WEBVTT - Embracing Digital While Maintaining the Physical

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic on Bloomberg Radio. Tim, how often

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<v Speaker 1>do we talk about companies going all in on digital

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<v Speaker 1>or hear from leaders, CEOs and more saying that's exactly

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<v Speaker 1>what they're doing, especially during the pandemic. I mean, that

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<v Speaker 1>is exactly what we heard over the last sixteen months, right.

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<v Speaker 1>And our next guest says, fun, you can go digital,

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<v Speaker 1>but it really needs to be about blending digital and

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<v Speaker 1>traditional business functions if you want a competitive advantage long term.

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<v Speaker 1>I think it's so timely that we're going to talk

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<v Speaker 1>to this guest, especially on a day when we're all

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<v Speaker 1>in on big tech and we're talking a lot about

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<v Speaker 1>digital strategies. We certainly are. Rob Siegel is a general

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<v Speaker 1>partner at ex C Capital, also a lecturer at Stanford's

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<v Speaker 1>Graduate School of Business, and the author of The Brains

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<v Speaker 1>and Braun Company, How leading organizations blend the best of

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<v Speaker 1>digital and physical. He joins us on the phone from

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<v Speaker 1>Silicon Valley, Rod, How you doing, I'm doing great, Tim,

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<v Speaker 1>Thanks for having me. What do you what do you

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<v Speaker 1>think of when you hear a company say what what?

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<v Speaker 1>Carol just said, because they tell us that all the

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<v Speaker 1>time that the key to growth is making sure that

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<v Speaker 1>you disrupt your existing business model, but do it in

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<v Speaker 1>a way that allows you to not actually cannibalize what

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<v Speaker 1>exists already. But digitization is really really important, but it's

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<v Speaker 1>not a panacea. And increasingly, what I see through the

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<v Speaker 1>companies I invest in as a as a as a

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<v Speaker 1>venture capitalist, but also those that I get to study

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<v Speaker 1>through my work at Stanford, is that the best companies

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<v Speaker 1>right now are blending the best of both digital and physical.

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<v Speaker 1>And we saw this, you know, the pandemic accelerated this,

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<v Speaker 1>that it wasn't just enough that we could shop online

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<v Speaker 1>and communicate online. You're all about case, Yeah, you're all

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<v Speaker 1>about case studies in this book. So give us a

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<v Speaker 1>few examples of some of these best companies. Well, so,

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<v Speaker 1>on the retail side, we saw magnificent performance from home Depot,

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<v Speaker 1>from Best Buy, and from Target, who really invested in

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<v Speaker 1>infrastructure and logistics as well as a great digital capability

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<v Speaker 1>where people could shop that way. And we also saw

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<v Speaker 1>obviously Amazon has done a tremendous job. And so we're

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<v Speaker 1>seeing organization in functions like retail, financial services, even healthcare,

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<v Speaker 1>doing a great job of making sure that there's both

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<v Speaker 1>a digital and physical component to everything that they do. So,

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<v Speaker 1>you know, it's in an interesting time to be talking about,

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<v Speaker 1>especially when we've seen increased Chinese oversight of uh they're

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<v Speaker 1>big tech companies specifically about data collection and China wanting

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<v Speaker 1>more at the government, the Chinese government wanting more control.

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<v Speaker 1>Do you believe that because of this combination of brains

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<v Speaker 1>and braun that some of those big tech companies they

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<v Speaker 1>do have too much focus on kind of the brainy

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<v Speaker 1>element of what they're doing and that they need to

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<v Speaker 1>be either more diverse or more government oversight. Well, you

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<v Speaker 1>raised an interesting point, Carroll, and that what's going to

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<v Speaker 1>end up happening is how supply chains will we configure

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<v Speaker 1>Where manufacturing jobs are going to be placed is a

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<v Speaker 1>function of the global economic competitiveness, largely written by the

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<v Speaker 1>challenges in the United States and China. And so no

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<v Speaker 1>matter what you manufact tour, no matter what you deliver

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<v Speaker 1>to your customers, as every good becomes connected, right because

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<v Speaker 1>there's a software component and the connectivity component to everything

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<v Speaker 1>digital organization, they're going to have to think about where

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<v Speaker 1>they're going to put their factories and factories can be

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<v Speaker 1>you know, traditional you know manufacturing factories. We do also

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<v Speaker 1>have additive manufacturing will which will allow you to put

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<v Speaker 1>basically factories at your customers client sides. And the companies

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<v Speaker 1>are going to think about how they construct all of

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<v Speaker 1>their digital and physical attributes. And historically companies are in

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<v Speaker 1>Silicon Valley haven't had to do that, and that's going

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<v Speaker 1>to have to change. Hey, rob we can learn a

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<v Speaker 1>lot from companies that have been really successful in this transition,

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<v Speaker 1>but we can also learn a lot from companies that

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<v Speaker 1>haven't been. What are some examples of companies that didn't

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<v Speaker 1>successfully make this transition and we can learn from that. Well,

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<v Speaker 1>you can think about that. For example, Borders back in

