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Speaker 1: Because you're a subscriber to this Bloomberg podcast, we thought

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Speaker 1: you'd be interested in a sponsored podcast called The CEO Radar,

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Speaker 1: produced by BCG and Bloomberg Media Studios. It analyzes almost

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Speaker 1: forty seven hundred earnings calls worldwide to assess what topics

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Speaker 1: merit a CEO's time and attention. Here's a recent episode.

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Speaker 1: The CEO Radar is meant to be a tool for

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Speaker 1: CEOs to compare their own agendas to those of their peers,

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Speaker 1: as well as the market as a whole. To do so,

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Speaker 1: it took a look at the topics that were discussed

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Speaker 1: on almost forty seven hundred earnings calls in the fourth

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Speaker 1: quarter of twenty twenty four. I'm Edward Adams of Bloomberg

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Speaker 1: Media Studios on this first episode of the Ceo Radar

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Speaker 1: podcast to unpack the topics behind the numbers. I'm joined

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Speaker 1: by Christoph Schweitzer, CEO of BCG, and by Judith Wallenstein,

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Speaker 1: who heads the firm's CEO advisory practice. Between them, they

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Speaker 1: speak one on one to more than six hundred CEOs

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Speaker 1: in the course of a given year. Let's begin with AI.

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Speaker 1: It's clearly still a top ten topic for CEOs. And

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Speaker 1: we certainly saw a huge increase in the number of

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Speaker 1: mentions of it when chat GBT was released in twenty

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Speaker 1: twenty two. However, in twenty twenty four we did see

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Speaker 1: the number of mentions begin to plateau, and in fact,

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Speaker 1: there was about a seven percent dip in the number

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Speaker 1: of mentions of AI and machine learning in the fourth

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Speaker 1: quarter of last year. So while it remains a big topic,

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Speaker 1: it seems as if something is afoot here, something is

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Speaker 1: changing the way that it's being deployed in companies. What

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Speaker 1: are you hearing from the CEOs that you speak to.

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Speaker 2: About Overall, it's about three quarters of company data say

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Speaker 2: AI is a top strategic priority for them, but only

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Speaker 2: about one quarter feels that they are seeing the value

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Speaker 2: that they were hoping to see. So there's a meaningful

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Speaker 2: gap between ambition and reality. And I do think what

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Speaker 2: that in uces is you're just a bit more careful

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Speaker 2: in your earning call as you talk about it. I

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Speaker 2: think that's what the number suggests.

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Speaker 1: Judith, We've seen some regional differences in terms of the

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Speaker 1: mentions of AI and machine learning. It's held relatively constant

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Speaker 1: in North America, it's actually gone up in Asia, but

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Speaker 1: it's been down significantly in Europe. It was mentioned thirty

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Speaker 1: nine percent less in quarter four than in quarter three.

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Speaker 1: What do you make of that?

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Speaker 3: In general, we do see some topics that are fairly consistent.

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Speaker 3: The whole struggle and challenge too, from the proliferation of

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Speaker 3: use cases to real impactful programs is something we hear

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Speaker 3: from European CEOs and the same way we hear it

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Speaker 3: in other parts of the world.

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Speaker 2: It's an interesting window because companies are now in our observations,

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Speaker 2: separating into those that are real within us in THEI

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Speaker 2: space and others that are laggards and struggled to get

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Speaker 2: the value out of it. The winners, for sure, are

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Speaker 2: a lot more focused. They don't have one thousand flowers bloom.

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Speaker 2: They have fewer use cases, fewer functions that they focus on.

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Speaker 2: They invest significant money in a really focused, concentrated way,

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Speaker 2: and very importantly, they double down on upscaling their organization,

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Speaker 2: on upscaling their team so that they change the way

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Speaker 2: they really work in every single day, and then they

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Speaker 2: measure it in a quite systematic way operationally and financially.

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Speaker 2: That's what separates the winners from those that are lagging.

