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MODERATOR: We're going to start with Carl-Henric.
And first of all, I wanted to say thanks for being here.
His fellow titans were quite surprised that
he made it today.
They thought he had a pretty excuse to not be here, and
perhaps a good reason to duck the conversation.
But he's a brave guy.
I can't resist starting by asking you, what's it like
being in the center of this storm around the
Gulf of Mexico.
CARL-HENRIC SVANBERG: Well, it's interesting.
When I came to Ericsson, we were in the middle of a crisis,
where we ended shrinking the company from 110,000
to 45,000 people.
We thought that this was the bubble burst.
And telecom is a continuous world of success and crisis.
And I felt going into this industry there should --
MODERATOR: You thought it would be calm?
CARL-HENRIC SVANBERG: Smoother ride.
It's obviously a big disaster that's we are witnessing.
It will be, in many way, a game change in the way that
Three Mile Island was.
We will learn a lot from this, and learn to do
things differently.
But right now, its a tremendous fight to kill that well.
We're actually in a positive fight on the surface.
We're actually taking off more oil than we're
bringing to the surface.
We are in a bit of good process.
It's actually, from a crisis prospectus-- I've been down
there, and we have this big center with 1,000 people.
The best people of BP.
The best scientists of the world.
Best specialists from every single competitor in the world.
Coast guard, representatives from states, everybody
working to just do this in a tremendous effort.
I think it will be successful.
But it's a challenge.
MODERATOR: Your reference to Three Mile Island
is quite chilling.
Does that mean you think we're never going drill in deep seas?
Are people going to say, this is just to dangerous?
CARL-HENRIC SVANBERG: Well, that would be the conclusion if
Three Mile Island would have lead to the end of
nuclear power.
It didn't.
We would just learn how to do in an even better way.
There are 1,000 wells in the Gulf of Mexico that are more
than 1,000 meters deep.
It's a rather standardized process.
There hasn't been a blow out for 20 years.
But these have happened.
We have to learn from it.
But what's interesting thing, also when you look ahead of
things, the world has always consumed more energy,
basically, in the pace that we see GDP grow.
And we may now be able to sort of crack that trend, by being
more energy efficient in the western world.
But the world's energy today, half is in the western world,
half is in emerging markets.
Emerging markets, with the growth rate it has, is
projected to have twice the energy need in only 20 years.
That's means that the world needs to produce two times the
total energy consumption in United States in addition
to what we do today.
So we would need everything.
We would need oil.
We would need coal.
We would need wind.
We would need biofuel.
We would need everything to make that happen.
MODERATOR: I'll as you a question that maybe
you'll like to hear.
Does that mean you think some of your critics
are hypocritical?
People who say oil is destroying the environment.
This
BP disaster is the latest example.
Is the reality that there's just no alternative?
CARL-HENRIC SVANBERG: I think the reality is that this
world needs energy.
There's no way around it.
And almost every energy form comes with some risk.
We've learned to live with that.
Of course, we all dream about that there will be a day
eventually, when wind and solar and such energy forms can fuel
it all, but we're not there.
Technology isn't there yet.
MODERATOR: Don.
What should Carl-Henric be doing to deal with
his PR disaster?
What's the digitally advanced solution?
DON: Fix the oil spill.
MODERATOR: I think he's trying.
He's working on it.
DON: I'm not deeply knowledgeable, but I know
there have been a number of collaborations outside of BP,
in trying to be helpful.
Why not hold a challenge to the world, and find that uniquely
qualified mind out there to say, how do we solve
this problem?
CARL-HENRIC SVANBERG: Well it certainly it is a good idea.
And I think that's largely what happens.
There are websites that everything, welcoming every
idea, that is there.
And on the ocean floor, 5,000 feet down, there is this
blow up preventer that you may read about.
That is the one that sort of kills the well if
it starts to flow.
That thing is 20 meters high and weighs 500 tons.
It is no small thing that you actually have to close it,
because you have to cut through casing pipes, and drilling
pipes, and everything.
Everything down there is done with submarines.
Well, they're young generation natives.
Your immigrants fellows.
They are born with joysticks of sitting, driving this small
remote vehicles, submarines to actually with small
ranges do things.
Pretty impressive working.
MODERATOR: Do you guys have any tips?
What would you do?
SPEAKER: It's a hell of a challenge.
I think the one interesting thing is the degree to which
people are objectifying BP and the oil industry.
And the question is, how do you may be, through some of the web
enablement, get them as part of helping solve the problem,
as opposed to stand on the outside and throw rocks.
That's the bit I would be worried about in the longer
term health of the company, is the sense that you're being
somewhat victimized, and pushed into the corner.
And actually, you need to get these guys to be
part of the solution.
DON: Let's face it.
This an age of transparency.
People are going to find out what's going on.
And they're going to find out what kind of company you are.
I think that's the big asset that BP has.
It's actually a good company.
And it's been a leader in thinking about green energy,
and its integrity is very strong in its values.
But companies are going to be naked and if you're going to
be naked, well fitness is no longer optional.
You better be buff.
MODERATOR: That's the next part.
When we have a swimsuit section.
ROBERT POLET: It's easy when a company is down
in a problem like this.
You'll get most of the people actually sticking their
foot out, and kicking them.
I actually believe that BP has done a good job so far.
They've been at it immediately.
They didn't make false statements.
They didn't go behind the scenes, whatever.
You guys have been out there.
You've got a center with 1,000 people.
You're inviting everybody's opinion.
MODERATOR: What about that tiny spill comment.
ROBERT POLET: Well you know, the spill.
The spill is the spill.
