Dr. Reddy’s Laboratories (DRREDDY) FY23 Earnings Concall Transcript

Dr. Reddy’s Laboratories (NSE:DRREDDY) FY23 Earnings Concall dated Oct. 13, 2022

Corporate Participants:

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Enno de Boer — Head Global Operations Technology

Rebecca Ivey — Head of Platforms and Impact

Erez Israeli — Chief Executive Officer

Xiang Wenbo — Chairman

Katy George — Senior Partner and Chief People Officer

Umang Vohra — Managing Director and Global Chief Executive Officer

Michael R McMullen — President and Chief Executive Officer

Revathi Advaithi — Chief Executive Officer

Presentation:

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Ladies and gentlemen, dear colleagues, welcome once again to Lighthouses Live. My name is Francisco and I’m delighted to be joining you from our TV Studio here in Geneva at the World Economic Forum. We are here to celebrate the further expansion of the Global Lighthouse Network, and we are about to welcome the members that will join this exclusive network as from today. By the end of this event, the global manufacturing community will be able to count on 114 Lighthouses, which is an impressive result.

So those of you joining us for the first time, let me tell you that the Global Lighthouse Network, it’s a World Economic Forum initiative that we are running in collaboration with McKinsey. The network is the leading global community of both production sites and value chains that are capturing and demonstrating value through the adoption of cutting-edge technologies and the Fourth Industrial Revolution. Lighthouses are recognized as leaders for having successfully leveraged technology, to drive productivity and growth, improved resilience, and deliver environmental sustainability.

Without further ado, let me get the conversation started and for that, I’m delighted to be joined today by my colleague and friend, Enno de Boer, who is a senior partner at McKinsey. Enno, a very warm welcome to you in New York. Why don’t you tell us more about the Global Lighthouse Network and why it is so unique?

Enno de Boer — Head Global Operations Technology

Thank you, Francisco. It’s my pleasure to be hosting this event with you today. The Fourth Industrial Revolution in manufacturing is well underway. We are far beyond the hype, more than 110 Lighthouses, 150 use cases have proven that companies can make great performance leaps with Fourth Industrial Revolution technologies and innovate supply chains. While the first chapter of the Fourth Industrial Revolution is closed and manufacturers have a powerful set of new tested tools at their disposal, the world has changed and with it, the strategic intent for most manufacturers. Good news, these new tools have proven to drive growth and productivity and sustainability and resiliency at the same time. Now, we must scale. Expanding the impact to the entire supply chain, Chapter 2 will be all about scaling.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Indeed, Enno, Lighthouses have proven that it is possible to make progress on and achieve these strategic goals all at the same time, gross productivity, sustainability, and resilience simultaneously, but you also mentioned scaling, what do you mean exactly by that and why is the next chapter so critical, but also so challenging?

Enno de Boer — Head Global Operations Technology

Innovating and deploying at scale require very, very different skills. First of all, we have to shift gears and acknowledge that a lot has been piloted in the last five years. So we must stop piloting and refocus our energy on deploying new standard use cases that are proven. Many manufacturers have 20, 50 or even 100 sites, hundreds of suppliers or even thousands and thousands of people. So, scaling fast requires assetization of a few dozen of high impact use cases that become the new standard and then relentless capability building of the people and deployment. At the same time, technology is evolving fast. So it’s critical to be agile as we deploy. So that’s the entire challenge we are facing.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Well, the very good new then is that with the Lighthouses, we now know that it is all possible. Lighthouses already show us that transformation at scale can be achieved. And most of the lessons actually were captured and reflected in the playbook that we release at our last live event back in April this year. Since then, the learning curve of our Global Lighthouse Network has actually massively accelerated.

Enno de Boer — Head Global Operations Technology

That’s right. Our research and the newly designated Lighthouses have highlighted that there are three must haves to master scaling. Number one, build a clear strategy. Without a clear strategy, the breadth of possibilities, the variety of use cases and technologies will get you lost in pilot purgatory. The digital transformation has to be designed customer value back in close alignment with the business strategy.

Second, invest into your people. I cannot mention this enough, without the right resource and capability models, your transformation will soon run out of steam. And third, set up the right governance. Without value assurance and governance and the right execution engine, you won’t be able to capture the value or see the real impact coming through. The hardest part is to design and adhere to the new standards. With outstanding tools, standard interfaces and data assets, you will not really get far.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Well, thank you Enno. Let’s now celebrate the new members who are about to join the Global Lighthouse Network. These are companies that prove that the new chapter of the Fourth Industrial Revolution has already started, and it’s all about scale. We are adding 11 sites to the network, bringing the total number of Lighthouses to 114. Lighthouses come from all around the world and from across many industry sectors. These are companies of different sizes, but they all have one thing in common, they are all lighting the way for our global manufacturing community.

