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 almost
Speaker 1: forty seven hundred earnings calls worldwide to assess what topics
Speaker 1: merit a CEO's time and attention. Here's a recent episode.
Speaker 1: The CEO Radar is meant to be a tool for
Speaker 1: CEOs to compare their own agendas to those of their peers,
Speaker 1: as well as the market as a whole. To do so,
Speaker 1: it took a look at the topics that were discussed
Speaker 1: on almost forty seven hundred earnings calls in the fourth
Speaker 1: quarter of twenty twenty four. I'm Edward Adams of Bloomberg
Speaker 1: Media Studios on this first episode of the Ceo Radar
Speaker 1: podcast to unpack the topics behind the numbers. I'm joined
Speaker 1: by Christoph Schweitzer, CEO of BCG, and by Judith Wallenstein,
Speaker 1: who heads the firm's CEO advisory practice. Between them, they
Speaker 1: speak one on one to more than six hundred CEOs
Speaker 1: in the course of a given year. Let's begin with AI.
Speaker 1: It's clearly still a top ten topic for CEOs. And
Speaker 1: we certainly saw a huge increase in the number of
Speaker 1: mentions of it when chat GBT was released in twenty
Speaker 1: twenty two. However, in twenty twenty four we did see
Speaker 1: the number of mentions begin to plateau, and in fact,
Speaker 1: there was about a seven percent dip in the number
Speaker 1: of mentions of AI and machine learning in the fourth
Speaker 1: quarter of last year. So while it remains a big topic,
Speaker 1: it seems as if something is afoot here, something is
Speaker 1: changing the way that it's being deployed in companies. What
Speaker 1: are you hearing from the CEOs that you speak to.
Speaker 2: About Overall, it's about three quarters of company data say
Speaker 2: AI is a top strategic priority for them, but only
Speaker 2: about one quarter feels that they are seeing the value
Speaker 2: that they were hoping to see. So there's a meaningful
Speaker 2: gap between ambition and reality. And I do think what
Speaker 2: that in uces is you're just a bit more careful
Speaker 2: in your earning call as you talk about it. I
Speaker 2: think that's what the number suggests.
Speaker 1: Judith, We've seen some regional differences in terms of the
Speaker 1: mentions of AI and machine learning. It's held relatively constant
Speaker 1: in North America, it's actually gone up in Asia, but
Speaker 1: it's been down significantly in Europe. It was mentioned thirty
Speaker 1: nine percent less in quarter four than in quarter three.
Speaker 1: What do you make of that?
Speaker 3: In general, we do see some topics that are fairly consistent.
Speaker 3: The whole struggle and challenge too, from the proliferation of
Speaker 3: use cases to real impactful programs is something we hear
Speaker 3: from European CEOs and the same way we hear it
Speaker 3: in other parts of the world.
Speaker 2: It's an interesting window because companies are now in our observations,
Speaker 2: separating into those that are real within us in THEI
Speaker 2: space and others that are laggards and struggled to get
Speaker 2: the value out of it. The winners, for sure, are
Speaker 2: a lot more focused. They don't have one thousand flowers bloom.
Speaker 2: They have fewer use cases, fewer functions that they focus on.
Speaker 2: They invest significant money in a really focused, concentrated way,
Speaker 2: and very importantly, they double down on upscaling their organization,
Speaker 2: on upscaling their team so that they change the way
Speaker 2: they really work in every single day, and then they
Speaker 2: measure it in a quite systematic way operationally and financially.
Speaker 2: That's what separates the winners from those that are lagging.
Speaker 3: Probably three data points why I think the topic remains
Speaker 3: as high on the agenda. One is the whole excitement
Speaker 3: about agents is very consistently in the Bloomberg BCG radar
Speaker 3: across all geographies. The second one, if you look at
Speaker 3: the companies that have upskilled more than twenty five percent
Speaker 3: of their workforce on AI, there's Japan and Singapore very
Speaker 3: much on the top. But then actually you have a
Speaker 3: number of European markets where these companies are headquartered. Before
Speaker 3: even you have the US and European CEOs who were
Speaker 3: surveyed on their willingness to invest find themselves pretty much
Speaker 3: in the same ballpark range than other markets that that
Speaker 3: are ready to invest. What is more pronounced is the
Speaker 3: insecurity on regulation, and in a continent that's a lot
Speaker 3: more where policymaking and regulation are more prominent and visible,
Speaker 3: you actually see that CEO say, look, I have no
Speaker 3: idea what to expect of this, like the EUAI Act,
Speaker 3: and how is a company we're going to navigate.
