Video transcript: Vision and Value

Transcript

Hannah Fry: Hello and welcome to PwC's human-led, tech-powered series. In this episode, we're going to explore vision and value. We're going to look at the ways in which organisations need to combine human ingenuity and the right technology to unlock value and deliver on their vision for running a successful business in challenging economic times. I think it makes the most sense to start with a question about how significant the challenges are that businesses are facing at the moment.

Tim Allen: We're seeing more corporate profit warnings, actually the highest level since 2008. Coupled with that, the geopolitical uncertainty or the technology change speeding up. And also, what we're seeing is people from different working experiences, whether that's hybrid working, working at home, greater flexibility, but they also want their organisations to have greater purpose as well.

Suzanne Ellis: Yes. The challenges are real out there at the moment. Large scale macro economic challenges, both for businesses and also consumers, real people, a lot of volatility as well, really affecting the marketplace. At the same time, there are a lot of consumer changes, changes in people and expectations as well. And these give us positive challenges as well as negative ones.

Hannah Fry: Shane, do you think that we're at peak challenge at the moment?

Shane Finlay: Very good question. And I would say, absolutely not. I think the challenges that we're facing into now are only going to shift more. We're seeing a real rebalancing of the supply chain, of taxes, of regulatory landscapes, and that's just not settled yet. It'll take some time. Again, there's also the energy crisis that we're facing into. I think the impact is mostly on the people part. If we're looking at it across the organisations and where they're really struggling right now, it's that tried and true experience and expertise, which isn't necessarily lining up with where the organisation needs to take themselves forward.

Hannah Fry: Okay, so I really like your point there about how it's the sort of human aspect that is really notable. But I also wonder about what the impact of all of this is on the investments that businesses are choosing to make.

Shane Finlay: Part of the investment is looking even just about the vision and how to communicate the vision, that's a really good first step for the organisation. So just doing like a bit of a survey across your employees, to help them feed back what they feel, what they think. So the first investment is really about listening.

Suzanne Ellis: I think to build both of the points there, it's really, for me, about the purpose of the organisation. So for us, we've spent a couple of years now on that journey really getting clear that it's about healthcare for humanity and then lining up everything behind that to make sure that we really deliver to where our consumer needs and we focus on that deep human understanding.

Hannah Fry: But then, this is happening at the same time, as you say, that profit warnings, you know, are as bad as they've ever been, since 2008. So how does that fit in at the same time where there's pressure on finances?

Tim Allen: Well, I think it's about making choices, isn't it? And where you continue to invest. So one of my clients' private equity house was talking to me about their institutional investors. They want to see that despite the downturn, despite the economic pressures, they're still holding their nerve and still making the investments and the things that are going to drive value. In this case, digital and ESG investment.

Hannah Fry: Is there a temptation though to just ease off on ESG investments and on tech in particular?

Shane Finlay: The investment has to be strategic. You have to look at why you're investing in the organisation, be able to tell that good story and narrative to, you know, the street, to the stakeholders. But it's about spending in the right way and the strategic way and together. We can't go through this challenging time alone. We have to build it together.

Tim Allen: Quite often, there's an actual link between the financial value and those other sort of value considerations that we're discussing here. But the consequence of that, linked to that, is actually, that's much more attractive to people, to talent. They can associate with a purpose around that versus perhaps the legacy purpose. And then, all of that together creates a huge amount of value.

Hannah Fry: So it's the longer-term strategic difference that it's going to make rather than just the short-term, you know, bottom line, as it were.

Tim Allen: I think that's right, you're thinking more from a sort of longer-term enterprise value rather than a quarterly EBITDA, maximise the position there.

Hannah Fry: But then, I mean, this is like a very lovely vision of the future you guys are painting. Is everyone doing this or is this like-, are these the sort of people who are most switched on that have adopted this approach?

Shane Finlay: You know, the ones that will act boldly right now will be the winners. It is too dangerous to go slowly right now. That will see people exit markets. And what Tim's really saying here is you can't afford to buy cheap shoes. Right? And that's a hard lesson.

Suzanne Ellis: And I think that it comes back to purpose, but also right to operate. I think people take more of a mindset now that they're a steward of a company and that if that company wants to exist and needs to have-, that company needs to have a right to exist going forward, then it does need to do the right thing by society, by its employees, by its customers and consumers. And actually, when you put it in that context, it makes it much easier to make those decisions.

Hannah Fry: Well, in terms of that investment then, do you notice people making a big move towards investing in digital?

Suzanne Ellis: Absolutely. I see everyone, even now, even with the volatility that we just talked about, moving towards digital, digital product, digital operating model, digital connections, insight, and it's almost like you can't afford to miss out on that in the race. But you do need to be really thoughtful about where you place those investments.

Hannah Fry: Well, I want to pick up on that point actually. In terms of smart investment, what makes a smart investment? What are the kind of investments that people should be making at the moment?

Tim Allen: Clearly, it's understanding what you're buying and what you're investing in. So what is the investment case? What are the capabilities and the assets you're buying, particularly what are the digital capabilities that that business adds and what could they look like, in what is your investment horizon? Investors are looking for those digital capabilities and that potential, they're also looking for the talent in those organisations as well. And also the ability, the stickiness of that talent.

Suzanne Ellis: So as we think about deal value, particularly when we look at larger deals, what we've been trying to do is not just look at the value itself and business continuity and how do we achieve that value most quickly (ph 06.38), but also this piece around people and employee experience. Because what we've realised is that the better we can make the employee experience, as we move through, for example, an integration phase, that the better the organisation will be able to focus on growth as it comes out the other side of that. One thing that all of us can do is make no regret moves, whatever they might be. So for our portfolio, what is core to us, what should we divest, where will we never regret doing something that's right for the consumer, for the customer, for our expert base, that's where we should invest. What's going to vastly simplify our operating model from a technology perspective, that's where we should invest.