As long as you're doing everything you can to actually
get the thing done, and behaving, like you are, in a
very open, transparent, responsible way.
I think this is the only two things you can do.
CARL-HENRIC SVANBERG: Thank you.
We need a few of you.
MODERATOR: OK Robert.
Well, I guess, it's your turn to be in the hot seat.
So you run Gucci.
Now would seem to be a tough time, not just with the
recession, but even in the post recession environment, to be
trying sell luxury goods.
We heard Archbishop Tutu talking about a new
age of capitalism.
He took the obligatory kick at Goldman Sachs.
We had David Cameron, the new prime minister, talking about
how he doesn't want the head of any civil servant to make
more than 20 times what the person at the bottom makes.
Is this a time that people are going to want to buy hugely
expensive, of course, incredibly beautiful, status
markers that you sell them?
ROBERT POLET: I'm glad you used the word beautiful, as well.
Because we are actually-- and I say just quite often, it might
sound a bit strange-- we are not in the business of selling
shoes or handbags, at all.
If you'd like to buy a pair of shoes, or if you'd like to buy
a handbag, I know a huge amount of addresses where you can buy
them a lot cheaper then in any of our stores.
And we, by the way, have eight brands.
It's a group with Yves Saint Laurent, [FRENCH]
So it's a multitude of brands.
And it's not only about beauty.
although it has often been said that the thing of
beauty is a joy forever.
But it's also about fulfilling desires.
And not selling the handbags or the shoe.
We actually in the business of selling dreams.
Now you don't get a spill from that one, so that will be a
next business idea for you.
You have the fake brans.
Yeah, we have the fake brands.
And when we sell dreams instead of products, this is the
essence of what we do, and hence, it is a market that
will always be there.
There are several reasons why people would like to belong to
the world of Gucci or the world of Bottega Veneta or Yves Saint
Laurent because its a world that says something about
your own personality.
First and foremost, of course, people have always had, when
they achieve a certain amount of wealth, a need to
pamper themselves.
But also a need, and luckily this is happening all over the
emerging markets, as people get into the middle classes, a need
to wear something on your body somewhere albeit shoes, or
jackets, or a handbag, or sunglasses, or the perfume,
that says to somebody else, hey look, I have arrive somewhere.
I am somebody.
It says something about their personality.
MODERATOR: But Robert, don't you worry that maybe we're
entering an age when people should be more
cautious about that?
We saw Don's pictures of the Greek protesters and the Thai
protesters, maybe to wear your luxury brand sends
the wrong message?
ROBERT POLET: Yeah.
And it's why people have actually changed in behavior.
They're buying different type of products, under our brands,
then they did two years ago, three years ago.
So we see a huge difference in the amount of logo, for
example, that is on the bags.
MODERATOR: Less logo?
ROBERT POLET: A lot less logo.
And one of our brands, Gottega Veneta, is actually positioned
right in the core of that what I call the new normal
behavior of consumers.
Because a payoff that says when your own initials are enough.
On the outside of the bag, it's a recognizable Gottega Veneta
bag for people who know about.
But it doesn't have a logo, nor does it have the brand name.
It has your initials on the inside of the bag.
So less overt.
MODERATOR: A status symbol but that only other rich people
recognize, that poor people can't recognize.
ROBERT POLET: You can cuddle, actually at home, with some of
those bags, that are so soft, or with your beautiful cashmere
blanket that you just bought, which is also luxury.
MODERATOR: And is there a difference?
You spoke about emerging markets, or frontier
markets, as people are talking about them.
Is there a difference in behavior there?
ROBERT POLET: And that's also one of the things that I think
we surprised the markets with, in the last two to three years.
Because we didn't actually see so much of a slow down.
Last year was our second most profitable year ever, with
cash flow up 60%, and the highest ever.
And this is due to the petrolio.
We've got a petrolio in brands, we got them in categories,
but also in geographies.
And take China for example.
In 2004, we had four stores in China for the Gucci brands.
We just opened yesterday, store number 34.
So we have more selling square footage in mainland China then
we built up in five years time, then we built up over
40 years in Japan.
So Greater China, which is mainland, Hong Kong, and Macau
is 17% of turnover, and its growing at 39%, at the same
margins as our other businesses in Europe or the United States.
MODERATOR: So, Don, talked to us about the
information revolution.
You're part, also, of the globalization revolution
happening at the same time.
ROBERT POLET: Globalization, but also information.
I vividly remember when I started, they said well the
iceman cometh, and now everything is going to be mass.
MODERATOR: Robert came from Unilever.
ROBERT POLET: We just launched last year, the ultimate product
that people could accuse us of being mass.
Namely a product that is the ultimate entry
price, and it is free.
We have a product that's absolutely free.
It is called the app for the iPhone.
It's a Gucci app.
It had been downloaded, in eight weeks, I
think 550,000 time.
And it is free.
But it serves the same purpose as all our other products,
because you can show your friends that on your iPhone,
you probably put it on your first page, that you
have the Gucci app.
It says something about you.
So now the circle's complete again.
Either a I buy a 10,000-- because we have them for
20,000 euros-- handbag.
Or, the opposite of the spectrum, I download the
Gucci app on my iPhone.
It's all about emotions.
And it's about behavior, and fulfilling desires.
MODERATOR: And your hope, of course, -- how many people have
downloaded the Gucci app?
ROBERT POLET: 550,000
MODERATOR: And you hope how many of them are going to be
upsold into your $10,000 handbag.
ROBERT POLET: A lot will.
And a lot will buy our goods online, as well.
Because totally convinced that our online stores will become
our biggest, fastest growing, and most profitable stores.
MODERATOR: You're dying to say something.
Please, jump in.