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<v Speaker 1>the day did not do a good job of figuring

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<v Speaker 1>out what Amazon was going to be doing to their business,

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<v Speaker 1>how they partner, how they you know, made sure they

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<v Speaker 1>talk to their customers. And we're seeing I think a

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<v Speaker 1>lot of the large mobility company really struggle. One of

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<v Speaker 1>the companies we look at in the book is Daimler,

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<v Speaker 1>which is a manufacturing and design engineering powerhouse, but they've

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<v Speaker 1>really done a very poor job on connectivity, on software,

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<v Speaker 1>and so they're really struggling behind companies like Tesla, which

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<v Speaker 1>you're going to do a phenomenal job and are doing

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<v Speaker 1>a phenomenal job of designing cars digitally first, and soon

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<v Speaker 1>that you mentioned China earlier, China will become an export

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<v Speaker 1>player in the automotive market. And so you can see

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<v Speaker 1>a lot of the incumbent carmakers really trying to fight

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<v Speaker 1>what they were doing before, which was basically bending metal

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<v Speaker 1>and designing great machines instead of thinking these devices as

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<v Speaker 1>if you will moving sensors on wheels, Well, what's interesting,

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<v Speaker 1>and I think about, in particular our audience, how do

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<v Speaker 1>they need to think about what you're saying in terms

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<v Speaker 1>of long term investment plays well, if you are thinking

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<v Speaker 1>about a physical company or something was with a physical DNA,

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<v Speaker 1>one of the questions you want to be asking is

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<v Speaker 1>are they investing in things like analytics and digital infrastructure?

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<v Speaker 1>Are they hiring the right type of people. Are they

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<v Speaker 1>developing competencies in ways that they can communicate with their customers.

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<v Speaker 1>We also need to think about are they changing, you know, creatively,

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<v Speaker 1>their business models as well as the technologies that they developed.

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<v Speaker 1>Are they really reaching out to their customers. One of

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<v Speaker 1>the companies we studied was Kaiser Permanente to the large

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<v Speaker 1>healthcare provider. And you know Bernard Thompson used to when

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<v Speaker 1>he would come to Stanford and talk to the students,

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<v Speaker 1>really kind of showed empathy, empathy for all the players

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<v Speaker 1>in the ecosystem, his doctors, his nurses, the communities, he

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<v Speaker 1>was in, the patients, and he really understood where everybody

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<v Speaker 1>was shaping their business. And so the question we have

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<v Speaker 1>to asked about the large incumbent organizations are they doing

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<v Speaker 1>those things? Are they really taking risks and running towards

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<v Speaker 1>the disruption or they just trying to hold on to

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<v Speaker 1>what they have before. All right, So it's interesting, Um,

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<v Speaker 1>if the companies don't get it right and do that

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<v Speaker 1>combination rob of brains and braun, then what well, then

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<v Speaker 1>everybody who works there should probably update their LinkedIn profiles

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<v Speaker 1>because you know what is going to happen, and what

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<v Speaker 1>what digital enables is you have companies that can come

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<v Speaker 1>into new market segments and maybe you didn't see them coming.

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<v Speaker 1>I mean a great example is that as Stripe and

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<v Speaker 1>what Stripe has done in payments and transactions in ways

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<v Speaker 1>that a lot of the large existing players didn't see

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<v Speaker 1>who were in kind of bee the whole transaction and

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<v Speaker 1>merchant process and account and so you've got to really

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<v Speaker 1>kind of be playing offense on this because you don't

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<v Speaker 1>always know where the attack is coming from. You know,

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<v Speaker 1>what happens when Uber and DD going to logistics and

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<v Speaker 1>what impact is that going to have on Federal Express

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<v Speaker 1>and ups and DHL. So people are gonna be completely

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<v Speaker 1>rethinking their business models and the technologies and the market

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<v Speaker 1>that they can go after. Hey, Rob always like to ask,

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<v Speaker 1>and we only have about twenty seconds left. Um. People

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<v Speaker 1>who teach a business schools lecture, a business schools lecture

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<v Speaker 1>at Stanford, where do your students want to go work

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<v Speaker 1>right now? So it's funny they a lot of times

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<v Speaker 1>they want to actually go to what I'll call the

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<v Speaker 1>sexy tech companies or they want to start their own companies.

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<v Speaker 1>We are starting to steal a lot of you know,

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<v Speaker 1>of the students, and we teach students from all over

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<v Speaker 1>the world. We're actually looking at a lot of the

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<v Speaker 1>larger established organizations who are doing some really interesting things.

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<v Speaker 1>So it's not just that everybody wants to do their

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<v Speaker 1>own startup anymore. We're starting to see people who actually

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<v Speaker 1>want to go in and actually have some big impacts

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<v Speaker 1>in some of the larger organizations because they really exciting

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<v Speaker 1>things going on there. That is an interesting trend um.

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<v Speaker 1>Rob Segel, thank you so much. Really enjoyed this general

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<v Speaker 1>partner Next Capital, author of the Brains and Braun Company,