Enno de Boer — Head Global Operations Technology

And now let’s welcome our 11 new Lighthouses. I’m so excited to announce that Agilent Technologies, CATL, Cipla, Danone, Dr. Reddy’s Laboratories.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Flex, Haier, Midea, Mondelez, Sany Heavy Industry and Western Digital are joining or expanding their presence into the network. A warm welcome to the Global Lighthouse Network to all of them. Let’s now discover more about these new Lighthouses.

[Video Presentation]

Congratulations to this new cohort and we have more cause for celebration with four new Sustainability Lighthouses, those making an outsized positive environmental impact. The new Sustainability Lighthouses are Aracelik, Micron, Unilever, and Western Digital. Congratulations, we now have 10 Sustainability Lighthouses in the network, but of course we want many, many more. Let’s look at what these companies have done to achieve this recognition.

[Video Presentation]

More than amazing cohort, we are welcoming to our global network today. Many congratulations again to all of them and to their amazing teams. It is now time to hear from some of their CEOs, and I’m delighted to introduce our first panel discussion of the day. The leader we are about to hear from are joining us to share how they have scaled Fourth Industrial Revolution technologies to achieve their strategic goals. Our first panel is moderated by Rebecca Ivey, Head of Platforms and Impact, at the World Economic Forum. Rebecca, a very warm welcome to you.

Rebecca Ivey — Head of Platforms and Impact

Thank you, Francisco. And the first chapter of the Global Lighthouse Network has been closed. More than 100 Lighthouses have demonstrated significant impact in using Fourth Industrial Revolution technologies. So now a new chapter begins and it’s all about achieving impact at scale. In fact, more than two-thirds of companies see scaling of Fourth Industrial Revolution technologies as a high impact lever to address productivity, sustainability and resilience priorities.

To discuss how scaling digital can help in achieving strategic goals, I’m pleased to have with us today two leaders from newly designated Lighthouses. Erez Israeli, Chief Executive Officer of Dr. Reddy’s Laboratories, and Xiang Wenbo, Chairman of Sany Heavy Industry. So I’m delighted to have both of you here today and I’ll start first by asking question to you, Mr. Israeli. Your company, Dr. Reddy’s Laboratories has embarked on a large-scale digitization program of your manufacturing network to increase competitiveness, eventually leading to the site in Hyderabad becoming a Lighthouse. So what would you say are the next priorities that you will address by scaling Fourth Industrial Revolution technologies?

Erez Israeli — Chief Executive Officer

Thank you, Rebecca. And first, I want to thank you. Thank you all for recognizing us. Thank you for the ability to be part of such an amazing program, it’s a big honor for us. We identified a group of about 1.5 billion patients, that actually will be saved if we will be able to make access to affordable medicines. And this is our purpose and actually without this, such a will not be able to achieve that as naturally the costs and the access related to. It is a must do once you are making the entire operation much more agile.

The next priority is naturally to scale it up, to scale it up to all of our sites and to actually connect all the digital, to all the modes and actually to move to a no touch point in all of our sites and eventually to enable each one of the units, we will be able to have a cost that will enable access to every person on earth actually and especially to the 1.5 billion patient that most of them are in Asia, most of those are in India, but also in the other countries outside of it. And of course, naturally, then it will enable us to scale it up and to make also the type of products also much better quality, because naturally the Lighthouse is helping also to make the quality in a very, very different level. Basically also without the relevant interventions that’s upcoming with it.

So we are talking about zero touch points and digital across all the relevant organization, not just in operation, but also throughout the supply chain, as well as markets.

Rebecca Ivey — Head of Platforms and Impact

[Foreign Speech] Fantastic. I mean it’s a huge endeavor, but as you said, it’s really about reaching the patients with the right products and how to do that at scale using the Fourth Industrial Revolution technologies.

Mr. Xiang from Sany Heavy Industry, quite a different set of industrial needs, but you now have two sites that are part of the Global Lighthouse Network, unlocking benefits around agility, in particular, for the Changsha site and productivity for Beijing. What are the other priorities that you will address by scaling?

Xiang Wenbo — Chairman

[Foreign Speech] It is a great pleasure to participate in this interview. I would like to take this opportunity to thank the Global Lighthouse Network for their support to sany. Going digital is one of Sany’s three major strategic priorities. In addition to our number 18 site in Changsha, which has joined our network this year and the Beijing Pile Crane Factory, which joined last year. We have 43 other sites under digital transformation globally.

Through digital transformation, we’re building smart factories equipped with automated manufacturing processes, smart logistics systems, and decision-making processes. The heavy construction equipment industry is facing many headwinds today, changing market demands, complex product portfolio, rising labor costs, and oversized in every way components. We’ll continue to address some of the following challenges by scaling smart manufacturing technologies.

