Speaker 1: Because you're a subscriber to this Bloomberg podcast, we thought
Speaker 1: you'd be interested in a sponsored podcast called The Ceo Radar,
Speaker 1: produced by BCG and Bloomberg Media Studios. It analyzes more
Speaker 1: than forty eight hundred Q three earnings calls worldwide to
Speaker 1: assess what topics merit a CEO's time and attention. Here's
Speaker 1: a recent episode when the company is investing in these
Speaker 1: AI pilots. Are they spending too long on them? Are
Speaker 1: they giving up too quickly on them? Or is it
Speaker 1: just right? I wish it was just right. It's both.
Speaker 2: Actually they're closing some of them too soon and some
Speaker 2: of them they're just stinking on for way too long.
Speaker 3: But I think that focus on value creation and particularly
Speaker 3: where you can build distinctive value creations, that is the
Speaker 3: critical way to be thinking about where and how to
Speaker 3: apply AI right now.
Speaker 1: The Ceo Radar reviewed earnings calls at forty eight hundred
Speaker 1: companies worldwide to see what's on the agendas of both
Speaker 1: CEOs and the market as a whole. I'm Edward Adams
Speaker 1: of Bloomberg Media Studios on this episode. I'm joined by
Speaker 1: BCG Global Chair Rich Lesser and Lad Lukic BCG Global
Speaker 1: Leader Tech and Digital Advantage. Rich and Blad Welcome to
Speaker 1: the podcast.
Speaker 4: Great to be here, ed Nice to be here.
Speaker 1: In Q three, tariffs remain the top one or two
Speaker 1: topics that were most mentioned during earning's calls, both by
Speaker 1: CEOs and by analysts, but the number of mentions went
Speaker 1: down from Q two.
Speaker 4: There is a shift that I thought was really interesting.
Speaker 3: And when we did this a quarter ago, all of
Speaker 3: the discussions are about policy related topics that will happen.
Speaker 3: What will happen. Now it's about, Okay, what are we
Speaker 3: going to do? There is still policy uncertainty. It's not
Speaker 3: that things won't shift, but now I think everybody realizes
Speaker 3: substantial tariffs versus anything we've dealt with historically in decades
Speaker 3: are now most likely here to stay, certainly as it
Speaker 3: relates to the US, and now we have to navigate it.
Speaker 3: And I thought the interesting shift in the types of
Speaker 3: questions and conversations that CEOs and ANAUS were having was
Speaker 3: really quite reflective of that shift.
Speaker 1: And along those lines, they were talking far more about
Speaker 1: growth topics we saw this year, particularly in AI, a
Speaker 1: topic we didn't think necessarily could be mentioned any more often.
Speaker 1: Than it had been.
Speaker 3: What we observe in our research is a bell curve
Speaker 3: of behaviors where you've got about five percent of CEOs
Speaker 3: that are really at the cutting edge about how to
Speaker 3: embed AI into their core business, reshape how they operate
Speaker 3: and invent new business models drive the business. You've got
Speaker 3: another thirty or forty percent of CEOs that are well
Speaker 3: on that journey, and you've got about sixty percent of
Speaker 3: CEOs that are really struggling to get on that curve,
Speaker 3: often either six zeros six percent. Right, No, it's a
Speaker 3: hard it's a hard transition to make because on the
Speaker 3: one hand, you have to change your mindset about how
Speaker 3: you're going to translate AI into impact at scale, not
Speaker 3: just do interesting pilots, and then you have to change
Speaker 3: your mindset to raise Yes, there is an enormous amount
Speaker 3: of interesting and important tech in here, but the hardest
Speaker 3: part of that change is often the human part of
Speaker 3: that change, how you embedded in and processes, leadership skills,
Speaker 3: and companies just find that journey to be a bit hard,
Speaker 3: and so every year webs are more and more moving
Speaker 3: toward the more advanced and their ability to do it,
Speaker 3: but it's still a substantial percentage of CEOs that are
Speaker 3: struggling on that journey. But for the ones at the
Speaker 3: top of the list, I think they're thinking about it
Speaker 3: in very sophisticated ways. How do you pick fewer things
Speaker 3: rather than more and really deliver them?
Speaker 1: LAD, you're oftentimes down in the trenches with these companies,
Speaker 1: not necessarily always at the CEO level. Are you seeing
Speaker 1: any disconnect between what rich is reporting at the top
Speaker 1: and what you're seeing when you're talking to people two
Speaker 1: or three levels down.
Speaker 2: Many times you could have the direction lined up by
Speaker 2: the CEO and fully aligned.
Speaker 4: By the executives.
Speaker 2: But if you're running HR and now, you need to
Speaker 2: hire igentic engineers that know how to wire these workflows together.
Speaker 2: You need to change job descriptions, you need to introduce
Speaker 2: new titles, and many times they they don't know how
Speaker 2: to do that. They haven't done it before.
