Deloitte Executive Edge CEO and CFO session
Shaper or follower. What is your strategy?
On April 3rd, over 200 of Europe’s leading CEOs, CFOs and startups attended Deloitte’s most recent Executive Edge Session in the Nieuwe Kerk in Amsterdam. With keynote speeches from Andrew McAfee, Jay Rogers and Aimee van Wynsberghe and interviews with Frans Muller and Feike Sijbesma, the evening on ‘Shaping or Following’ resulted in a very interesting one.
The world already witnessed huge impact made by companies that were the first to see potential in concepts like crowdsourcing, which they transformed into successful new businesses. So, should leaders take transformation of their organization into their own hands? Or would it be wiser to execute an adaptation strategy? The unanimous conclusion from the Executive Edge Session: whatever you choose, playing by the rules in the previous playbook is asking for trouble.
Hippo vs Geek
Andrew McAfee, one of the top-50 world thinkers about management, introduces the acronym ‘hippo’: highest paid person’s opinion. On which, according to him, ''most companies base most of their decisions most of the time.''
Not necessarily for their own good, as research shows: 48% of the time the hippo’s didn’t add any value and 46% of the time they were destroying value by ventilating a ‘gut feeling’. Whereas geeks, the mortal enemies of the hippos, go where the evidence takes them. The gap between geeks and hippo’s becomes even bigger in the era of machine learning. McAfee claims: “A lot of work that you currently assign to your experts or your scientists, is going be done better and faster by the technology.” Therefore, companies need to adjust their strategy. “Like the way you ran a steam factory needed to change when electricity came along, there are going to be important parts of your business model that you are going to have to rethink.”
“Once in a while a technology comes along that is so powerful that it changes the rules of business. If you continue to follow the previous playbook on how to be successful, you can get in trouble.” – Andrew McAfee
The old advice: ‘Find the best people and listen to them’ will get you into trouble nowadays. You’d better find the best people to help you analyse and understand the world better. And the adage ‘Walk away from something that isn’t working’ is actually bad advice. The revolution in artificial intelligence is just starting. McAfee: “Walking away if your first couple of experiments don’t work out is a terrible idea. We’ve seen industry after industry get transformed by platforms. That is not about to stop. And we have interconnected humanity for the first time ever and given billions of people access to extremely powerful tools. If you’re going to act like everybody you don’t know already is irrelevant, you won’t get very far.” The hard part of being a business leader is getting clarity about which parts of your business model are going to absolutely change and which trends are going to endure. “You need feedback from the world for that''.
Lift your Anchors
Someone who wholeheartedly agrees with this last comment is DSM CEO Feike Sijbesma. When asked by Rabobank’s top executive Wiebe Draijer how the transitional journey of DSM started, and if this could be sustained, his answer was: “We didn’t know that. You never know for sure. If you have billions of sales and are paying your salaries every single day, there will be numerous people in your company telling you it isn’t necessary to change. But if you don’t lift your anchors, you never move.” So, DSM divested its petrochemical activities part by part, and invested in complete new branches – very successfully, as it turned out. On his journey to shape an industry, Sijbesma travelled the world and exchanged thoughts and ideas with various people from different industries. These encounters provided him with a diverse input and helped him to build his vision on how society would change.
“Choose right, and you can have a thriving company and an impact on the world.” – Feike Sijbesma
Building a vision for DSM also strengthened him in gaining a stronger perspective on the role of business in society in general: “Of course the share prize is important; none of us here is leading a philanthropic organization. But I strongly believe creating a better world is a task for companies. Economy is a distribution model of competences to live happy all together. And if we don’t live happy all together, we have to take our responsibility. When the world around you fails, you cannot call yourself successful. This evening, there will be 3.000 mothers in the world who will lose their own children in their arms. Will it be in the newspapers? No, because the same has happened this afternoon. And the same thing happened this morning. So: 9.000 children a day. If we, as a company, can have an impact on malnutrition, or if we can potentially have an impact, then we have the responsibility to address it. Use your influence.”