First, address rising labor costs and labor shortage by letting robots perform traditionally manual tasks. Second, upskill workforce organization wide by digitizing personnel skills and empower machines through programming and data input. We also use automatic detection technology to ensure product quality and to create a digital manufacturing system with excellent efficiency, lower costs and stable quality. Third, replace forklifts and traveling trains with super heavy duty AGVs and intelligent trusses on site to reduce labor intensity and eliminate workplace safety hazards caused by transporting super heavy parts. Thank you.

Rebecca Ivey — Head of Platforms and Impact

Thank you so much. And as you mentioned, of course, many enabling factors of technology, but of course, the human factor is still critical and safety being of top importance as well. Maybe back to you, Mr. Israeli, if we think about the key to enabling these transformations to take place, I mean, Dr. Reddy’s Laboratories is scaling Fourth Industrial Revolution technologies across 15 sites in parallel. So what is required from the leadership, from you and from your team, your leadership team to run a digital transformation at such a large scale?

Erez Israeli — Chief Executive Officer

Hopefully our leaders never did it in their career. It’s the first time that we are all doing it. Most of us, especially the, let’s call it, the older generation, they never went to this type of management, as well as never went to the type of challenges certainly. So, the first is about us changing our mindset of how to do operation. It’s about us allowing the digital and technology make the products efficient, a zero touch point and all that stuff that are coming to play.

So the biggest investment is actually in our people, understanding the task, appreciate learning what is done, and design a very different type of operation for the future. They understand of the value of data, they understand of the value of how data can be used also in the future and to design. Then cater of leaders around the entire country, we’re talking some for sites that are in village and more places in which people did not have access to these kind of knowledge, technology or systems and to train them to do that.

And on top of it, it is about a culture in which we people understand that by doing that, it will enable the scale and enable much better service, and many more patients that will be able to enjoy better health because of that. So it’s all about, for us, the leaders, their mindset and once it is there, the rest is relatively operational, and let’s call it, easier.

Rebecca Ivey — Head of Platforms and Impact

Well, it doesn’t sound easy, but I’m sure there are many lessons learned and I’m sure that’s also something that the Global Lighthouse Network is a great place to share those learnings with others who may be facing similar challenges. Over to you Mr. Xiang. In a low-volume, high complexity industry, the site in Changsha achieved a breakthrough 60% production lead time reduction by combining analytics and automation technologies. So how big is this opportunity to expand, beyond just scaling factories, how does this impact your overall production networks, the whole value chain or the functions in your company that go beyond manufacturing?

Xiang Wenbo — Chairman

[Foreign Speech] This is a huge opportunity, future companies will all be platform businesses with an ecosystem. The 4IR is a technological revolution, and once in a lifetime opportunity that significantly impacts all industries. It presents both opportunities and challenges to the manufacturing industry. Other sectors as well have also been given the opportunity for technological innovations. As we see successful application of advanced technologies in the heavy construction equipment industry, we believe 4IR technologies will benefit areas such as logistics and smart cities. We’re in an industry that is characterized by diversified product portfolio, small batch sizes and heavy-weight and oversized components. We understand that it’s more difficult for us to scale digital transformation than players in other sectors. The number of Lighthouse factories representing different industries already illustrates very well.

The 4IR is a once-in-a-lifetime opportunity, our then Chairman, Mr. Liang Wengen used the phrase “sink or swim”, to demonstrate his determination to scale 4IR across Sany in 2018. Of 45 sites of Sany are building smart factories and scaling 4IR technologies across their value chain. Our first Lighthouse factory has already become a beacon of confidence for our business partners and has created industry wide impact. So, precisely what do we do? First, we have automated logistics system, covering outbound, inbound, sorting and distribution using AGVs and other technologies.

And second, we have automated a manufacturing process, covering feeding, molding, and coating by using industrial robots, intelligent trusses and technologies such as visual recognition and automated retrieval. And third, we have automated our decision-making process, empowered by our platform softwares such as MOM, ATS and WMS. We’re able to achieve end-to-end process management and monitor the production site in a smart and transparent way. And we have enabled automated decision making across the manufacturing process. Thank you.

Rebecca Ivey — Head of Platforms and Impact

Thank you so much. And I’d love to ask you another question actually, really related to the overall Global Lighthouse Networks. So since Sany Heavy Industry became a Lighthouse since 2021, how would you describe what the Global Lighthouse Network brings to your company?

Xiang Wenbo — Chairman

[Foreign Speech] It brought us great value. Sany is committed to using digital technologies to empower smart products, smart manufacturing and smart operations. Through technology scaling and experience sharing within Global Lighthouse Network, Sany is setting new standards for the global heavy construction equipment industry.