Speaker 2: My anticipation for twenty twenty five is that we are
Speaker 2: actually going to see quite some bifocation. I think there
Speaker 2: will be fantastic success stories. We are starting to see
Speaker 2: some of those. For example in biopharma research and development.
Speaker 2: We see it in some of the coding for big
Speaker 2: software companies, but also for banks and insurance companies and
Speaker 2: similar We also see some great examples in field services.
Speaker 2: We see great example in customer service and kind of
Speaker 2: customer interaction management of all sorts. So there are some
Speaker 2: great success stories emerging, but it turns out it is
Speaker 2: harder than many CEOs thought when they went on stage
Speaker 2: in their earning scool year or eighteen months ago go
Speaker 2: and make big promises.
Speaker 1: So you mentioned AI agents, which is something that we
Speaker 1: saw in uptick in mentions of this quarter. I think
Speaker 1: quarter three there were about twenty four mentions of agents globally,
Speaker 1: hardly on the radar at all, and this past quarter
Speaker 1: there were one hundred and five. Is that sort of
Speaker 1: the new flavor of the month for AI. AI agents
Speaker 1: is going to be what we'll be talking about in
Speaker 1: twenty twenty five.
Speaker 2: Well, we believe that AI agents are going to be
Speaker 2: an important next step of evolution of functionality and also
Speaker 2: impact potentially for the companies that really adopted in a
Speaker 2: productive way. So it's going to be sizeable. However, it's
Speaker 2: also still very early days, and I think it's important
Speaker 2: to calibrate, and we have about more than one hundred
Speaker 2: mentions of AI agents, but we have about one thy
Speaker 2: four hundred mentions of AI, So it's it's the next thing.
Speaker 2: We believe in the potential. We expect that you will
Speaker 2: hear it more frequently mentioned in twenty twenty five earnings releases.
Speaker 2: But between that and the substance in the P and L,
Speaker 2: I think there's quite a bridge to cross.
Speaker 1: A lot of companies in recent years have been saying
Speaker 1: that AI is not going to be a job killer,
Speaker 1: that it's going to be something that changes the way
Speaker 1: in which a lot of people work, but it's not
Speaker 1: going to eliminate positions in their enterprises. I'm curious what
Speaker 1: your view on that is.
Speaker 2: Well, our observation is in line with what you just said.
Speaker 2: There are not many companies, In fact, there are less
Speaker 2: than ten percent of companies where AI deployment has led
Speaker 2: to redundancies and people being let go. In fact, it's
Speaker 2: a bit kind of the classical pattern, right, I mean
Speaker 2: ten twenty years ago, we were all speculating that digital
Speaker 2: and the iPhone and similar devices would completely make parts
Speaker 2: of the workforce obsolete, and that has not happened. In fact,
Speaker 2: it has created anti new industries, new functions, new things.
Speaker 1: Let's certain of these new agendas that CEOs are facing,
Speaker 1: As you guys know, the Radar found that CEO mentions
Speaker 1: of environmental topics such as cloud exposure or greenhouse gas
Speaker 1: emission targets and ESG topics as well like board independence
Speaker 1: and diversity. All four of those topics declined in Q
Speaker 1: four and that's really a continuation of a decline that
Speaker 1: they have been seeing in recent quarters in prior years.
Speaker 1: What do you think explains those declines?
Speaker 3: Ju I think it useful that high water mark of
Speaker 3: talking about climate emissions companies climate targets in twenty twenty,
Speaker 3: and it has declined ever since. If we reflect what
Speaker 3: we hear from CEOs, you frankly have the full spectrum.
Speaker 3: You have those who say, thank god, I mean, my
Speaker 3: board's letting me off the hook on this climate thing now.