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Speaker 3: Probably three data points why I think the topic remains

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Speaker 3: as high on the agenda. One is the whole excitement

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Speaker 3: about agents is very consistently in the Bloomberg BCG radar

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Speaker 3: across all geographies. The second one, if you look at

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Speaker 3: the companies that have upskilled more than twenty five percent

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Speaker 3: of their workforce on AI, there's Japan and Singapore very

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Speaker 3: much on the top. But then actually you have a

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Speaker 3: number of European markets where these companies are headquartered. Before

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Speaker 3: even you have the US and European CEOs who were

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Speaker 3: surveyed on their willingness to invest find themselves pretty much

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Speaker 3: in the same ballpark range than other markets that that

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Speaker 3: are ready to invest. What is more pronounced is the

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Speaker 3: insecurity on regulation, and in a continent that's a lot

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Speaker 3: more where policymaking and regulation are more prominent and visible,

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Speaker 3: you actually see that CEO say, look, I have no

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Speaker 3: idea what to expect of this, like the EUAI Act,

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Speaker 3: and how is a company we're going to navigate.

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Speaker 2: My anticipation for twenty twenty five is that we are

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Speaker 2: actually going to see quite some bifocation. I think there

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Speaker 2: will be fantastic success stories. We are starting to see

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Speaker 2: some of those. For example in biopharma research and development.

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Speaker 2: We see it in some of the coding for big

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Speaker 2: software companies, but also for banks and insurance companies and

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Speaker 2: similar We also see some great examples in field services.

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Speaker 2: We see great example in customer service and kind of

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Speaker 2: customer interaction management of all sorts. So there are some

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Speaker 2: great success stories emerging, but it turns out it is

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Speaker 2: harder than many CEOs thought when they went on stage

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Speaker 2: in their earning scool year or eighteen months ago go

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Speaker 2: and make big promises.

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Speaker 1: So you mentioned AI agents, which is something that we

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Speaker 1: saw in uptick in mentions of this quarter. I think

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Speaker 1: quarter three there were about twenty four mentions of agents globally,

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Speaker 1: hardly on the radar at all, and this past quarter

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Speaker 1: there were one hundred and five. Is that sort of

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Speaker 1: the new flavor of the month for AI. AI agents

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Speaker 1: is going to be what we'll be talking about in

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Speaker 1: twenty twenty five.

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Speaker 2: Well, we believe that AI agents are going to be

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Speaker 2: an important next step of evolution of functionality and also

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Speaker 2: impact potentially for the companies that really adopted in a

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Speaker 2: productive way. So it's going to be sizeable. However, it's

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Speaker 2: also still very early days, and I think it's important

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Speaker 2: to calibrate, and we have about more than one hundred

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Speaker 2: mentions of AI agents, but we have about one thy

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Speaker 2: four hundred mentions of AI, So it's it's the next thing.

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Speaker 2: We believe in the potential. We expect that you will

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Speaker 2: hear it more frequently mentioned in twenty twenty five earnings releases.

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Speaker 2: But between that and the substance in the P and L,

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Speaker 2: I think there's quite a bridge to cross.

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Speaker 1: A lot of companies in recent years have been saying

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Speaker 1: that AI is not going to be a job killer,

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Speaker 1: that it's going to be something that changes the way

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Speaker 1: in which a lot of people work, but it's not

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Speaker 1: going to eliminate positions in their enterprises. I'm curious what

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Speaker 1: your view on that is.

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Speaker 2: Well, our observation is in line with what you just said.

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Speaker 2: There are not many companies, In fact, there are less

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Speaker 2: than ten percent of companies where AI deployment has led

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Speaker 2: to redundancies and people being let go. In fact, it's

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Speaker 2: a bit kind of the classical pattern, right, I mean

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Speaker 2: ten twenty years ago, we were all speculating that digital

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Speaker 2: and the iPhone and similar devices would completely make parts

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Speaker 2: of the workforce obsolete, and that has not happened. In fact,

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Speaker 2: it has created anti new industries, new functions, new things.

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Speaker 1: Let's certain of these new agendas that CEOs are facing,

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Speaker 1: As you guys know, the Radar found that CEO mentions

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Speaker 1: of environmental topics such as cloud exposure or greenhouse gas

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Speaker 1: emission targets and ESG topics as well like board independence

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Speaker 1: and diversity. All four of those topics declined in Q

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Speaker 1: four and that's really a continuation of a decline that

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Speaker 1: they have been seeing in recent quarters in prior years.

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Speaker 1: What do you think explains those declines?

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Speaker 3: Ju I think it useful that high water mark of

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Speaker 3: talking about climate emissions companies climate targets in twenty twenty,

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Speaker 3: and it has declined ever since. If we reflect what

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Speaker 3: we hear from CEOs, you frankly have the full spectrum.