“Many of our big innovations were already proposed 5 or 6 times in the board room to be killed. There’s always a financial person who will say: ‘How long are we continuing with that hobby?’” – Feike Sijbesma
There is another responsibility that board executives need to take seriously according to Aimee van Wynsberghe: the ethical use of artificial intelligence. “That will be a topic of discussion in your board room between now and a year.” Van Wynsberghe, member of the European Commission's High Level Expert Group on AI: “What it comes down to is the data, and the cleanliness of the data that is being used. Is it acquired in an ethical manner? There already are organizations that provide a data nutrition label. If you are denied a loan by a bank and they can’t explain why, that’s not going to go over very well with customers. There already are companies that are critically examining the algorithms and striving for explainable AI. We need to have board level executives asking these questions. We’re in the middle of a movement. Customers, ngo’s, China, the US: they’re all looking at responsible AI. As recent as April 9th, the EU has published ethical guidelines. We can do a lot with AI. The question you should ask yourself is whether or not you should do something.”
“Ethical A.I. is about the humans behind the system and the decisions they are making. Not about creating machines that are ethical.” – Aimee van Wynsberghe
Adapt your Strategy
Ahold Delhaize was quite an early online player, coming from a strong store network. Now, the concern sees pure online players starting to build stores. Which is good news, says CEO Frans Muller: “We all believe that omnichannel has the future. But what is the right strategy? Food is a very different business than books and electronics. Human contact is important. Buying and selling food is a lot more complex than online players believe. I think that technologies like AI and forecasting are easier to copy than running a fresh food supply chain with high quality products, manage a store network and earning the trust that we built over the last 150 years. Think also about fresh, chilled and frozen products that need to be at the right temperature. Also, figuring out the last mile to deliver food to our customers is not easy. Some competitors, like Amazon Fresh have tried this, but haven’t succeeded.
A different definition
Andrew McAfee respond to Muller’s opening remarks: “I have never heard any CEO say: “Our business is just like anybody else’s. CEO’s are always extremely articulate why their industry is different from that industry that got disrupted by some younger, more digital company. Everything you said might be true. But if someone with a bookstore 20 years ago might have talked to me about how important they were in the community and that people wouldn’t want recommendations from a cold hard algorithm because a book is an emotional object, I believed him. And yet there aren’t many chain bookstores anymore.” Muller: “The definition of a supermarket will be very different. Diapers and detergents will go to our online stores. That creates more space with which we can do interesting things: health centres, nutrition advice. Our loyal customer base will help us design new products. Part of our ethical value is how we handle data. In the past, trust came from food safety, hygiene et cetera. The next source of trust will be data handling. So we’ll be very careful. We only use your data when there’s something to win for yourself. I’m quite happy with the GDPR in Europe. I think a sort of GDPR will come to America as well.”
The employees at Local Motors Industries think of themselves as the world’s first OEM: they can take concepts to deployed products in under one year, all on its unique digital thread. Jay Rogers and his staff are on a mission to transform mass manufacturing to micro-manufacturing in order to match the new pace of technology and quickly changing consumer needs. “Gone are the days when you can enter a market being a low cost provider. But being a differentiated provider is certainly possible.” Which proves Rogers’ own ground mobility, using open source designs.
It begins with a community
“If you know exactly which product you are going to make, you should go for mass production”, admits the CEO. “But if there is a chance that the customer is going to change on you in the middle of that, you look a lot better being a micro-manufacturing producer. If you think you’re the Gap and make the perfect t-shirt, you do that. But I’d bet on Zara every time, because of the faster turns. 3D-printing a car gives the customer more options. It’s the end result that matters to the consumer. Our motto is: ignore the world when you make a product, and the world will ignore your product. That’s why we begin all of our designs with a community. Local Motors has a global community of over 200.000 people around the world that believe in the brand. They have ideas and opinions and they are our future ambassadors.”
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