Shane Finlay: The no regret moves have got to be about doing it together. If you go alone, it will be risky, and I think anyone making an investment in an organisation that sees that lone movement is going to take pause. Now going it alone in technology means that you're building it on your own and you're setting your organisation up for some serious risk because when the headwinds come, those people that have built those solutions to deal with your current uncertain state, have moved on. Then your state is in a place of risk because you can't adapt to-, people aren't there to actually make it work. Lean on your partners to have the R&D strength that you don't and have the ecosystem and partners that they can also share with you so that when things change, they've already thought about that.

Hannah Fry: In some ways, what you're describing there is looking at the current landscape and trying to reduce the uncertainty almost.

Tim Allen: I think that's right, right. There's a farming proverb actually around, you don't fear an ill wind if you've got your hay tied down.

Hannah Fry: I'll have it printed above my door.

Tim Allen: I live my life by it. But I think organisations need to make sure they've gone back to some of the basics around that, right? So having-, I have a background in turnaround, so having a real understanding of liquidity, of your-, where your core strengths are, investing in those. And then when you are making investment choices, just making sure that you've thought through all the different scenarios, contingencies and risks that may materialise. What you need to really be very astute at is-, it's a bit of a cliché, but it's a scenario planning, right? So what will investors be wishing they'd done, they'd probably wish that they'd modelled that interest rates were not going to stay at record low levels forever. Now we're looking back and saying that, it seems obvious, right? But everyone just assumed that was the-, status quo would prevail. So I think it's thinking more about those, what used to be called black swan events, which are no longer black swans or black swans have become a lot more common. And modelling and understanding those and then going back to that, staying true to the fact that value is ultimately created by having that clear purpose with people tied to that and technology enablement throughout it.

Hannah Fry: So how important is technology when it comes to shaping those kinds of deals and investments that companies are making?

Tim Allen: I mean, I think it's critical. I can't think of a deal that I've been involved with for the last 5 years where technology's not at the heart of it.

Hannah Fry: At the heart of it, no less.

Tim Allen: At the heart-, I mean, any sector, it is, and in all different forms, right? Because technology is so enabling for what people are doing. Your point around why are companies investing, why groups are investing in technology in these times, well, it's because there's a-, they can see the payback.

Suzanne Ellis: So when I think about technology from a deals perspective, then I think of it from the two different angles. One is if we're buying the technology itself but secondly is then in the deals process. And you know, right up front initially, can you use technology for scanning the environment? Technology can obviously, you know, look through so much more than a human could possibly ever read in an enormously long amount of time. Then as you move into the diligence phase, we've actually used technology when we couldn't visit, for example, factories, so that we can do virtual tours. And then as we move into the integrations, that then systems and processes have always been absolutely critical to our deal value and moving with speed to extract that value as well.

Hannah Fry: Talk to me a little bit about the kinds of investments that are being made in healthcare into technology.

Suzanne Ellis: As a brief example, we talk about healthcare with humanity, and therefore, that leads us to talk about health inequality. And then we think about our existing products, for example, there might be people that can't read the labels, that don't understand the labels, etcetera, etcetera. So how do we really help them on that journey? So we've been working in partnership with Microsoft, with something that's called Seeing AI, which is a free app to really help people to understand the ingredients, how to use our products, what that looks like and we continue to lean into that partnership as time goes on.

Hannah Fry: So let me understand this then, is this a sort of smartphone app that you hover over a medicine bottle or whatever it is, that will tell you what's in there so you don't confuse your toothpaste with, I don't know, hair removal cream?

Suzanne Ellis: That's exactly right. Exactly right.

Hannah Fry: I guess my mind automatically goes to, we're in a time of, like, serious financial pressures in lots of ways. How can you prioritise that kind of investment at a moment like this?

Suzanne Ellis: I think it's about a win-win for everybody in that situation because if our consumers can use and engage with our products better, then that's better for them and it's also better for us as an organisation. So I think that it's finding that sweet spot where the consumer wins, the company wins, and society wins.

Hannah Fry: I guess technology can also help reduce time to market as well though.

Shane Finlay: Yes, absolutely. You brought up a brilliant point around intelligence and AI. Where can you inset something that's going to automatically happen so that you don't have to grind through that process on a time to market effort or anything else for that matter. You know, where do you remove your labour and get them more strategic so they can come up with different and new products that take to market? You want your whole force to be thinking about how your business is going to make revenue, not necessarily just doing their operational jobs.

Hannah Fry: I do wonder though, as we enter more into this era where we are creating more autonomous systems, where we are embedding technology more in our decision making, in our due diligence processes, how do you balance that tension sometimes that appears between human qualities like, you know, empathy and understanding of context and nuance and what the technology is suggesting is the right way forward?

Suzanne Ellis: We've spoken a lot about technology, but actually, we know that even if we acquire a brilliant technology that it won't land in our business without all of the human elements that we need to wrap around that.

Tim Allen: When you make a new investment on technology, you need to spend as much time thinking about how is this going to make people's lives easier, how is this going to make our customers' experiences better.

Hannah Fry: It's really noticeable how in everything you're saying, it's not just about thinking of the humans or the technology as though it's in isolation, it's really about how the 2 come together. So thank you very much for joining me, all of you, a really fascinating discussion. And just to let you know that you can catch up with all of the other episodes in our human-led, tech-powered series. Thank you very much.

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Kevin Ellis CBE

Kevin Ellis CBE

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Marco Amitrano ACA MCMI ChMC

Managing Partner & Head of Clients and Markets, PwC United Kingdom

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