Rebecca Ivey — Head of Platforms and Impact

Thank you so much. Mr. Israeli, from your perspective, as a recent joiner of this community, what are your expectations for the Global Lighthouse Network and what do you expect this network to bring to your organization?

Erez Israeli — Chief Executive Officer

Firstly, our people here, especially people around me are very proud to be part of the process and we already brought a lot of value by bringing the sense of pride to the many people that are dealing with it. It is a big honor for us to be recognized and big honor for us also to present India in this process as well. So thank you for doing that. It’s all about learning for us, we would love to learn from people that are veterans and well advanced in this process, we are still in our initial steps in that direction. Although we are very determined that we want to move fast on that, and to scale it up fast, and we are allowed to contribute by pitching others, new joinee that will come in the future and we are offering our help at anytime that you wish and thank you so much for that recognition and for enable us this kind of learning.

Rebecca Ivey — Head of Platforms and Impact

Well, it’s fantastic to hear. And I think learning is really at the heart of what this network is about. And maybe on that note, if you were to give us your speculation or your prediction for what the next chapter of the Fourth Industrial Revolution might look like, what would be a couple of key words or key concepts that come to mind as we look to the future?

Erez Israeli — Chief Executive Officer

So naturally after Fourth comes the Fifth, and it’s all about how to connect, the digital, to robots and to move the technology even further. It is actually unbelievable how much more we can do on both the chemistry, as well as on the physical way of which medicine are made in order to make medicines much more affordable, which is a huge unmet need worldwide and they — still many people cannot have access to basic needs because of this. So, I’m actually looking forward also to invest in the same level in the robotization, automations and whatever new level of technology to take it even further into the market and I’m actually looking forward to that.

Rebecca Ivey — Head of Platforms and Impact

Fantastic. And Mr. Xiang you mentioned the debate or the dilemma within your company several years ago about what to do about the Fourth Industrial Revolution and you decided to seize it. So what do you see as the next technological innovation to seize in the future of your company?

Xiang Wenbo — Chairman

[Foreign Speech] If I would describe the future with a few keywords, I would say the first is connectivity. Everything will be interconnected. The second keyword is automated decision making, that is machines will free humans from tedious and time-consuming manual processes. The third is synergy. In the future, be it in manufacturing or any other industry, synergy and collaboration will be the key to problem solving. Thank you.

Rebecca Ivey — Head of Platforms and Impact

So insightful. I really appreciate the insights from both of you. And I mean, if I could take away one thing from this conversation, I would say it’s still the emphasis that both of you placed on the interface between people and technology and that still really is at the heart of what the Global Lighthouse Network is also trying to promote, which is really a better learning culture and a network for all of us, but also a more sustainable and prosperous society. So very much, I appreciate again your joining this conversation.

And Francisco, over to you.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

That was a fascinating discussion. Thank you, Rebecca. The Fourth Industrial Revolution is really a once in a lifetime opportunity. And as you just heard, there are great rewards available for those companies that can scale, which means expanding across networks and into new functions of their organization.

Enno, over to you.

Enno de Boer — Head Global Operations Technology

We have one more panel discussion for you today, featuring three leaders from the network who will be sharing their insights on how environmental sustainability and workforce engagement are critical to the success of any transformation. To lead this discussion, I’m delighted to introduce Katy George, Senior Partner and Chief People Officer at McKinsey and a close friend to the Global Lighthouse Network.

Katy, over to you.

Katy George — Senior Partner and Chief People Officer

Thank you Enno. Environmental sustainability is one of the top three priorities for all of our Digital Lighthouse companies, but also for other companies around the world. And so today we’re going to talk about how many of our Lighthouse leaders have achieved real improvements in environmental sustainability, through using Fourth Industrial Revolution technologies. But we’re also going to talk about the role of workforce engagement and upskilling, because of course investing in the workforce is the way that we get results to happen.

I’m thrilled today to be joined by three leaders who have really set an example for achieving high impact on sustainability, and also really innovating the way that they’re working with their workforce. So excited today to be joined by, first, Revathi Advaithi, who is the Chief Executive Officer of Global Electronics Manufacturer, Flex; Michael R McMullen, who is the President and Chief Executive Officer of Agilent; and Umang Vohra, who is the Managing Director and Global Chief Executive Officer of Cipla. Really excited to have such an exciting group of companies represented and we’ll be talking about sites all around the world, Singapore, India and Brazil.

So, Umang, let me start with you and some of the experience and impact that you had at Cipla. First of all, congratulations for your Lighthouse designation. You are the first Cipla Lighthouse Indore, and what we were really excited about was how you’ve leveraged artificial intelligence to optimize machine parameters automatically, and you’ve reduced energy consumption by 30%. Can you talk about what role Fourth Industrial Revolution transformation is playing and helping Cipla achieve your goals and pledges around sustainability?

