house, and how to translate technology to business. Those are the people that succeed. Those are the guys that are going to reach that C-suite because they can speak both sides of this coin. They can do IT, and yet they can do the finance side of the house. Well, that makes a lot of sense. I mean, basically it's a communications tool, and you've got to be able to design that tool to communicate what they need to know. Right. I mean, most of the people in your state want things like return on investment. That's the language that you guys understand, right? If an IT guy is telling me to spend $2 million on a project, what is my ROI? And your typical IT guy will go, well, it meets my security, right? It helps me there. It's new technology, right? We need to modernize, and it's 2 million dollars. Right. I've had IT people come to me in the past and want to get bigger this or bigger that or faster this and that, and the question is why? Well, it's because it's faster. It's bigger, but that doesn't always equate to more profitability or more efficiency. Right. Yeah, it's interesting. That's good insight. And so you were Boeing? Now, Boeing has been on gangbusters recently. I'm switching gears here a little bit, but they've been second record high. Correct. They've got some pretty neat stuff going on over there, but you decided to leave Boeing and what, come back to Hawaii at some point? So what had happened was I was in Boeing's program, and they were trading us to be your original data science. We were doing what at that time was called parametric analysis, which is actually multiple regression analysis. Okay. They were sending a button. Telling the future. Telling, trying to predict. And at that time, what we were doing at Boeing is if you shoot back to the early 90s, Boeing was in a race against Airbus. They were trying to reduce a lot of their costs. They kind of still are. Correct. And they were trying to reduce a lot of their costs, but they've already looked at things like lean manufacturing, single piece flow, JIT, just in time, inventory. They've already looked at those things and had reduced a lot of those costs. The only thing left that was out there was their procurement cost, what it cost them to buy a single part. And they hadn't really done an analysis on that. And so they had created this team of college kids going on and trying to figure this out. And we actually were able to reduce a lot of Boeing's cost by doing regression analysis. Doing things like, this is the same part that goes on to a car that's flying on an airplane. Why does it cost 10 times more to fly on an airplane versus a car? So we're looking at what we call world-class pricing. Doing that analysis and going back to the vendor and saying, we shouldn't be paying this much above what the world-class price is just because it flies on an airplane. So I had a lot of experience with that, so I know how. It's so refreshing to hear some of this because sometimes people will get the impression that because you're putting something on a $50,000 car, it needs a cost less than if you're putting it on a $50 billion aircraft. Numbers can get big and sometimes people lose a connection with reality when those numbers are in the billions. But that's good. So now it sounds like this is absolute perfect training for you or experience for what we need here in a state. It's been good training to get to that. And so really after Boeing and we went through that dot-com world, right, I think I was employee six or seven and we grew to a few hundred employees and then ended up selling the company and then I ended up coming home. And what was the bridge? Because there's a lot of people out there that are on the mainland and they want to come home, but there's challenges. It's not an easy process to come back because there's a lot of dynamics that are different. So when you came back, how did that work for you? So it was a different time. We were making a lot of money in that time. And my saving grace was I knew that I always wanted to come home, so instead of buying the nice cars or the big house at that time, I was able to save a lot of money and then purchase a home when I came home at that time. But the big thing was I always wanted to come home, right? And I think that's the difference now in a lot of the kids that I'm talking to, the high school kids and a lot of the college kids about leaving Hawaii and going to the mainland, a lot of it is about we don't feel that there's an opportunity here. That's why we don't want to come home, right? And when I was in school and left school at that time, I always felt there was a career and opportunity here for me to grow, right? Versus the kids today feel like there's really not an opportunity for them to make a living here and find a job and a career. And it's hard sometimes to get people to understand that there is opportunity. And maybe it's not exactly what they have on the mainland. I mean, a mainland is a whole lot of land and it's easy to move around. You just jump in the car and you go here or there. There's a lot of mobility. Here, there's less mobility and there are expenses that have to be incurred to live here that's not existing on the mainland. But there are opportunities if you look for it and if you've got the right experience. The experience, the skill set, right? And just being on the mainland and gaining some experience and knowing that hey, that experience can be valuable for you to find an equitable job here. I think that's the message that a lot of people need to understand. Hey, yes, the opportunities may not be as large here in Hawaii and it may be harder if you just