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Speaker 3: You have those who say, thank god, I mean, my

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Speaker 3: board's letting me off the hook on this climate thing now.

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Speaker 3: And you have those who actually feel, in a moment

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Speaker 3: where the topic might have less public attention, it's a

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Speaker 3: fantastic moment to double down and invest to outcompete in

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Speaker 3: the long term, specifically in those areas in the energy

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Speaker 3: transition where CEOs feel they can invest in technologies where

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Speaker 3: scarcity will prevail in the to long term and where

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Speaker 3: they will be better positioned. You also see that in

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Speaker 3: the radar you see that mentions of individual green technologies

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Speaker 3: go up, such as clean hydrogen, but actually quite a

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Speaker 3: margin in all regions. You also see that climate risks

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Speaker 3: and natural hazards are one of the topics that have

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Speaker 3: risen to the top, actually grown by more than one

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Speaker 3: hundred and ten percent, probably not a big surprise. Eighty

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Speaker 3: percent of these mentions come from US CEOs, who also

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Speaker 3: have seen the highest number of the basically natural hazards

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Speaker 3: and weather phenomena happening in the past year that have

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Speaker 3: created damages of a billion plus in each and every case.

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Speaker 2: My observation, in line with what Judith said, is that

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Speaker 2: within the companies there is still largely a commitment to inclusion.

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Speaker 2: There's a commitment to managing climate risk, to decarbonizing and

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Speaker 2: setting up the company for the future. And so I

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Speaker 2: do think substantively CEOs and companies are continueing to steer

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Speaker 2: in that direction, but they do it in a much

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Speaker 2: more selective, in a more calibrated, and certainly in a

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Speaker 2: much less vocal way. It's one of the topics where

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Speaker 2: I think substantively behind doors, there's a lot more action,

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Speaker 2: a lot more commitment, as you also describe you to

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Speaker 2: than you hear in the earnings calls.

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Speaker 1: As environmental and cultural issues have declined in importance, trade

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Speaker 1: and taxes have seemed to have taken their place. Right.

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Speaker 1: There were over forty national elections last year around the globe,

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Speaker 1: and generally, if you were a challenger and you were

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Speaker 1: focused on economics, you won the day. In those elections,

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Speaker 1: CEOs mentioned supply chain shifts and tax policy. Those mentions

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Speaker 1: rose by almost double digits in Q four. But oddly

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Speaker 1: CEOs talked less about tariffs, which we know is going

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Speaker 1: to be a huge topic this year. They spoke about

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Speaker 1: sixteen percent less than they did in Q three, whereas

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Speaker 1: the analysts spoke about it one hundred percent more than

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Speaker 1: they did in Q three. Christoph, what's going on there?

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Speaker 2: I think the analysts understand that there will be meaningful

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Speaker 2: impact on the P and L of major multinational companies,

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Speaker 2: and they are starting to model that and put it

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Speaker 2: in a kind of their assessment of the quality and

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Speaker 2: rating of companies. I think CEOs are staring at tariffs

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Speaker 2: and they know something is going to happen, and they

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Speaker 2: watch as Q one evolves how it will impact their business,

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Speaker 2: and then they're going to talk about it. I expect

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Speaker 2: they will talk a lot about it in twenty twenty five.

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Speaker 2: But I mean, what could you say in twenty twenty

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Speaker 2: four You were waiting in anticipation of what the first

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Speaker 2: quarter would bring, and now here we are.

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Speaker 1: Right when we look forward to twenty twenty five. One

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Speaker 1: of the things that you were mentioning before we began

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Speaker 1: taping was a rise in M and A activity, and

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Speaker 1: certainly discussion about that on these calls. What's driving that?

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Speaker 1: What's behind the increase that you expect to see come

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Speaker 1: the first quarter this year?

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Speaker 2: Well, our own word at the moment, as BCG tells

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Speaker 2: us that there will be meaningfully more M and A

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Speaker 2: in twenty twenty five. It's not a topic that you

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Speaker 2: talk about in your earnings call until it happens, right,

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Speaker 2: Neither if you're an acquirer, nor if you're potentially a target.

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Speaker 2: You talk about this until the moment when it happens.