Speaker 1: Richard told us that they are About sixty percent of
Speaker 1: companies are still struggling to get out of the incubation phase.
Speaker 1: Right with AI, If we're on the outside of a company,
Speaker 1: how do we recognize a company has moved beyond and
Speaker 1: it's begun to really get some ROI from from its
Speaker 1: implementation of that.
Speaker 2: I mean, I would say focused on the bottom line results,
Speaker 2: like the really good ones immediately. However, we cut the
Speaker 2: data and when we look at it, the ones that
Speaker 2: have really leaned into AI are growing faster the numbers
Speaker 2: are there.
Speaker 1: Are you finding that that CEOs are willing to talk
Speaker 1: about that on earnings calls to sort of be public
Speaker 1: about yes, we're improving in AI is one of the
Speaker 1: reasons why.
Speaker 3: I think some are starting. One of the leading insurers
Speaker 3: talked at length about underwriting and how they've really thought
Speaker 3: about underwriting differently to be able to go faster and
Speaker 3: more effectively. And in commercial underwritings it's often a speed game.
Speaker 3: The ability to get to a proposal very soon for
Speaker 3: a client is critical to whether you're going to win
Speaker 3: the win the bid or not. And so a leading
Speaker 3: mining company has talked about how it's automated. A huge
Speaker 3: part of Western Australia runs it out of a control
Speaker 3: center with TED people uses predictive and enerve AI to
Speaker 3: be able to make much smarter decisions about what time
Speaker 3: of data fill different kinds of ships, how to run
Speaker 3: the whole process. Loreal has talked about beauty Genius. It's
Speaker 3: desired to create a more agentic beauty platform that people
Speaker 3: can use online and get recommendations, but also fulfilled orders
Speaker 3: and do things. And how they just did a major
Speaker 3: rollout here in the US and some other places this
Speaker 3: year that it's a learning mode, but those are real businesses,
Speaker 3: not just a small pilots.
Speaker 2: It's a test to build off of that. There is
Speaker 2: need to communicate for several reasons. Son, you need to
Speaker 2: get new talent. The talent is now looking at am
Speaker 2: I joining a company that will be a winner in
Speaker 2: the space, and will I get all the tools in
Speaker 2: my hands to be successful. The buyers are looking at
Speaker 2: their suppliers and saying are you going to be cutting edge?
Speaker 2: And are you going to be pushing on the innovation
Speaker 2: curve and on the cost curve fast enough to remain
Speaker 2: so the CEOs need to signal both to their employees
Speaker 2: and partners in the broader ecosystem that they're on top
Speaker 2: of this.
Speaker 1: I want to find out whether or not you're seeing
Speaker 1: AI as a job creator or a job killer, at
Speaker 1: least at this stage of the process. Lad, you're on
Speaker 1: the ground, what are you seeing?
Speaker 4: Yeah?
Speaker 2: Counter to like what we might hear in the media, right.
Speaker 2: I'm actively engaged with probably twenty engagements right now. Not
Speaker 2: a single one of them has a thesis on reducing
Speaker 2: the number of labor. It is about growth opportunities and
Speaker 2: growing the business. Now that is in the short term.
Speaker 2: Does that mean it doesn't have longer term implications for sure?
Speaker 4: Right?
Speaker 2: But where I'm seeing the winning convoys when you get
Speaker 2: the efficiency and then translate it into new value propositions
Speaker 2: to customers, right and grow the business. So that's the
Speaker 2: conbo that seems to be winning so far.
Speaker 3: I agree with that, but I would add the two things.
Speaker 3: One is, we have seen examples I mentioned earlier, the
Speaker 3: Australian example where a a mining company can control an
Speaker 3: enormous amount of land area autonomously have a control center
Speaker 3: with a very small number of people in it. I
Speaker 3: mean obviously that has labor displacement from the way they
Speaker 3: would have used to.
Speaker 4: Formal we would have operated.
Speaker 3: And then the second thing I'd say is there is
Speaker 3: so much capital going into AI and data centers now
Speaker 3: it's hard to see how that pays out in the
Speaker 3: long term if labor displacement isn't a part of that.
Speaker 2: I'm optim is that it's going to generally result in
Speaker 2: net positive number of jobs, but they're not going to
Speaker 2: be the same jobs. People will have to be reskilled
Speaker 2: and moving to new into new fields, et cetera. And
Speaker 2: the ones that embrace this are going to be more
Speaker 2: relevant than ever. If you embrace this and do it,
Speaker 2: you'd get a superpower and you can be more relevant.