start out here. But if you go to the mainland and get some experience, hey, there's going to be some opportunities here that could afford you a livable lifestyle here. It certainly could and let me share a thought with you and you tell me if it makes sense or not. But I came over in the 70s, I went through college, I started working here and it occurred to me that I needed to go to the mainland to get some experience, get up to the point in the career ladder that I could come back and start at a senior level and jump over this large, middle management group of people that have never left and they're comfortable being here for whatever reason, they just enjoy what they're doing, which is great. But I had to leave to get that experience and come back again. Does that make sense? Yes, I think that if you're looking at it from that perspective, it makes a lot of sense. And when we tailor that to IT, it will, wow, within the IT world, what garners your experience is? How many, how large of a network you're managing? How many people are you managing? How big is the company's infrastructure that you're managing? Well, unfortunately, some of our largest companies, they're about 3,000, 2,500 people. They're not very large. And so in your analogy, yes, if you were to leave the state and go work for a very large company like a Boeing who has hundreds and thousands of people that are there and run an infrastructure of that size coming back, now you have all of that experience. Running a 2,000 or 2,500-person company from an IT perspective is very easy compared to a multinational company right with hundreds of thousands of people. Right, that makes sense. And I think it's just like going to school. You don't want to go to one school to get all your degrees. You want to be able to go out and work for different companies for a while and move around and look at the different ways that they do things, because there's not always just one right answer. There could be different answers depending upon the company and the dynamics involved. So it's good to get that experience. I think the other big thing about that is, I mean we talked about this a little bit, was your experience from the manager, from the people that are above and going out there and working for a lot of different companies and getting exposed to different managers the way that they manage how they treat people and how they bring up that next generation, that experience is what's really going to catapult your career. Knowing how to manage people, understanding that as a manager, that's your job to manage the careers of your employees. You learn the right way and you learn the wrong way. And then hopefully you know the differences. So you don't want to go that way. You want to do it the right way. And plus every individual that you manage is a little different. And so you just have to understand all the different ways of getting that done. Now we're going to go on break in a second. But just to close that topic, you're always looking for good people, right? There's always a need for good IT people. And if somebody was out there watching the show, they wanted to see what was available, is that something that's on your website? Yes. So you can always visit us. We currently have 29 vacancies in my organization. If you're interested in a job, you can visit us at ETS.Hawaii.gov. And you can go on their positions in recruitment. We're also very heavy on LinkedIn. So you can just go on to LinkedIn and look for Enterprise Technology Services or the state of Hawaii. And you can find our job listings there as well. Very good. Well, we might come back and loop back on that here in a second. But we're going to take a 60-minute break. This is a business in Hawaii with Reg Baker. We're here today talking with the chief innovation officer of the state of Hawaii. And in the second segment of our show today, we're going to get into a little bit of some of the successes that Todd has had and maybe some of his challenges. And we'll probably even touch base a little bit on tax reform because that's going to be a big one for 2018. But we'll be right back. Aloha Kakao. I am Andrea. I am from Italy. And I've been studying and working here in Hawaii for more than three years for my PhD. Hawaii is home to a truly fantastic community of middle and high school students. And did you know some of them are currently out there right now using their free time to invent new quantum computers? And did you know some of them are exploring cybersecurity and the new frontiers of robotics? I am just always amazed as I talk to them at science fairs. Oh, but there's more. Did you know that these students are coming here on FinTech Hawaii to share their story with us? Come and join the new young talents making way show and discover how these students are shaping our future. Starting on February the sixth every Tuesday at 11 AM. Only here at FinTech Hawaii. Mahalo. Well, welcome back. I bet you that was the fastest 60 minutes you ever had. Anyways, it was a 60 second break and we're back and we're going to be talking some more with Todd, Chief Innovation Officer for the state of Hawaii. Now you've been in that position for how many years now? Almost three years. Three years. It will be three years. All right, and you still got some hair left, so I'm impressed. Just a little bit, just a little bit. Now it's been an interesting three years, at least from what I've been reading in the papers and some of the things that you've been going on. You know, was it everything you expected or is it more of a challenge or what do you think? It's been interesting. You know, when I took this job, the