Speaker 3: And you have those who actually feel, in a moment
Speaker 3: where the topic might have less public attention, it's a
Speaker 3: fantastic moment to double down and invest to outcompete in
Speaker 3: the long term, specifically in those areas in the energy
Speaker 3: transition where CEOs feel they can invest in technologies where
Speaker 3: scarcity will prevail in the to long term and where
Speaker 3: they will be better positioned. You also see that in
Speaker 3: the radar you see that mentions of individual green technologies
Speaker 3: go up, such as clean hydrogen, but actually quite a
Speaker 3: margin in all regions. You also see that climate risks
Speaker 3: and natural hazards are one of the topics that have
Speaker 3: risen to the top, actually grown by more than one
Speaker 3: hundred and ten percent, probably not a big surprise. Eighty
Speaker 3: percent of these mentions come from US CEOs, who also
Speaker 3: have seen the highest number of the basically natural hazards
Speaker 3: and weather phenomena happening in the past year that have
Speaker 3: created damages of a billion plus in each and every case.
Speaker 2: My observation, in line with what Judith said, is that
Speaker 2: within the companies there is still largely a commitment to inclusion.
Speaker 2: There's a commitment to managing climate risk, to decarbonizing and
Speaker 2: setting up the company for the future. And so I
Speaker 2: do think substantively CEOs and companies are continueing to steer
Speaker 2: in that direction, but they do it in a much
Speaker 2: more selective, in a more calibrated, and certainly in a
Speaker 2: much less vocal way. It's one of the topics where
Speaker 2: I think substantively behind doors, there's a lot more action,
Speaker 2: a lot more commitment, as you also describe you to
Speaker 2: than you hear in the earnings calls.
Speaker 1: As environmental and cultural issues have declined in importance, trade
Speaker 1: and taxes have seemed to have taken their place. Right.
Speaker 1: There were over forty national elections last year around the globe,
Speaker 1: and generally, if you were a challenger and you were
Speaker 1: focused on economics, you won the day. In those elections,
Speaker 1: CEOs mentioned supply chain shifts and tax policy. Those mentions
Speaker 1: rose by almost double digits in Q four. But oddly
Speaker 1: CEOs talked less about tariffs, which we know is going
Speaker 1: to be a huge topic this year. They spoke about
Speaker 1: sixteen percent less than they did in Q three, whereas
Speaker 1: the analysts spoke about it one hundred percent more than
Speaker 1: they did in Q three. Christoph, what's going on there?
Speaker 2: I think the analysts understand that there will be meaningful
Speaker 2: impact on the P and L of major multinational companies,
Speaker 2: and they are starting to model that and put it
Speaker 2: in a kind of their assessment of the quality and
Speaker 2: rating of companies. I think CEOs are staring at tariffs
Speaker 2: and they know something is going to happen, and they
Speaker 2: watch as Q one evolves how it will impact their business,
Speaker 2: and then they're going to talk about it. I expect
Speaker 2: they will talk a lot about it in twenty twenty five.
Speaker 2: But I mean, what could you say in twenty twenty
Speaker 2: four You were waiting in anticipation of what the first
Speaker 2: quarter would bring, and now here we are.
Speaker 1: Right when we look forward to twenty twenty five. One
Speaker 1: of the things that you were mentioning before we began
Speaker 1: taping was a rise in M and A activity, and
Speaker 1: certainly discussion about that on these calls. What's driving that?
Speaker 1: What's behind the increase that you expect to see come
Speaker 1: the first quarter this year?
Speaker 2: Well, our own word at the moment, as BCG tells
Speaker 2: us that there will be meaningfully more M and A
Speaker 2: in twenty twenty five. It's not a topic that you
Speaker 2: talk about in your earnings call until it happens, right,
Speaker 2: Neither if you're an acquirer, nor if you're potentially a target.
Speaker 2: You talk about this until the moment when it happens.