Umang Vohra — Managing Director and Global Chief Executive Officer

Thank you Katy, and my compliments to all the fellow participants today, and to the World Economic Forum for running something like this. And recognizing, frankly, the progress that lots of companies are making. I’d like to thank team Indore, this is our first site that got on to this network and we’re hoping that many of the other sites could also take this example and follow, but for a phenomenal effort by the team there. So, I just wanted to step back coming, from the emerging side of the world, there’s a lot of catch up on climate change that needs to happen, and we’ve set ourselves goals that would say that we would be water positive, carbon positive, and we have zero waste landfill, all in the next 5 to 10 years. And some of these will get done before, someone would happen at appropriate times during this window.

And water is very important as well for a geography like India, where we have about 1.4 billion people and pharmaceutical manufacturing is actually quite — uses a lot of water, very often in its manufacturing operations. So coming specifically to your point, I think we’ve looked at data, I think the journey for anything that you want to do with an industrial — with the Fourth wave of Industrial Revolution is actually to start with data. That’s what we’ve done at Cipla. We’ve got a large deployment of the right data coming in and being analyzed and I think we’ve used that data to optimize settings for chillers, we’ve used that data for optimized setting of machine parameters and that’s really reduced consumption that we use in our factories. And actually there are three ways that we’ve done it.

One is just to optimize the amount of consumption that we use, and that happens through the machine settings, the design of parameters, figuring out that right zone of operation, the timing for activities. The second is really optimizing within the plant, which is across our sets of machines of trying to look at how we can network these machines more effortlessly, how we don’t lose power and we don’t lose idle time. And therefore increase our overall throughput and output. And the third is really looking for new technologies that these machines have embedded that can allow for power consumption to be significantly lower. So those are the three things we’ve done effectively at Indore. The results that we’ve reduced this by about 30%, I think we can go further and there’s a lot of impetus that we are providing to our teams, as well as to the other sites in our network that will hopefully get us to get there.

Katy George — Senior Partner and Chief People Officer

Thank you very much Umang, and congratulations again. Mike, let me turn to you and congratulations for the work that you and your Singapore sites have done and what you’ve achieved. You’ve also reduced energy consumption by 30% and you’ve done it while growing capacity and throughput by 60%. So, pretty exciting combination and many times companies feel like they can’t do both at once. How have you done it? How have you leveraged Fourth Industrial Revolution Technologies to achieve both of these goals?

Michael R McMullen — President and Chief Executive Officer

First of all, Katy, thank you. It’s really good to be here with you today and first want to thank you, the forum, and McKinsey for hosting this event. I’d also like to recognize our Singapore team for their absolutely amazing work led to this distinguished recognition, you made us all proud here at Agilent. And I’d also like to — it’s a real honor to appear with the two very distinguished business leaders, and my congratulations to your organizations as well for this amazing recognition.

So, to your question, how do we reduce energy while increasing productivity? We did it through three steps, all enabled by 4IR approaches. First, we implemented a building management system that draws an industrial Internet of Things, Climate Control accounts for about 50% of our energy use in this facility. So that presented an opportunity for us on conservation. Our cloud-based system optimize the chiller load, allows automatic scheduling, and then there is a need for manual data collection. The second thing our team did was quite a big data, analytics platform, leveraging the cloud, AI, machine learning to streamline and simplify our factory process. This achieved a significant reduction in cycle time, waste and chemical usage and we did this all at scale.

The third, we have transitioned to renewable energy sources. The 6,700 solar panels on our factory’s flat rooftop produce about 27% of the sites energy. This reduces carbon emissions by more than 1,500 tons per year. All these efforts have led to our first Smart Factory adaptation. We are now extending 4IR technologies and sustainable initiatives at scale across other Agilent sites worldwide. Our net zero commitment has played a major role as our mission is to advance the quality of life and protecting the planet as part of that mission. As we recently reported in our recent ESG report across our operations, we reduced carbon emissions by 34% per square foot and municipal water use by 22% per square foot since 2014, diverting 94% of our waste from landfills.

Katy George — Senior Partner and Chief People Officer

Mike, that’s incredible and it’s exciting — go ahead please.

Michael R McMullen — President and Chief Executive Officer

I say, you can do both, you can drive volume while reducing your energy consumption.

Katy George — Senior Partner and Chief People Officer

Well, that’s what I think is so exciting that we’ve moved away from what used to be really a trade-off mentality in manufacturing, right. We can be flexible or cost efficient. We can reduce — be an environmental winner or be cost efficient and productive and you — all are really demonstrating how we can do both.

Michael R McMullen — President and Chief Executive Officer

It’s not a either or choice.

Katy George — Senior Partner and Chief People Officer

Revathi, let me turn to you, because you also in Sorocaba have really created a circular economy for electronic waste, using 4IR technologies. We’ve all, I think, come to realize environmental sustainabilities increasingly a license to operate. How have you also made a competitive advantage?