DON: I'm always dying to say -- now in the spirit of Serge's
interrupt, I think there is there a lot of good
lessons here.
But one of them is this idea that we shouldn't
be selling products.
We should be creating experiences.
That's not just motherhood.
It's an actual economic fact.
I'll just give you a quick example.
You buy coffee on a commodity market.
You sell it, you can get about 1/20 of cent
for a cup of coffee.
You put it into a good, and you can get $0.07 for the same
coffee you sell in a store.
You get someone to make it, you can get $0.85.
It's called a service.
You throw some foamy stuff on the top, and a cool logo, and
so on, you can get $4.00 for the same coffee.
And then you put some great wifi and the ability to get
certain iTunes and so on, in the store, and it becomes
a transformed thing.
People talk about Starbucks as the third place.
There's work, there's home and there's Starbucks.
And this is now becoming broadly applicable
to many industries.
And of course, again, the web is the mode of production and
distribution that enables us to think about, not, just selling
to people, but to engaging them, and even to co-innovate
value with them.
You've got companies like Threadless, where their
products are designed by the customers now.
MODERATOR: Well we're going to hear from Howard
Schultz later today.
Ian also faces a sort of fundamental challenge to what
he's doing, which is, I suppose in some ways, people could have
described your business as a play on all the bad things that
were happening in the world's economy prior to the
financial crisis.
You sold more stuff as people bought homes around the
world that they couldn't afford it turned out.
So you were sort of surfing the real estate boom, not only in
Europe, but also say in China.
How have you adapted to that?
And are you worried that the new normal is not going
to involve us spending so much to improve our home?
SPEAKER: I would say, firstly, that people's connection,
emotionally, to their homes is still the single most
important thing --
MODERATOR: You're a dream seller, too?
SPEAKER: Yeah.
Absolutely.
We do a survey around the world.
80% of the people think that home is the most
important thing.
And what they're describing then, is not bricks and mortar.
It's about their connection with their family
and their homes.
And so what I think we have seen is a shift away from the
home as of a sort of a key asset, or your biggest part
of your pension plan.
And we've definitely seen that effect to be reversed.
And so some of the froth, the speculation that lead to
an overheated housing market, won't come back.
And we are seeing fundamentally lower levels of absolutely
spending on housing.
Interesting though, housing markets around Europe fall
maybe 30, 40% in some cases.
Our markets fell maybe 3 to 5% because what happened was,
people basically said, well I'm in my home.
I'm still going to spend on my home.
I care about it.
MODERATOR: So instead of buying a new house, people
fixed up their old ones.
SPEAKER: And, also there was a sort of interesting
shift that happened.
We've said, if you're not treating it as a sort of series
of transactions, or buy to let, we found for example, we have
this explosion, certainly in the UK, of designer wallpaper,
with very, very, over the top patterns, because people were
no longer just painting it magnolia, and hoping to flog it
next week to someone else.
They were saying, actually this is more about me.
So I think, and to echo Don's point, I think what we've got
to do as retailers, is find the next model, which is how do you
tap into that desire for the home and service.
And actually creating something beyond fundamental
bits and pieces.
We're at the end of a model now which is 40 years old.
You used to, in the '70's look at TV, see an ad, get in your
bit of tin, go to big box, buy it and come back home.
This generation is not going to do that.
This generation is looking for a whole set of
different things.
And we're in a point where, fortunately, we're not as
exposed maybe as the music business.
But we know, and it's very hard to digitize a
power tool, thank God.
Where we are is on a journey towards a very different,
sort of tighter spending.
But the fundamentally economic dynamic is solely emotion of
the consumer about their home.
And I think that's the core.
MODERATOR: And what do you mean by that journey to a
different type of spending.
What does that actually mean?
SPEAKER: Well I think you're going to see things like more
demand for quick effectively makeover type flexible rooms.
So you actually have the ability to change your house
every three years as your life stages, your kids grow up, you
want to use rooms differently.
Average homes are getting much smaller around the world.
You have to use that space much more intensively.
I think fundamentally, you're also seeing people much less
skilled than in the traditional U.S. or Canadian big project of
build the whole thing, is much less evident now.
This generation is now digital, and completely
useless at doing DRY.
So we're going to have to--
MODERATOR: Yes my husband is an example of that, sad to say.
SPEAKER: But I think we're going to have then step into
the breach, and say, some stuff we're going to make
it really easy for you.
And some stuff, we're probably going to have to make it more
of a service proposition.
MODERATOR: So you'll start to sell services?
I can buy the stuff, and also, you'll sell me--
SPEAKER: We already put in about 15% of the
kitchens we sell.
We install ourselves.
Why not be the person that actually helps you re-plan your
house every three or four years, gives you color advice,
makes it simple for you.
Because people are very dissatisfied with what they
can do with their homes.
They find it difficult, confusing, it's not
straight forward.
So, the person that can simplify that, and
particularly, using social media, I'm actually convinced,
this is going to be about people comparing notes.
Saying look, here's my project online People
love to share this stuff.
We do it with [UNINTELLIGIBLE]
or trade business where people come on saying, I've got this
widget 17.3 da la la and there's is tidle wave of forum
chat that comes and says, oh you need to this, or you need
to go and do that, which is not rational economics, because its
the consumers getting something free.
But it makes perfect human sense.
Because that's the way we're wired.
MODERATOR: And do you see that working at a more
retail level as well?
Sort of Don's idea that you let people design the products that
you then go on to sell them?
SPEAKER: Oh.
Completely.
I think the whole co-creation opportunities are enormous.
And actually one of the big things we want to do, we've got
a big complex range 40,000 SKUs in a big box, what products
are people not seeing.