governor told me that my job is to modernize the state of Hawaii. Big job. Big job, no small task there. And you know, we've made some huge strides. A lot of people are telling me that, you know, they've never seen this much technology and being implemented within the state as fast as we've done, right? We are leading the nation in a lot of different things. We lead the nation in digital signatures, right? In one year, we've signed close to 200,000 documents digitally. So no longer are we routing paper around. As opposed to like zero before. Exactly. Right? We're on, we've moved off of all a lot of our archaic email systems. When I first started, we had nine email systems just for the executive branch alone. We moved us to Office 365 in a single year. Microsoft calls us one of the most advanced states on their Azure platform. Everything we do is in the cloud. We're in Amazon, we're in Azure, you know, we're on the Salesforce platform as well. We have some of the latest and greatest technology that's out there. Now, one thing that I think is important to just mention, prior to joining a state, you were with another large company, and that was? That was Microsoft. So I worked for Microsoft for the last 11 years. Right, and you headed up the local market here. So I was in charge of what we call Premier Services for the state of Hawaii. So all of, you know, a lot of the consulting and basically day-to-day stuff that a vendor or a company would use Microsoft for, we were there to support them. Very good, and so after 11 years of doing that, you get to know a lot of people in the state, didn't you? Yes, and I think that really has made this transition and our ability to move the state ahead of technology, that's really been a key factor there because as I was rolling through the state and selling Microsoft product to a lot of different companies here, I was able to identify a lot of the talent there. And I was fortunate enough that a lot of that talent was interested in coming to the state and helping us do this modernization. Well, and that's why you had such great success in that. 100% of the success that we've had in rolling out these new technologies is the people that work for us, right? And I guess, you know, once you get everybody, and I don't know if you're there yet, you might be, but once you get everybody on the same email platform, for example, I mean, communication improves and hopefully that's gonna lead to better coordination. So that's the biggest thing, right? You imagine that when you wanted to set up a meeting with someone, you couldn't look at their calendar. You'd have to pick up the phone and call their secretary to find out if that person was available, right? We couldn't do a, well, we could do video calls but it wasn't as easy as it is today with Skype for Business. Right now, just right mouse click, video, and I'm on a video call with someone, right? And it's very efficient for us instead of having to run across different places and different offices. But you know, the governor always asks me, you know, how are you gauging your success in the state? How are you figuring out if you're moving the platform based instead of just technology? How are you knowing that people are coming? And I had to think about that for a while and one of the things that I, how I've started to gauge this is when I first went to a cabinet meeting, right? So you think of this, right? These are all of the records. When I first went to a cabinet meeting, I think 90, probably 99% of the people there had pen and paper. Maybe one or two of them had a tablet, right? We're pretty close to half now of our cabinet having some digital device with them. And I think a lot of it is because they understand that in previously the technology was okay, it didn't work for them, right? By moving to things like Office 365 and other collaboration software, it's enabled them to go and move to that digital platform. And a lot of it is the governor himself. He's mandated that we be a digital government, right? So a lot of us are having to change over by giving them the tools is really allowing them to do it. Right, and then training them on how to use them, you know, for people who've not used them before, there's a learning curve, but then once you're there, I mean, the efficiency that you gain from it is just significant. There's so much that enables, again, what we're trying to do is enable the state worker, right? I think that a lot of our state workers, they kind of get a bad rap. A lot of people feel that, hey, they're part of the union and so forth. But really what it is is enabling those individuals. The governor always says that the answers to solving the most complex problems within the state are going to come from its employees. We just need to enable them. And really that's what we're doing through this modernization process is enabling those individuals, right? Giving them the tools that they need to be more efficient, more transparent, and more effective at their job. I think from the experiences that I've had, and I've worked pretty extensively with the Department of Taxation over the years, and some of the people that are there are very experienced, they're very knowledgeable. They really know what's working and what isn't. And they know what the answers are, but nobody ever asks them. And again, that's part of this transformation that we're doing. As a lot of us in the IT world know, right? It's never the technology. It's always the people in the process. And it's really that mindset change that has to happen. I, as a leader, I have to make sure that my employees know that I support them, that