Revathi Advaithi — Chief Executive Officer

Yes. Firstly, thanks for having me and really want to start with congratulating Agilent and Cipla both for this award, and it’s exciting to be in such good company. I want to thank the Lighthouse team for doing this amazing work, I have been in manufacturing all my life and to have a organization that really focuses on taking — continuing to take manufacturing to the next level of performance is super exciting and it makes all of us passionate to achieve being in the Lighthouse network and within Flex itself, our Flex team is very competitive and all our 100 plus sites are competing to be in the Lighthouse network someday. So, congratulations to our Sorocaba team. I was fortunate enough to travel and see them last year and saw what a fantastic team that is, and why they deserve to be in the Lighthouse network.

So our Sorocaba operation is located in Sao Paulo, Brazil, and has been around for around 20 years and they make products for different customers and it can be in a variety of different scenarios. Very complex manufacturing environment, it can be high mix, low volume or high volume, low mix, so has to cater to a variety of different customers. And as all of you know, Brazil is a very competitive environment and you have to be focused on making sure that to retain market share you’re providing the best solution for customers, which could be price, quality, all of those things put together.

So the Flex team, absolutely driven by kind of our central team, but also our — and our Brazil team, embarked on adopting the Fourth Industrial Revolution technology journey and put an emphasis on sustainability, people, but also on growth. So we’re able to kind of straddle all of these really, really well. And what they did in terms of the Fourth Industrial Revolution is really focused on creating a digital factory, an integrated digital factory, upskilling the labor and our people, our colleagues. Digital Performance Management, you could see there, everywhere you went in the factory, it’s all connected end-to-end, and through all of that achieved not only fantastic safety record, but supply chain transparency. So really connecting the end-to-end value chain, I think, in a super elegant way. And all of this, of course positions Flex Sorocaba as a differentiated competitor. And our customers want that you have a very resilient and competitive value-added solutions and that’s what Flex Sorocaba gives for the Brazilian market.

And then all of this they do while reducing manufacturing costs, at the same time helping with greenhouse gas emissions, making sure that we’re focused on zero waste. So, it really is a very end-to-end view that the Flex Sorocaba team takes. And then meeting all of this and still honoring the sustainability goals and maintaining the health and safety of our employees, but being the most competitive organization, so they can also improve their market share is tough thing to do. But I think like Michael said before, it’s — these days, you able to achieve all of these goals and it’s a comprehensive set of victories for the team. So, Katy, that’s a little bit of our — what happens in our Flex Sorocaba team. I’m honored to be talking on their behalf.

Katy George — Senior Partner and Chief People Officer

Well, congratulations to you and to the whole team. What I’m really struck by is, how you described end-to-end change and all of you were talking about pretty fundamental kind of broad systems wide changes, network-wide changes. If I think back to when we started the Lighthouse network, we were really looking at examples of more localized transformation and all of you are now getting to something that feels like real scale. Umang, if I turn to you, you are deploying Fourth Industrial Revolution technologies in 22 sites at once at Cipla, which is just tremendous. But I’m sure also not very easy. What are the lessons that you’ve learned around how you’re engaging the workforce in really making this transformation and allowing you to scale?

Umang Vohra — Managing Director and Global Chief Executive Officer

That’s a great question. I think there are effectively two types — well, two people or two sections of people who get affected by this. The first is, I don’t think we could have accomplished any of this, if we didn’t have any new talent that is infused into the organization, because this is not talent that is readily available to the pharma industry. And so we’ve had a few people join us, who’ve really been the change and the torch bearers for this change within the organization.

And then we’ve also worked to move the other set of people who are part of our organization to a level of capability, which is very important for that performance. So, I think if you were to talk about the latter, I’ll talk about the former as well, but let’s focus on the people who are working with us. I think the most important thing to do is to get the leaders involved first. And the way we did that was we tried to figure out what the leaders do on the shop floor. And I think the biggest thing is, they solve problems, they make decisions, right. And how do you embed this data driven digitally native aspects of the organization in the way that they make decisions. That’s the first thing that we tried to tackle.

Then we had about these 150 odd data translators that are working with us, how did they get trained to get to the next level of proficiency. And then the rest of the users who use the system on a day-to-day basis, what do we do for them? So we segmented the whole population into three parts and worked on all three solutions. But I think the biggest change came from when the leaders realized that the way they would make decisions in the future was going to be very different than how they were doing it in the past. And I think that’s where the chain cycle begins to work.

I think the former, which is when you bring new people into your organization, I always say one thing to them. I said, don’t let Cipla infect you before you infect Cipla, right. Because steady organizations have this ability to actually bring, then they see new talent to bring the dominant logic onto the new talent without absorbing what this new talent brings in. And so we’ve tried to do that by keeping the culture connect — we’re tried to make sure that the culture and the passion stays in what we do across the two sets of people, but also creating flexibility in how these new people operate, right, and how and what type of change they want to bring into the system.

