Not too long ago I spoke with the CEO of a global operating company about his major business challenges. I call him Joe. His company develops, manufactures and sells discrete consumer products. The sales is via a huge international network of retailers, and via some direct sales. He has more than 30,000 employees, in more than 100 countries, and over 10 plants. Joe's company is listed and he reports on a regular basis about the progress of the company to both the financial markets and his non-executive Board.
"Well, there are many challenges, where do you want me to start?" I answered: "Talk about those challenges that keep you awake at night". "OK, here you go".
"The Major challenge I have is to predict in a trustworthy way the future of the business, how the business will develop. For shareholders the expectation of future business is key for their confidence and longer-term financial loyalty. Of course I also have to report results of the current business, revenue numbers, market share, etc. and of course they want to see a positive trend here, but even more than that they want to know how we as a company want to respond to major trends in the market, like the AI trend and the energy crisis, how we want to compete, where we want to invest new capital.
"Concretely, how we want to compete with the cheap and intense competition from Chinese competitors, and from South Korea, in the long run. So, my challenge is to present a trustworthy pipeline of new products and new market segments with realistic financial estimations, and concrete timelines."
I asked: "You mentioned trustworthiness a couple of times already. Why?". He continued: "Let me tell you, if my promises are not trustworthy, the shareholders will replace me immediately. And fact is, we are not so good as a company to launch on time, the products that we agreed to launch, we are too often too late, and we have many recalls, because we have to cut corners.
"I was a mechanical engineer myself, so I know what it means to deal with the pressure at the shop floor in R&D and in the Plants. For me the timing is very key, because it influences our cash position directly. If a product is 2 months late in say 3 regions, you have a gap in your expected cash position, revenues".
I asked: "Why is it so difficult to be on time in the market with the agreed products? Any idea?". Joe answered: "Huub, we need hours to discuss this. But high level the challenge we have is to design and produce products that meet the latest demands of the market. Not easy. In the first place we have to offer green products, products that are ready for the circular economy. This demands not only new technologies, but even more rethinking and reorganization of our complete ecosystem. For example which partners will collect and reuse the waste of our products once with the consumer, in all these countries. It is a major challenge.
"And on top of that we have to deal with the demands of digitization. The market expects 'smart' products, and even for a cheaper price. My company struggles to combine these 2 major KPIs. Ideally the digitization is a mean to greener products, but many of the digital people put themselves in the center, it is a cultural thing. They believe software is the center of the universe, but of course this is not the case. My challenge is to get them work together towards one and the same KPI: green products that are smart. I cannot sell smart products that are not green in my markets. I hope that AI can help us to be quicker and cheaper, and to be On Time! How, I don't know yet, we must figure it out very soon".