How do we get them to get involved in the
shaping the products?
If we're previewing stuff, how do we get them to
help us move it forward?
I think that's just, for a very traditional, frankly deeply
boring, retail business, we've got a lot of opportunities
ahead of us.
MODERATOR: We'll take questions in a
few minutes.
So please get your questions ready, and it would be good if
you could come to the mic.
It's easy to talk about re-inventing a business.
How much traction are you getting actually saying to
your designers, I don't want you to design any more.
I'm going to let our consumers do the designing for you.
How hard is that?
SPEAKER: I don't think its that hard.
It's not so much the actual innovation around product.
The hard part is trying to re-imagine the business model.
MODERATOR: You mean actually make money out of it?
Like not like the new--
SPEAKER: Yeah.
Exactly.
I think you're seeing huge inertia around of
existing business model.
Because everyone knows how they make money.
The people are very comfortable with that.
They find it really tough to reinvent the next
way of making money.
So they sort of tend to say, well, we've made money this
way, so we'll paint it a different color.
We'll carry on making money that way.
There is actually a different paradigm in there is the
really tough bit to grab.
MODERATOR: Robert.
ROBERT POLET: I would be very careful to expect consumers to
design the products, because that is something that I
think will never happen.
Look at what a designer does for a living.
And we have about 150 designers in Gucci Group.
What they do for a living is that they invent and create
products that you and I were not yet aware of that
we had a need for.
And there are the few people in the world, talented
individuals, that have this capability of inventing and
creating products that the moment we see it, we say,
that's exactly what I wanted.
And it takes a designer.
It takes a human being.
It takes a talent to actually be able to do that.
You can't ask [UNINTELLIGIBLE]
to do that.
MODERATOR: I'm hoping that Carl-Henric and Don are
going to disagree with you.
It looks like it.
DON: I think it's true if what you're selling is products, but
you told us earlier that's not what you're selling.
And if you build iPhone apps, and engage your customers in
the whole service and experience side of it, there
are all kinds of opportunities to create a richer experience
and deeper of relationships beyond just doing transactions
around products.
I think, of course, Gucci has fabulous designers, It's going
to be hard to replicate that.
ROBERT POLET: We do sell products.
but we sell the dream first.
So if you're a woman, for example, this room, you have to
go on stage-- you're wearing somebody else's design
today, never mind.
--which is also very good.
So here we go.
MODERATOR: But Robert is wearing Gucci himself.
The belt, and --
ROBERT POLET: It makes me feel more self confident.
Because if you're a woman, and you enter a room, and
everybody's looking at you, what is the biggest worry
that you have as a woman?
Maybe men sometimes have the same?
What will they think?
How do I look?
If you're wearing Gucci heels, and you're wearing tight
fitting Gucci dress, you feel more self confident when
you enter that room.
It helps you, if you see what I mean.
We sell the dream first, and we sell the products after.
So we're in the products business.
We're a consumer goods business.
MODERATOR: Carl-Henric, you had a --
CARL-HENRIC SVANBERG: I'm just sitting reflecting a bit.
I don't disagree at all with that.
It's well described.
But I think I just like to come back to where you started
today, because we are, and the theme of this very hour,
also, is very much about leading from the front.
We have to be aware that we are going through
a financial crisis.
We can all think about how this financial crisis
will affect us.
But then parallel to that is this tremendous technology
shift, which is what you described about.
The whole turn to internet, which opens up the digital
management rights, as you were saying.
The IPR, all of that.
And then parallel to that, we have this huge shift from
mature markets to emerging markets.
Sometimes, I feel a bit nervous that in our mature market, we
think we're going to battle through this financial crisis.
And then when we're over that cold river, we get up on
land again and march on.
But that land is going to be fundamentally different.
MODERATOR: And what are the big differences going to be?
Are they going to be the digital revolution
that Don spoke about?
Are they going to be globalization?
What's the next hurricane?
CARL-HENRIC SVANBERG: I think the digital revolution is
going to be just massive.
In my work as Ericsson, I've been all over the place.
And I think it's interesting, there wasn't a politician in
the '50's or '60's that didn't think about if I don't have an
airport, people won't fly to my city.
People won't fly to my country.
But do they understand enough of what the digital world
means about rolling up [UNINTELLIGIBLE]
society.
Our society's new highways.
When I travel the world, I find that there isn't a single
politician is the emerging markets that aren't hungry to
learn about how to build an intelligent society.
Whereas our politicians, where we live in a part of the world
where it isn't that dynamic anymore, they don't think
so much about that.
We're sort of more into how we can distribute the wealth
we have, rather than how we build a productive society.
And I think that's a very important part.
So there's a risk that these play in the hands of the
emerging markets, both of them.
MODERATOR: Relative to the developed markets?
Do you think that --
CARL-HENRIC SVANBERG: I think there is an emerging market--
the emerging markets are definitely growing there.
There's a good demand there, but it is also a new form of
competition growing up there.
But there is also an ambition to learn about faster
building in an intelligent and mobile society.
SPEAKER: I have to say, one the things, I was outside one of
Robert's stores in Shenzhen on Friday, and what was
fascinating was watching this Chinese consumer with
an iPhone with an app.
And the degree of penetration of the digital sort of ethos,
even if maybe the level of penetration isn't there.
But for that middle class Chinese customer, they are as
wired, if not more wired, than anyone that I've seen.
And so you combine the natural dynamism and the shift towards
these, plus the digital dimension and I think you've
got serious other challenges for western economies
to adapt and cope.
ROBERT POLET: I'd like to add one more thing.
I think China and technology are the big game changes that
luckily, we are experiencing.