Speaker 1: But at the beginning of the year, there's a lot
Speaker 1: of talk about agentic AI AI being able to accomplish
Speaker 1: tasks to a degree on its own right, to be
Speaker 1: able to book my flight to La get me a hotel,
Speaker 1: get me a dinner reservation without me having to get
Speaker 1: involved with it, as just one example. Are you still
Speaker 1: seeing that emphasis on agentic at the as we begin
Speaker 1: to close out the year, or has it has it
Speaker 1: shifted somewhat?
Speaker 2: For sure, it's it's still there, and it's in two
Speaker 2: specific flavors. One is articulating, are of the possible? Oh boy,
Speaker 2: wouldn't it be cool if we could combine all of
Speaker 2: these things together? Right, the reality is we're just not
Speaker 2: there to pull it off. So where we're seeing agentic
Speaker 2: being deployed is in a specific workflow end to end,
Speaker 2: but then with a human to act on the decision.
Speaker 2: What we're not seeing is and what a lot of
Speaker 2: folks are hoping for, is agents talking to agents and
Speaker 2: like stringing together a bunch of processes because you still
Speaker 2: have accuracies in the eighty to ninety percent range. So
Speaker 2: that means if I string together ten steps and each
Speaker 2: one of them is eighty percent accurate, at the end
Speaker 2: of it, I'm at less than fifty percent accuracy. So
Speaker 2: you do need a human in between that is interpreting
Speaker 2: and fine tuning the agents within.
Speaker 4: Those specific workflows.
Speaker 2: That's where we are, and for us to enable the
Speaker 2: next level, we'll need better data, we'll need better infrastructure.
Speaker 2: It was a fantastic catalyst to actually surface a lot
Speaker 2: of the basic needs that the companies need to rewire
Speaker 2: and rethink on their textag. So it's there as a
Speaker 2: catalyst and the promise of what it was can happen,
Speaker 2: and companies are leaning in and are committed to that
Speaker 2: motion for the years to come.
Speaker 4: Which I don't need to tell you.
Speaker 1: The valuations of the Magnificent seven and other AI related
Speaker 1: stocks are scott high. If those valuations were to tank,
Speaker 1: much as we saw the valuations of dot com companies
Speaker 1: tank during the dot com bubble. Do you think that
Speaker 1: companies will continue to invest in their own AI initiatives
Speaker 1: or do you think that may have a knock on
Speaker 1: effect in terms of how the worldwide corporate environment looks
Speaker 1: at AI.
Speaker 3: I think it will have very little effect on the
Speaker 3: real economy. It'll obviously have a massive effect on the
Speaker 3: stock market, as they represent a high share of total
Speaker 3: stock market valuations.
Speaker 4: If that's an aarrea where will occur.
Speaker 3: But I actually think the more companies see the kinds
Speaker 3: of impacts they can drive, and the more they can
Speaker 3: point to examples even if it's of competitors or in
Speaker 3: other industries that they can rise, they need to take action,
Speaker 3: that will be what drives momentum. I actually think that
Speaker 3: companies are realizing you can fundamentally operate differently with these technologies.
Speaker 3: Even if the market is overvaluated, there's no question AI's
Speaker 3: capabilities will continue to grow.
Speaker 1: Rich Are you finding that companies are investing in AI
Speaker 1: in the right kind of way?
Speaker 3: Obviously a subset are, but I'd say too many more
Speaker 3: than half are still at the stage where they're either
Speaker 3: investing may need to do pilots and not thinking about
Speaker 3: scaling or Equally importantly, they're doing the kinds of things
Speaker 3: that are important to stay competitive, to be more productive
Speaker 3: all of the many AI tools that come along from
Speaker 3: tech players and others, but insufficiently investing to what will
Speaker 3: really lead to competitive advantage, which is where you're either
Speaker 3: reshaping entire workflows or functions, where you're building new business models.
Speaker 1: So lad when a company is investing in these AI pilots,
Speaker 1: are they spending too long on them? Are they giving
Speaker 1: up too quickly on them? Or is it just right?
Speaker 1: I wish it was just right. It's both.
Speaker 2: Actually they're closing some of them too soon, and it's
Speaker 2: some of them they're just sticking on for way too long.
Speaker 2: We had a client that for three months was running
Speaker 2: a pilot and in an area that had so much
Speaker 2: value right and they were evaluating a tool that was
Speaker 2: available three months ago, and at the end of it
Speaker 2: was lukewarm results and they said, Okay, we're done. Well,
Speaker 2: there's so many new tools that got released in the
Speaker 2: last three months that can get the performance to the
Speaker 2: next level, but they gave up. So if you know
Speaker 2: that there is a lot of value in that workflow,
Speaker 2: sweat it out, stick with it, don't abandon it too
Speaker 2: soon because the pace at which the new tools are
Speaker 2: coming is so high. Right on the flip side, there
Speaker 2: are a number of them that are seeing good, interesting
Speaker 2: results from the pilots, but it's in a process that's
Speaker 2: not a bottleneck, and even if you solve it from
Speaker 2: ten days to minutes doesn't change the overall outcome. You're
Speaker 2: just increasing your cost. But they stick with it because
Speaker 2: the technologies, they can show cool demos and it's moving,
Speaker 2: but it ends up being a distraction. Stop stop those
Speaker 2: much sooner than kind of instead of creating zombies in
Speaker 2: the organization.