So I think in a snapshot, that’s broadly how we’ve used the cultural transformation. We’re still on it, it’s not done, but I do know that the spirit of Cipla is always to keep trying new things, it’s always keep improving. So I’m hopeful that this will go a long with the 22 other sites that we are trying to focus on.

Katy George — Senior Partner and Chief People Officer

Thank you. I love what you said about culture. We used to go around and hire for “culture fits”, and I think increasingly we all recognize in our organizations that we need to figure how to expand cultures and include new kinds of thinking in order to be successful. So thank you for that.

Mike, I know you also have been making real changes in the way work is done in your organization structure with agile ways of working, with new digital roles. How have you been able to drive changes with workforce engagement?

Michael R McMullen — President and Chief Executive Officer

Yes. Thanks Katy. And I just have to echo Umang’s comments. It all starts with how you engage with your own team. So at Agilent, our culture and our people drive our progress and we have a very strong culture, we’re very proud of and that culture defined by innovation, trust, respect, teamwork, integrity and accountability, and we work as one team. Our One Agilent approach emphasizes collaborating across functions and teams, really become intrinsic to the culture and are already working and I think has enabled us to quickly implement innovations at scale as we talked earlier.

At our Singapore facility, we took a variety of steps to engage employees in 4IR. First, we launched a school of digital innovation. This has helped us become strong digital thinkers, we offer courses on data analytics and programming languages. We even provided formal certification program to become a digital expert, I’m hoping to get that certification one day myself. We have been engaging digital — we have this really kind of engaging digital educational events for employees to network and exchange ideas. It’s also a lot of fun activities such as Digital Carnival, Road shows, Hackathon.

We’re working hard to innovate, but at the same time, we’re trying to have fun while we do it. We provide on the job training, upskilling and retraining. So our jobs aren’t static, but evolve and change. And individual employees can direct a lot of this, which increases engagement. We encourage employees to apply their knowledge, for example, we have smaller teams tackling Special Projects that employees can contribute to, such as our dedicated digital solutions team and our tailored incubator program that drives proof of concepts, and by leveraging the power of our data with AI, we’re making data more accessible to everyone and found them engage and offer ideas.

Now we’re all driven by the goal to build a factory of future in that factory of future everyone has a role and they can see the results, it’s very inspiring to actually be part of that, and our leadership is very present, as Umang mentioned earlier, we established a dedicated solutions engineering team to focus on 4IR with new roles, if you will, a Multi-Disciplinarian Task Force directs our agile approach to minimum viable product methodologies. And the importance of this work is underscored regularly by the most senior leaders across the organization. We are also recognized and celebrate milestones achieved each stage. All this is grounded in the strong Agilent core values.

Katy George — Senior Partner and Chief People Officer

That’s fantastic. I love what you said about making this fun, that so often some of the media around automation and digital, and just the use of new technologies, kind of pits adoption and acceleration of these technologies against the workforce, right. We’re automating people out of jobs, but in fact, I think what you any other Lighthouses have demonstrated that this is a way to really improve people’s jobs to improve in each one’s satisfaction, that’s what we see time and again.

Revathi, you also have at Flex been really investing in upskilling. But I also thought it was very interesting, some of the low no code digital tools that you’ve been using are ways of really integrating new technologies into the front line in a way that is easy to integrate and to leverage. So we’d love to hear kind of your perspective on how important these workforce engagement and where does this go next?

Revathi Advaithi — Chief Executive Officer

Yes. So Katy, like Umang and Mike, I’d say that you cannot embark on these journeys without being — bringing your colleagues along the way. And I grew up in a manufacturing floor, and it’s all about making sure that your shop floor colleagues are as excited about all of this as all the techies are. So you can’t just go implement a solution and hope everyone will come along for the ride. So, Flex, at the end of the day, we are a manufacturing company. We have 170,000 people, so we are a company of people, right. That is the heart of our operations. And bringing our employees along for these kinds of changes is very critical for our manufacturing strategy.

So what Flex Sorocaba was able to do was upskill around 200 plus employees in terms of this low no code digital tool. So all the usual stuff, right, workshop, training, lot of internal communications, help them understand how digital process transformation can help them in their daily jobs. They implemented a lot of RPA technology solutions. And also some collaborative online tools like power platforms and things like that, that will take some human repetitive tasks and eliminate them, which were exciting for our teams, right. They did not push back on any of that, they wanted to be part of the solution. So this increase — reduced our overall kind of work for our employees, but at the same time, improved our customer satisfaction. So, and really the metrics were significant in terms of the improvement and our employees saw it and understood it and wanted to be part of the process.