It's the biggest opportunity I've ever experience.
I'm working for 32 years, and this is the big thing.
And the third one, I think, is that fundamentally, we need to
rethink the way we lead our businesses, in order to make
sure that we motivate and get the best out of people.
Because society has changed.
Not for nothing, I did leave one company in order
to join another one.
That's the old model of telling people what to
do, and controlling, is completely over.
MODERATOR: And how was that related to your choice?
You felt your old company was too hierarchal?
ROBERT POLET: Well let me not talk about my old company.
Let me talk about the new one.
And where at the beginning, when I started, I saw that in
the business side and the creative side-- 150 leaders on
the business, 150 leaders on the creative side--
had something very important in common.
They really disliked it, and still do, if you
tell them what to do.
They hate it.
They don't like it at all.
So how to organize with eight brands and a global
[UNINTELLIGIBLE], completely global business, it is as
relevant in Indonesia, in China, and Latin America, as
it is in Belgium, or in Holland, for that matter.
How to organize it in a way that it still makes more profit
then before, it's right there, it beats the competition.
And then creativity is allowed to flourish.
And we coined it in a concept, and it's called, Freedom
Within the Framework.
We have it hand written, two page, not a book, not a
bible, handwritten state--
MODERATOR: Handwritten by you?
ROBERT POLET: By me.
It's stayed hand written for four years, on two pages,
and you've got these are the rules of the game.
Within that, within budgets, and three year plans, trusting
a co-leadership of a CEO and a creative director, who are
actually married to each other, with all the ups and downs, and
then we said, let them go.
Let them go.
No control.
Not meetings.
No reports.
No minutes of meetings.
Go for it, guys.
Conquer the world.
MODERATOR: OK.
I think we'll take some questions, now.
AUDIENCE: My name is Amit Eris, I'm a professor at INSEAD,
and the question I wanted to ask is about trust.
What you see that, on an individual level, we've seen an
enormous amount of increase of trust and transparency, as
people start to interact on all the platforms they have,
and share the data.
On the other hand, if I look at the 16 institutions you
describe, what you see maybe because they
see what's happening.
Trust has come down enormously.
They
have become defensive.
They start to be less transparent.
The customer may be very scared of what's coming to them.
And yet, they are the same individuals who are more
trustworthy on an individual basis, who get more suspicious
and defensive on an institutional basis.
And so my question-- I think Robert just gave a great
example of how it can handled-- how do you think, maybe, Don,
how can you break --they know what is going to happen, what
you have to do, however, they don't have to trust to jump?
For me, that's the major bearer.
How can you get beyond that one?
MODERATOR: They don't have the trust in the company?
AUDIENCE: Well they don't have the trust to change their
business models and to do the way the things are doing,
because they're so scared of what they are about to lose.
And that is hampering a lot of the things which
should be possible.
CARL-HENRIC SVANBERG: I would say that issue is
very, very important.
A reason why you see shift in development in the world.
I think that is the reason why, for example, we can expect
China to be the ones that takes the lead in green cars.
Because they seem to need that.
We will need it.
But in the western world, we're all sitting defending and
lobbying for defending the existing works, workplaces
and all of that.
So it's a matter of combination of vision, and self confidence,
and political leadership, to dare to go where
the future lies.
MODERATOR: Why political leadership?
You think governments need to be pushing this?
CARL-HENRIC SVANBERG: Yeah, because I think sometimes there
are regulations or that are ways of working or setups, and
so on, you need ambitions to change if you're going to
challenge your existing industry to come to a
new and better place.
SPEAKER: I think there is a fundamental question,
which is [UNINTELLIGIBLE]
going back, most of the innovation tends to come from
outside the established players precisely because to the
established players have culture so hard wired in, it's
really difficult to imagine a difference alternative reality.
You almost need some unreasonable, heretic
out on the sides, to be the agent for change.
I think the one thing you can do, certainly for a business
point of view, is create a culture where it is OK
to do some failing.
And it's amazing how failure adverse business
cultures have become.
Because, basically people want experimentation, innovation,
but somehow they want it without any failure attached to
it, which is simply impossible.
So, if you can create a culture, which says OK, how
many good failures have you had this year, and actually maybe
you have a failure award instead of an innovation award.
MODERATOR: Have you done that?
Do you have [UNINTELLIGIBLE]
award?
SPEAKER: We weren't going to call it that.
MODERATOR: It's my branding suggestion for you.
SPEAKER: Right.
I think creative failure award.
I think you're got to have some--
MODERATOR: How much money would you be allowed
to lose in this award?
SPEAKER: Well I think you can--
MODERATOR: Or encouraged to
SPEAKER: I'm not sure we're going to put a monetary value
on it, just to get people competing for the biggest
hole they can create.
I think what we saying is have you tried to do something
creative, that was going to lead to business idea,
and then it failed.
And if you look at things like drug development, aircraft
design, and stuff like, even with all the advances being
made, there's a massive ratio of failure to success.
But corporations really bad at creating areas in
which you can do that.
ROBERT POLET: This is absolutely the core, I think.
Because I always say in the company, guys if there are no
mistake being made, it means that nothing is happening.
There is no activity, at all.
Because the only people that they are paid to be risk
adverse, probably you can find in the government.
Not in a company.
So, if you do 10 new things, statistically, you do six
of the ten right, and four will be wrong.
If four mistakes are made, it means that six things have
been done in a new way.
And then, you need to encourage people, I think, always
to break the rules.
Say look, there's the rule, and there's a rule that you have to
be respectful of human beings and of nature.
But for me, any other rule is there to be broken, or to be
bent, or to be circumvented.
And then, you need to ask for forgiveness.