I'm looking for the answers from them, and it's okay for them to bring those answers forward or bring those solutions forward, right? And I think the mindset has to be that, as a leader, I'm a people manager first, right? CIO second. And my job is to manage their careers, to enable these individuals. And when they know that, that's when these solutions come up. That's how we're able to move things forward. I'll give you a prime example, digital signatures. We're on what we call the state of Hawaii's East Side platform. And normally, previously the state would have gone out, hired consultants to do it, hired consultants to go throughout the state and teach people how to do that, right? And then implement their technology. So last year we signed 200,000 documents throughout the state. I have one person that's responsible for digital signatures for the entire state. Wow. One individual. So to return on investment, think about that. We didn't spend millions of dollars implementing a platform. This platform to allow us to do digital signatures throughout the state is less than half a million dollars a year. Okay, so where were you when the Hawaii Health Connector was coming online? Oh my God. We spent tens of millions. Hundreds of millions. And it didn't work. Amazing. No, but it's, and that's just one area of saving is just to have a better coordination. And somebody that's got the experience that knows what they're doing to make it happen. You know, that's, anyways, we can talk about that all day long. Are you getting involved with rail at all or is that kind of... I'm responsible for technology. Are you implying that the rail is not... No official claimant. Moving right along. So the, you know, I guess one of the big issues, particularly with the president just signing the tax reform that they've been trying to do for, I guess, ever since he got elected, how is that going to complicate things for you in trying to get the department of taxation on a single system that's working? So, you know, there's a lot of things that have been in the press over the last couple months about what's going on in the department of taxation. You know, what people need to understand is that we have very capable individuals there, right, that know what they're doing, right? The difference is this was, we have an older system. I think the last time that system was actually updated was almost 20 years ago. One of the hardware that that system runs on is no longer supported, right? We built what's called a parts locker this year to ensure that if we do have a failure that we have parts on island to fix that. I think there were comments before that we're buying parts off eBay. That is true for certain things like our mainframe. These are very archaic systems, right? Our financial system, our payroll, our time and attendance. In three to four years, they're going to be close to the country, oh, they're over 40 years old. Did they have computers 50 years ago? I'm told they did. And so that's what I think that a lot of people need to understand that, yes, taxes complex, as you know, right? But really we're coming off of an older system onto a newer platform that should enable us to make the changes necessary in a short amount of time. And more importantly, make it easier for taxpayers to pay their taxes online. You know, I had a company just 20 years ago that was called Pendleton. And we were doing 7,000 tax returns a year. And I had a mainframe AS-400 and I had some other things. I still have that. And what I'm getting at is that for me to, and I needed 200 people to do that, to do the 7,000 returns. Today in the environment we have in a hosted environment and with the distributed type of terminals, you know, the data entry, I can do it with probably more like 50 people. And I can probably do more than 7,000 returns. Sometimes the hardware that was designed 30 or 40 years ago is just not capable of providing all of the current services that's needed. And so you've got to upgrade in order to stay current. You know, there's so many reasons for us to upgrade. Obviously, our systems can't fail. Payroll, right? The state of Hawaii on our payroll system pays 80,000 people, right? And we cannot have failures like that. And so upgrading is one thing. The other thing is all of the security compliance regulations. As we know, cybersecurity is a huge concern for many companies, and especially the state of Hawaii. That is our number one concern. And specifically the Department of Taxation. The IRS and the Department of Taxation and CPAs are all high-target areas for the scammers to try to get into the hackers. And the Department of Taxation is so important because that's the revenue generator. That's the collector. And you've got to have that working right. But we're going to have to wrap up here. We've got, believe it or not, we just blew through a whole 30 minutes. And it's been very interesting. And you have a website that people can go to to get more information, because actually more than just employment opportunities, there's also a lot of other information about what's going on. And that website is on the screen now, ets.hawaii.gov. So, you know, we really appreciate, Todd, you taking the time to come over and talk to us. And good luck in 2018. It'll be a fun year. Take care. Thank you. This is business in Hawaii with Reg Baker. We just spent the last 30 minutes talking with Todd, who is the Chief Innovation Officer of the State of Hawaii. He's going to have a very interesting year ahead of him as all of us will be particularly dealing with the new tax rules and regulations. But I will see you next week. Until then, aloha.