I’d say again, going back to the fact that Flex Sorocaba is in a very competitive Brazilian environment. You want to make sure that the operations have kind of this agile mindset and the idea of continuous improvement. So, as we look forward, what the team tells me in Flex Sorocaba is, their plan is to continue to invest and deploy 4IR technologies and lots of new solutions like 5G private networks in their operations. Of course, we are busy deploying all kinds of autonomous robots and warehouse operations because we know that that’s a skill that our employees are very happy to turn over to these types of automotive — autonomous robots.

We’re looking at a lot of AI in processing field returns for plastic automation and things like that. So we’re really focused on end-to-end, what are the ways that we can really implement 4IR technologies. For me, I’ll say — I’ll step back and say, at the end of the day it will always be about making sure that your colleagues are in the shop floor are understanding that they are a critical part of enabling this type of implementation. It doesn’t happen in silos and our team fully gets that, having visited our Flex Sorocaba site, I’ll tell you that, our shop floor employees, our engineers, our leaders are all passionate end-to-end, and they understand how this makes a difference for our customers. And this is how we changed the entire value stream and that’s the journey that we’re in at Flex, Katy.

Katy George — Senior Partner and Chief People Officer

That’s super. I have found the stories from all three of you, just to be very, very inspiring. The stories of how you’re scaling, looking at the whole ecosystem, end-to-end. At McKenzie, we talk a lot about the importance of driving sustainable and inclusive growth and I think all three of you have demonstrated that that’s possible. That’s not a paradox. You can do all three things at once, and super inspiring.

Let me end with a final kind of lightning round. We’d love to hear from each of you, one or two words about what being part of the Global Lighthouse Network has meant for you and for your companies. Umang, why don’t I start with you.

Umang Vohra — Managing Director and Global Chief Executive Officer

If we stick to the script and it’s just two words, then future ready.

Katy George — Senior Partner and Chief People Officer

Future ready, I love that. Mike, how about you?

Michael R McMullen — President and Chief Executive Officer

Oh, my goodness, I have the same two words. I mean it is future ready, and I really don’t think that the big change like this happens without intention and commitment and this Forum has been a very important part of that journey for us, and I just want to thank you for having me on today’s forums. So, Umang, I didn’t copy of your paper, that’s where we came [Speech Overlap].

Revathi Advaithi — Chief Executive Officer

I feel like I should follow Umang and Mike and say future ready, but — which I love it, because it is so true, right. It’s all about being ready for the future. For us it is manufacturing excellence. We are a manufacturing company, we have to be fantastic at it, and the Lighthouse process just makes us make sure that we are the best manufacturing company. So it’s all about manufacturing excellence for us.

Katy George — Senior Partner and Chief People Officer

I’m very grateful to all three of you for your time today and for sharing these really inspiring stories, very exciting. And congratulations again to each of you and to the teams that have made such a remarkable progress.

Enno, over to you.

Enno de Boer — Head Global Operations Technology

Thank you, Katy. Great to see confirmation from the Lighthouse that there is no trade-offs anymore between sustainability and growth. And also that driving transformation at scale requires an engaged workforce capability building and embedding a digital way of working throughout the entire organization. And this is something I really, really like, making it fun for everyone to adopt new technologies. Once again, it is time to bring our event to a close. In doing so, I would like to share three takeaways.

Number one, chapter one of the Fourth Industrial Revolution is closed. Lighthouses have demonstrated that we can innovate supply chains and make great leaps in growth and productivity. Second, while the world and the strategic intent have changed, the Lighthouses have proven to master today’s and tomorrow’s challenges, they can achieve productivity sustainability and resiliency while continuing to drive growth. Third, the new chapter is scaling and we have a playbook that works, must haves are building a clear strategy and vision, investing into the people to give them the skills they need to adopt 4IR technologies and deploying the right governance for value assurance and standards.

Many, many congratulations again to all of our 11 new Lighthouses and to the four new Sustainability Lighthouses. Francisco, back to you.

Francisco Betti — Head of Shaping the Future of Advanced Manufacturing and Production

Let me say, thank you here in New York, and thank you to all our colleagues at the World Economic Forum and McKinsey for their amazing dedication in our work, which makes all this possible. We end our event today with 114 Lighthouses in our network, including 10 Sustainability Lighthouses. This is such an amazing achievement and result. However, we still have a lot of work to do. There are millions of facilities and companies around the world that we want to engage in the very unique learning opportunity that the Global Lighthouse Network provides.

Our network will continue to grow and we invite you all to reach out to us and learn more about the journey towards becoming a Lighthouse. There are many benefits of being part of this global community of innovators. Benefits for you, your colleagues, and also to the wider communities in which you operate.

Thanks again to all for joining us today. Please stay engaged and bye for now.