And never ask for permission.
Because if you ask for permission, somebody might
say, no, I don't think this is a good idea.
And then your stuck.
Because then you can't do what you just had passionately
you wanted to do.
So go do it.
And then explain to somebody else, you've just done it.
I'm so sorry.
Next time, maybe, next time I'll ask for permission.
But you don't.
MODERATOR: And are you good at forgiving people
who break your rules.
ROBERT POLET: But of course you do.
MODERATOR: You really do?
Like it's one thing to say it.
But like when someone breaks one of those rules you
wrote down by hand--
ROBERT POLET: That's how you live your life.
This is how we live our lives.
SPEAKER: [INAUDIBLE]
positive intent.
I think that's the thing.
If you're just breaking the rules, you know, embezzling
large amounts of money, I don't think I'd be as
forgiving on that one.
DON: On her question.
What is trust?
To me, trust in business, and to a certain extent in society,
is the expectation that another party will create value.
And value is evidence like never before, because of
transparency, but also that they will behave according
to a certain set of values, that we call integrity.
They'll be honest.
They'll be considerate of your interests.
They'll abide by their commitments.
And they'll be open.
That's in part, why we don't trust the financial
services industry, because they violated that.
But what's happening is there's now a systemic trust crisis
across every one of those dozen of institutions that
I talked about.
And what's happening, just to sum that up, to me, this is
a new paradigm that we're moving into.
When you get one of these, these things cause confusion,
and dislocation and uncertainty, they're nearly
always received with coolness, or worse mockery, hostility.
You get vested interests that fight against change, and the
leaders of the old are the last to embrace the new.
MODERATOR: You mean these guys.
DON: Well no.
These guys are getting with the program.
But I was just making a little list here, for this group.
Why didn't AT&T create Skype?
That would have been a good one.
How come NBC didn't create YouTube?
Why didn't Universal create the new generation
video game industry?
Yellow page could have created Craigslist.
Why didn't CNN create Twitter?
Sort of a micro thing, right?
Why didn't Microsoft create Google?
And you look around at what's happening this
digital divide --
MODERATOR: Why didn't Google create Facebook?
That's for all the Googler's here to answer that.
DON: Why didn't they let Microsoft invest?
But you look at something like the digital divide.
You know the world's leading organization and bringing about
broadband in the world, I would say, is Google, through its
initiative around this gigabytes per second thing
in the United States.
Because they're saying no, no, no.
Don't think about it 20% increment.
Think about a couple of orders of magnitude.
Because that's what we really need.
But again, it's not a leader of the old paradigm
that's able to do that.
MODERATOR: OK.
I'm going to just stop you for one minute, let's get
a few more questions.
Is that OK?
Sorry.
AUDIENCE: Thank you.
I'm Fredrick Court, I'm an investor with Advent Venture.
A question for Robert, and would like to also have
the feedback from the rest of the panel.
You talk about Gucci being about selling the dream.
But you are also controlling the dream very tightly,
and it's very directional.
So what about sharing the dream, enabling people to
engage with the brand.
Is there a rule with your website managers, that they
can't open up the site, and like [UNINTELLIGIBLE]
website, you get the plumbers commenting on which kind of
widget they should be using.
Should they be commenting on whether you should you be
wearing a blue jacket or not, with your loafers, and then
have a dialogue with other Gucci lovers.
So is this something that we're going to see on
the Gucci Group website?
ROBERT POLET: I was wondering whether you were saying,
loafers or lovers?
It could actually be both.
Never mind.
It is a particularly good question, because it goes
back into the essence of brand management.
Because don't forget we are a branded consumer goods company
that happens to own 660 retail stores.
So we do it in our own stores.
But in managing brands, what is absolutely core and key, is
that you stick to the DNA of your brand in a very
consistence way over time.
So why is Gucci brand 90 years young, as we say?
Because it was invented 90 years ago, but it's still
young, contemporary and relevant for today's customers,
because they stuck to the core, and they rejuvenating, revamped
the brand over time, that was consistent with the DNA.
Now Gucci brand is about power, it's about sensuality.
It's also about heritage and craftsmanship.
It's also about innovation and linking that innovation
to it's heritage.
If you stick to that, to those principles, you can probably
do anything you want.
What is my biggest barrier to do exactly what you suggest we
should be doing, which I agree with, is internal.
Is internal.
How do we manage this community of Facebook
friends that we have?
660,000 for the Gucci brand.
And I said, well you interact with them.
You ask them everything that they want to tell you.
Ah, but they might say something which
is bad about us.
That's exactly what you would like to know.
Yeah, but it'll be public.
But you know what?
We better have it saying it to you, then being public, and
saying it to their friends anyway.
So also there, I think that there are no more any barriers,
and it is a complete interaction.
And by the way, this is a marketeers dream.
[UNINTELLIGIBLE]
that we're living now because what is marketing about?
It's about the one on one relationship that we
actually go back again.
That started 90 years ago, with Mr. Guccio Gucci having a
customer in his store, selling one to one.
We can get back to that one to one relationship.
A dream.
MODERATOR: Why can't you get past those internal
barriers though?
You run the place.
ROBERT POLET: Fear of cannibalism.
Fear of change.
It is in all of us.
Each human being has those two fears.
We are all born with that.
And you either destroy it all or-- Absolutely.
MODERATOR: Would you like to comment, or should we
have another question?
AUDIENCE: Hello.
My name is Alexis Bump I'm the CEO of [UNINTELLIGIBLE]
We're creating a new world that's based
on direct democracy.
All online.
Do you think that the present society that we live in is
really sustainable long term?