Speaker 1: So apply AI to the core of your business operations.
Speaker 3: Where there's business value in a very distinct and measurable way,
Speaker 3: as opposed to where you can do really interesting stuff
Speaker 3: that looks really cool. I mean not that we don't
Speaker 3: all like to have a little bit of cool. You
Speaker 3: want a little bit of pizaz in whatever you're doing.
Speaker 3: But I think that focus on value creation and particularly
Speaker 3: where you can build distinctive value creation that is the
Speaker 3: critical way to be thinking about where and how to
Speaker 3: apply AI right now.
Speaker 1: Since we're almost at the end of twenty twenty five.
Speaker 1: One of the questions we want to ask you was
Speaker 1: what were the kinds of attributes that CEOs needed this
Speaker 1: year to be.
Speaker 3: Effective rich resilience? Like this is another year that could
Speaker 3: be characteristic over this entire decade. But I just think
Speaker 3: this ability to take unexpected things and figure out how
Speaker 3: to navigate them and do it in a way that
Speaker 3: both anticipates as best you can, but then can respond
Speaker 3: quickly and adapt and then reimagine that set of attributes
Speaker 3: is turning out to be over and over again really
Speaker 3: critical in this world.
Speaker 1: Are you finding that most CEOs have that skill set
Speaker 1: or is it something that any of them are still
Speaker 1: reaching for.
Speaker 3: I think they've had to develop it a lot more.
Speaker 3: In fact, when I meet new CEOs that I do
Speaker 3: a lot of sessions with them, I always say, you
Speaker 3: have no idea how much this generation of CEOs is
Speaker 3: able to handle resilience. More than six years ago, pre COVID,
Speaker 3: it had been so steady for so long, I think
Speaker 3: people sort.
Speaker 4: Of lost that muscle.
Speaker 3: But now one thing after another, so I do think
Speaker 3: CEOs are generally more capable, but each shock requires something different,
Speaker 3: and the tear of challenges that we discussed on earlier
Speaker 3: podcasts this year I think required a new set of
Speaker 3: capabilities to be built. But people are more comfortable building
Speaker 3: new capabilities in this world, Blaed.
Speaker 4: What do you think really good ones not?
Speaker 2: As they were resilient, they were not shying away from
Speaker 2: asking some of the basic questions. I see too many
Speaker 2: CEOs that sometimes don't want to ask a basic question
Speaker 2: so they don't look silly in front of their technical
Speaker 2: staff or in front of the juniors. Right, and the
Speaker 2: really good ones went back to the basics. Okay, what
Speaker 2: problem are we solving for each customer? Where what will
Speaker 2: be the value created? So those the combination of resilience
Speaker 2: and going back to the basics was the winning combo
Speaker 2: this year.
Speaker 1: What was the best thing to come out of this
Speaker 1: whole tariff chaos that we saw this year?
Speaker 2: It forced people to step back and think, Okay, how
Speaker 2: do we make money in this business?
Speaker 4: Where are we irrelevant? What is the value we're delivering?
Speaker 2: And it really had them look at the business and
Speaker 2: I would argue for a lot of them to fall
Speaker 2: back in love with the business because there was a
Speaker 2: momentum they were just building off of.
Speaker 1: Interesting are you seeing companies focus their attention?
Speaker 3: I think this year pushed people to build geopolitical muscle
Speaker 3: that they probably needed to build in the long term anyway,
Speaker 3: but it really accelerated it. I mean often the people
Speaker 3: understood how to deal with tariffs and trade possees were
Speaker 3: three and four and five levels down understanding supply chain risks,
Speaker 3: not just in your own manufacturing, but deep into supply chains.
Speaker 3: We're really not getting the attention that they deserved. And
Speaker 3: I think the sharp impact of tariffs, the increases that
Speaker 3: are so substantial versus the last eighty ninety years of history,
Speaker 3: I think that's caused people to build muscle that will
Speaker 3: served them well in the long term, but had not
Speaker 3: received as much attention in years prior to this one.
Speaker 1: Rich and lad thanks for your insights today.
Speaker 4: Great to be here, Nice to be here.
Speaker 1: Those of you who would like to learn more about
Speaker 1: the CEO Radar can read the full report at Bloomberg
Speaker 1: dot com slash CEO Radar, and if you liked what
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Speaker 1: your favorite podcast platform. I'm Edward Adams of Bloomberg Media Studios.
Speaker 1: Thanks for listening.