Speaker 2: But fundamentally, we do believe there are some very important
Speaker 2: factors that are going to drive activity. First of all,
Speaker 2: we had a number of relatively low MNA years, there's
Speaker 2: pent up demand. Number Two, we expect that private equity
Speaker 2: is going to put some of its dry powder to
Speaker 2: work in twenty twenty five, but also private equity are
Speaker 2: going to exit some of the assets that they've been
Speaker 2: holding longer than they anticipated. Third, there will presumably be
Speaker 2: some moderation of interest rates. In fact, there has been
Speaker 2: a decline in interest rates and important parts of the world.
Speaker 2: A bit less in the US than people would have
Speaker 2: thought last year, for sure, But I mean the trend
Speaker 2: is the trend. And lastly, I think many companies do
Speaker 2: anticipate that the regulatory environment from an anti trust perspective
Speaker 2: is going to be easier to navigate. And you take
Speaker 2: those factors together, we expect there will be meaningful M
Speaker 2: and A and not only acquisition but also carve out
Speaker 2: of business units and divisions in twenty twenty five. For sure.
Speaker 2: It's one of the topics where we feel the demand
Speaker 2: that we experience as PCG is ahead of what they
Speaker 2: talk about in the ONEX cours.
Speaker 1: Judith, when you think about the way in which CEO
Speaker 1: roles have been changing in recent years, what's your census
Speaker 1: to the way CEO should sort of approached their task
Speaker 1: in twenty twenty five, if you had to give them
Speaker 1: a sort of thirty thousand foot look at what the
Speaker 1: way in which they should do things, perhaps differently in
Speaker 1: the coming months than they have in prior months, or
Speaker 1: be a recommendation if you look at.
Speaker 3: The last years, I think CEOs have gone through these
Speaker 3: waves of deciding where to take positions in a much
Speaker 3: more divided, polarized world, often with very passionate workforces that
Speaker 3: literally wanted their CEO to take positions on everything from
Speaker 3: a local community issue too political turmoil in the world,
Speaker 3: and a lot of CEOs have done so because they
Speaker 3: felt this is what it meant to have the back
Speaker 3: of their organization. And I think most of them have
Speaker 3: realized that's a very very slippery slope. It's very difficult
Speaker 3: because that could keep you busy the entire day. It
Speaker 3: also exposes your business quite a bit. And I think
Speaker 3: most of them have gone back to say, how do
Speaker 3: I strike that subtle balance of empathizing with my workforce
Speaker 3: where people live the exposure to hate speech, political division
Speaker 3: a lot more every single day. How are you the
Speaker 3: great unifier in a way internally where you promote the
Speaker 3: values of the company's civil dialogue, the need to really
Speaker 3: exchange and listen to each other while not taking positions
Speaker 3: on everything and anything. And I think that's a very
Speaker 3: fine line. I think it's also a really noble task
Speaker 3: because even a more chaotic, more insecure world, you can
Speaker 3: provide purpose and direction to organization, and if you can
Speaker 3: give them the feeling that in a world where they
Speaker 3: often feel powerless, they can contribute and have impact on
Speaker 3: something that matters for the company, for the community, and
Speaker 3: to larger society. In the end, I think that really
Speaker 3: mobilizes an organization and that gives everyone a place to
Speaker 3: rally around.
Speaker 1: It's an interesting notion that they function as a unifier
Speaker 1: in chief in a very divisive time. I mean, I
Speaker 1: think it's clear that we're at an inflection point here.
Speaker 1: We're not just changing years or not just changing quarters,
Speaker 1: but business is headed in some kind of a different direction. Clearly,
Speaker 1: twenty twenty five and beyond, these topics are going to
Speaker 1: be playing out in it's very very interesting ways. I
Speaker 1: want to thank you both for your insights today. For
Speaker 1: those of you who would like to explore the CEO
Speaker 1: radar in greater depth, you can see the entire report
Speaker 1: at Bloomberg dot Com slash CEO Radar. If you like
Speaker 1: what you're hear, we recommend that you subscribe on YouTube
Speaker 1: or the podcast platform of your choice to get our
Speaker 1: second episode, which will drop in early Q two with
Speaker 1: an entirely new batch of data. I'm Edward adams On,
Speaker 1: behalf of BCG and Bloomberg Media Studios. Thanks for listening.