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Speaker 2: But fundamentally, we do believe there are some very important

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Speaker 2: factors that are going to drive activity. First of all,

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Speaker 2: we had a number of relatively low MNA years, there's

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Speaker 2: pent up demand. Number Two, we expect that private equity

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Speaker 2: is going to put some of its dry powder to

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Speaker 2: work in twenty twenty five, but also private equity are

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Speaker 2: going to exit some of the assets that they've been

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Speaker 2: holding longer than they anticipated. Third, there will presumably be

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Speaker 2: some moderation of interest rates. In fact, there has been

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Speaker 2: a decline in interest rates and important parts of the world.

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Speaker 2: A bit less in the US than people would have

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Speaker 2: thought last year, for sure, But I mean the trend

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Speaker 2: is the trend. And lastly, I think many companies do

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Speaker 2: anticipate that the regulatory environment from an anti trust perspective

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Speaker 2: is going to be easier to navigate. And you take

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Speaker 2: those factors together, we expect there will be meaningful M

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Speaker 2: and A and not only acquisition but also carve out

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Speaker 2: of business units and divisions in twenty twenty five. For sure.

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Speaker 2: It's one of the topics where we feel the demand

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Speaker 2: that we experience as PCG is ahead of what they

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Speaker 2: talk about in the ONEX cours.

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Speaker 1: Judith, when you think about the way in which CEO

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Speaker 1: roles have been changing in recent years, what's your census

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Speaker 1: to the way CEO should sort of approached their task

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Speaker 1: in twenty twenty five, if you had to give them

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Speaker 1: a sort of thirty thousand foot look at what the

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Speaker 1: way in which they should do things, perhaps differently in

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Speaker 1: the coming months than they have in prior months, or

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Speaker 1: be a recommendation if you look at.

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Speaker 3: The last years, I think CEOs have gone through these

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Speaker 3: waves of deciding where to take positions in a much

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Speaker 3: more divided, polarized world, often with very passionate workforces that

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Speaker 3: literally wanted their CEO to take positions on everything from

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Speaker 3: a local community issue too political turmoil in the world,

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Speaker 3: and a lot of CEOs have done so because they

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Speaker 3: felt this is what it meant to have the back

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Speaker 3: of their organization. And I think most of them have

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Speaker 3: realized that's a very very slippery slope. It's very difficult

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Speaker 3: because that could keep you busy the entire day. It

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Speaker 3: also exposes your business quite a bit. And I think

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Speaker 3: most of them have gone back to say, how do

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Speaker 3: I strike that subtle balance of empathizing with my workforce

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Speaker 3: where people live the exposure to hate speech, political division

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Speaker 3: a lot more every single day. How are you the

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Speaker 3: great unifier in a way internally where you promote the

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Speaker 3: values of the company's civil dialogue, the need to really

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Speaker 3: exchange and listen to each other while not taking positions

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Speaker 3: on everything and anything. And I think that's a very

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Speaker 3: fine line. I think it's also a really noble task

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Speaker 3: because even a more chaotic, more insecure world, you can

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Speaker 3: provide purpose and direction to organization, and if you can

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Speaker 3: give them the feeling that in a world where they

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Speaker 3: often feel powerless, they can contribute and have impact on

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Speaker 3: something that matters for the company, for the community, and

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Speaker 3: to larger society. In the end, I think that really

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Speaker 3: mobilizes an organization and that gives everyone a place to

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Speaker 3: rally around.

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Speaker 1: It's an interesting notion that they function as a unifier

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Speaker 1: in chief in a very divisive time. I mean, I

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Speaker 1: think it's clear that we're at an inflection point here.

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Speaker 1: We're not just changing years or not just changing quarters,

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Speaker 1: but business is headed in some kind of a different direction. Clearly,

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Speaker 1: twenty twenty five and beyond, these topics are going to

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Speaker 1: be playing out in it's very very interesting ways. I

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Speaker 1: want to thank you both for your insights today. For

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Speaker 1: those of you who would like to explore the CEO

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Speaker 1: radar in greater depth, you can see the entire report

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Speaker 1: at Bloomberg dot Com slash CEO Radar. If you like

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Speaker 1: what you're hear, we recommend that you subscribe on YouTube

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Speaker 1: or the podcast platform of your choice to get our

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Speaker 1: second episode, which will drop in early Q two with

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Speaker 1: an entirely new batch of data. I'm Edward adams On,

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Speaker 1: behalf of BCG and Bloomberg Media Studios. Thanks for listening.