I mean [UNINTELLIGIBLE]
just wanted to say that we only have one planet and
nobody can jump off.
You represent huge companies obviously.
Do you really think that the way we were doing
things is sustainable?
MODERATOR: I think we'll ask the lucky Carl-Henric that --
CARL-HENRIC SVANBERG: Oh.
What a wonderful question.
I actually thought a lot about that question.
I am not the one to answer it, obviously.
And I think everybody has an intelligent view on that.
But it is interesting the way this world have
become with companies.
Because industry is a very, very fundamental driving
change of society.
If you go 20, 30 years ago, most companies, although they
were international, they were exporters, they were
all over the place.
But they were basically nationally based.
So you were a German company, or you were an English
company, or an American, or Swedish, or whatever.
Then came this whole globalization where the
companies became so huge.
So they really don't belong anywhere any longer.
And that, I think, is a very important question for us as
business leaders, to think about what's the company for?
What are we here to do?
And it's very easy to say, well, let's build shareholder
value and best possible return.
Well, who are the shareholders?
Well, largely, hedge funds, and others.
They don't have much long term expectations or
anything, or ambitious.
So I think, when you were a national company, it was
impossible not to be part of the thinking of society.
Because you were, you were chatting every now and again
with the prime minister, and you would do things.
You were part of something that took the responsibility.
Today, the large corporations are on a another level
where they don't have a natural connection.
So it's a subsidiary that talks to the political leadership.
I think this is just one way of showing how countries and
states and everything isn't necessarily in full sync.
I think we have some tremendous challenges, and I don't think
there's any one politician or anyone that can solve it alone.
MODERATOR: If I an just ask a follow up to that, because I
think it's a really important point.
You've all spoken about how you really see your future and your
growth in the emerging markets.
And you're worried about stagnation in Europe, maybe
in North America as well.
How does that fit with fact that you're companies
aren't national anymore?
Is there any danger that you might be extremely successful
as global businesses, but start find you face real opposition
in the countries in which you were once based that aren't
participating so much in that growth?
CARL-HENRIC SVANBERG: I think it's already there.
A lot of the global companies are already doing everything
they can to establish themselves and leverage
their positions in the emerging markets.
And they don't take that active role, maybe, in their home
markets where they once were.
I don't think you have that tight relationships anymore.
I think it happens.
MODERATOR: And is it possible to be company that's
not a citizen of any particular country?
Can you be a global citizen without being a national
citizen as a company?
SPEAKER: We don't see that.
I think we, fundamentally, [UNINTELLIGIBLE]
held by the fact that 80% of our customers come from
within 20 minute drive time.
So we're very local at the same time as being global.
But I think you have to fundamentally play into a
local community at local and national level.
And I think it's still very much, we're a series
of national companies.
If I were just do a two second answer on the question, the
very short answer is no.
At the moment, the current level of resource intensity is
not sustainable by definition.
So I think we have to find a solution to that, and be
fundamentally much less impactful.
I think there's also a broader question, which is what's
the next the evaluation.
I think it is evaluation of capitalism.
Because it isn't going to go on exactly the same way.
My only hope is that we get that in a sensible evaluation
enabled by, for example, the digital infrastructure, rather
than a sort of government lead, knee jerk, sort of post crisis
regulation type evaluation.
So I think there are some really big challenges for
major businesses that we're all going to be facing.
And it's really important that business is part
of that conversation.
Doesn't try to hide in the corner and avoid the issue.
ROBERT POLET: I made one thing to add to this, because I'd
agree with that, but the other thing I'm convinced of is that
organizations as they exist actually are an
assembly of people.
What do we do?
We influence lives of people with the product, the
brands that we sell.
But most importantly, we provide an environment for
people who work with us, for which we have the privilege
that they had joined us, and are working for us, to provide
an environment where they can exploit their own talents,
and they can be themselves, and grow as human beings.
And I think that is a very important part of why there
is this organization.
Because many other things will be the consequence of that.
So if you allow talents to grow, if you allow people to be
themselves, and exploit their own talents over time, you have
an organization that is fantastically successful.
MODERATOR: But in this digital world, don't you face the risk
that your most talented people will go set up their own thing?
Why do they need you?
ROBERT POLET: Well they don't need me, but if I am able to
provide an environment, where people feel, not because
they're told, but because they feel that they are in an
environment where they are being respected, and that they
can actually grow their talents and do things the way that they
think the thing should be done.
Which means new things.
Because younger people have a completely different idea
of what needs to be done then people of my age.
You know what?
It'll be fine.
You'll have success.
DON: I think when it comes to younger people, a lot of them
are going to be entrepreneurs out of necessity.
You got 22% youth unemployment in the United States.
We have this little euphemism, it's called structural
unemployment, which means it's not going to change.
40% in Spain.
So, young people, again, have at their fingertips, this
powerful tool for organizing, and for creating companies that
can have the same capabilities as big companies.
On the question, I think Carl nailed it.
If we're going to pull this off, and we don't know if
we can, as the Archbishop said, every institution is
going to have to change.
As well as our own behavior.
And a big one is the corporation.
And we need to move away from this -- what is the
purpose of a corporation?
Ultimately, that's what it comes down to.
I interviewed a CO of a bank three years ago.
And he said that's a dumb question.
It's to create value for it's shareholders.
That is the purpose of a bank.
Well, you know, banks have a broader role in society now.
We need them to do other things.
And there was this view in the past that you
do well by doing good.
That's the corporate social responsibility type.
I don't think it was true.
I think lots of companies did really well by
being really bad.
By being monopolies, having terrible labor practices,
or by externalizing.
[INTERPOSING VOICES]
DON: But now, because of this new transparent environment, I
think, increasingly it will be come true, that corporations
are going to have integrity as part of their bones.
And they're going to have to be considerate of the interest of
all of their stake holders.
And if there's anything this crisis tells us, it should be
that business can't succeed in the world that's failing.
And so I have hope because of that.
MODERATOR: There are two people patiently waiting
to ask questions.
So if you could ask your questions very succinctly,
and then we'll have a speed panel answer.
Please.
AUDIENCE: Hi.
I'm [UNINTELLIGIBLE]
I'm a journalist and writer.
Mainly addressed to Don.
Don, you talked in your remarks and also in Wikinomics about
net generation, and the idea that it was a generation who
were neurologically changed by the revolution you describe.
But at the same time, you describe a crisis
of institutions.
I'm particularly thinking of government, which is heading in
completely opposite direction.
It's tending to centralize.
It's tending towards greater message control.
It talks about empowerment, but actually the process is heading
the opposite direction.
Now what are the means by which you can knit the two together?
Because it seems to me that's the institution of all the
institutions you describe that in many ways, least meshed with
the revolution we're all interested in.
MODERATOR: OK.
We'll have the final question and then we'll answer
them together.
Thanks, Matthew.
AUDIENCE: My name's Allen Bryan, [UNINTELLIGIBLE].
I worked with Rob some years ago.
And I think it was clear even then, even more clear today,
that Rob is not the type of guy who'd want to run an oil rig.
My question to the panel is how you manage as a leader to have
a culture in a business, and in a business system, which allows
you to be absolute rigorous in say, health and safety
standards in one part of our business, yet leaves the free
play space and other parts of the business to be creative?
MODERATOR: OK.
These are two excellent questions.
Riggering creativity in business, and empowered
individuals disfunctional government.
So we'll just run through the panel.
Answer as you wish, quite otherwise, Dan will
pull the plug on us.
SPEAKER: OK.
Just to pick up on Allen's [UNINTELLIGIBLE]
Two things.
One is this thing Robert talked about, rules of the game.
You've got to have really clear boundaries and framework.
It is that freedom within the framework concept.
People confuse empowerment with loss of control.
It's all about autonomy within a defined space.
And all the issues are about being very, very clear about
where that space is and how that works.
If you like a contradiction, I think just have to be super
clear about whether these rules apply, and where
is the freedom --
MODERATOR: Break rules, but don't embezzle,
as you were saying.
SPEAKER: That would be good.
ROBERT POLET: Of course, I freely agree with it.
But I'd like to add then, one more thing.
And that is that's I've seen this when our children grew up.
When they were three or four years old, we started
treating them as full, grown up human beings.
And you know what?
Even at three, four years, they could handle
that responsibility.
So, I've always said, why would I not trust somebody who has
studied, and who's got years of experience in a business to
have enough common sense, to behave like grown up.
And to take the decisions that he or she thinks are correct,
in the light of the rules of the game in the company, and
the vision and the ethics, and the values that we've
agreed in the company.
You know what?
I think 99% of the people actually can be trusted
with the responsibility.
You do not have to control them.
They take the right decisions themselves.
MODERATOR: Carl-Henric, I think your answer is the toughest,
because it's one thing to have creative home designers and
fashion designers, but do we really want our deep sea
drilling engineers to be that free and creative?
CARL-HENRIC SVANBERG: Well I would just like come back
to the question as such.
I think it's a relevant question.
And of course, in a company like BP and it's competitors,
same as airlines or nuclear power plants or whatever, in
this kind of industry, there cannot be a single
moment of compromise.
Safety is first.
You can see that in a company like BP, every single meeting,
every single meeting starts with a safety briefing.
Every one.
It's just no way, that you have to have in the DNA, never, ever
compromise safety for close to safety for profit.
But it's also logical, because at the end of the day, a
failure costs many men more time than whatever you could
save, so it absolutely has to be part of the DNA.
DON: I think, ironically, one of the ways to achieve control
and security in this new environment is to open up.
Because you can't control many things.
And the way to control others is to be more open.
I mean look at how BP is trying to solve this huge crisis.
It's to engage the world in finding solutions.
And when it comes to a government, this is a big
problem, because governments are illusory to think that
these all command and control bureaucracies that have this
old model of creating public value are going to
be sustainable.
And you've got the intersection of the new web and this new
generation, that want to engage with governments very
differently and have different expectations regarding what the
government should be.
And if you want to learn as a government on how to fix that,
I think a good place to start is actually with Obama.
Because, first of all, he created a platform,
MyBarackObama.com whereby 35,000 communities, powered by
young people, brought him to power, and that's not
just my point of view.
It's his point of view.
And now he's working hard with some success, some failures, in
trying to keep citizens engaged in a very difficult
environment.
But it's a good segue to the next session, actually because
government has a platform, and the use of data is going to
be really critical in creating a more open
and engaged government.
MODERATOR: OK, Don and I are clearly in psychic communion
because, maybe its our shared Alberta roots, because he has
segued into the next panel beautiful, which
is, after lunch.
It's going to be about the power of data.
It's going to moderated by John Palfrey who's a professor
at Harvard Law School.
We all have to be very nice to him because with Elana Kagan
appointment to the supreme court, the control of Harvard
Law School over the machinery of U.S. Government
is now absolute.
Before we go to lunch, I hope you'll join me in thanking
our magnificent panel.
Don told us that old style companies are on that road to
death, and it's new digital individuals who are going to
lead the way to the future.
But I think we've had three incredibly innovative and open
thinking leaders of really legendary and esteemed
firms, so thanks a lot.
And especially Carl-Henric.
Very brave of you to come today.
Really appreciate it.