Success comes from accomplishing short and long term goals, says ex-CEO of Honeywell Cote

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Cote says this method of paradigm shift, which he shares in his book “Winning Now, Winning Later,” was applied and proved to be virtually effective during his tenure with the US industrial conglomerate from 2002 to 2018. , when he developed the business market. capitalization from around $ 20 billion to almost $ 120 billion, offering returns of 800% and beating the S&P by nearly 2.5 times.

In a recent interview with Fastmarkets, Cote – who is now president of data infrastructure products and services provider Vertiv – discussed how industrial companies can be successful in the short term in the context of today’s global supply chain challenges. and inflationary environments, while investing in the future in the era of decarbonization and digitization.

Robustness of the offer
Global trade today is caught in a perfect storm of supply chain disruptions – with growing demand for goods amidst a post-pandemic recovery – and a shortage of shipping containers, sky-high freight rates and a generalized energy crisis.

This tightening of supply has put a question mark on what manufacturers could do to improve the robustness of supply.

“One of the things the Covid-19 crisis highlighted was that no matter how robust we thought our supply chains were, they weren’t,” Cote said, suggesting that companies ‘ensure that they always have two sources which must also be diversified in different countries to prepare for a similar scenario in the future.

Even if manufacturers could get their hands on more sources of materials, they would still face another worrying problem: higher costs resulting from an inflationary environment.

Take the example of China. The lingering energy crisis caused by energy policies and the shortage of thermal coal have pushed up the prices of a wide range of metallic and ferroallied products, including silicon, magnesium, aluminum, nickel and ferro. -silicon.

And there’s only one solution for businesses to beat inflation, according to Cote.

“There’s no way you can generate enough productivity to offset the impact of high inflation, you just can’t,” he said. “So every business needs to figure out how to raise prices faster and faster than in the past to stay ahead of inflation. “

The consequences for a company that fails to offset higher costs can be detrimental to its own cash flow and employees, Cote said.

In addition, great leadership is also crucial in managing an economic recession, which helps ensure that the company takes advantage of the situation relative to its competitors, including managing staff and dealing with suppliers, a declared Cote.

“When you’re up to your alligator butt, it’s hard to remember that the original goal was to drain the swamp,” Cote said. “But that’s a leader’s job – to look up to see if I clear the swamp when everyone’s caught up.”

In his book, Cote wrote about real-life cases where Honeywell took advantage of economic downturns to negotiate with suppliers. And as a result, they were able to source materials at better prices and generate a growth rate of their aerospace components business of 50%.
superior to that of their competitors.

Location in China – “becoming the Chinese competitor”
For global companies, China has long been a popular market. As a pioneer in localization strategy, Honeywell has succeeded in growing its Chinese market into its largest market outside of the United States.

In just 10 years, the number of Chinese employees of the multinational has grown from 500 to more than 13,000. At the same time, its annual sales have grown by $ 360 million – representing less than 1% of its global sales – at over $ 3 billion, one of the company’s most important sources of growth.

The secret to achieving such success is to fully immerse the company in Chinese business and culture, Cote said.

“Too many Western companies that go to China are looking at their competitors – other Western companies. If they do, they only look at the top 5-10% of the market where many high-priced, high-value products [are targeted] but there is a strong demand from the mid and low end market, ”Cote said.

He argued that the remaining 90-95% market is where international companies should focus, and the only way to be competitive is to become “truly local”.

“It means local in everything – management, personnel positions, design authority, technology development, manufacturing, sourcing from suppliers,” Cote said.

Honeywell introduced the “East for East” strategy in the Chinese market to meet local market demand through product development and innovation. He also introduced an “East to Rest” strategy to bring the innovation developed by China to the rest of the world.

The race for zero carbon emissions
Cote underscored the importance of business commitment to decarbonization in today’s world where achieving net zero carbon has become part of how stakeholders want them to operate.

Honeywell, which makes everything from aircraft engines to catalysts used in oil refining, has pledged to become carbon neutral in its operations and facilities by 2035, according to the company’s website.

He explained how the company had succeeded in reducing its greenhouse gas emissions by around 80 to 90% in 15 years by developing an energy reduction plan.

“We would do our financial budget, at the same time we would have the corporate budget, the energy and water consumption, and what we do to reduce that,” Cote said.

“And we would have an energy efficiency plan that looks like a financial plan. Everyone would know at budget time, I wasn’t just reviewing the financials, I wanted to see their energy efficiency budgets and long term plans.

Honeywell has focused on certain key technical areas to eliminate its carbon footprint. Earlier this year, he established a low-carbon center in China to focus on new energy, renewable resources, material recycling, as well as carbon capture, use and storage.

Sustainability has also been at the center of the concerns of the metals industry, which has seen the demand for recycled or low-carbon materials – low-carbon aluminum, for example – increase in recent years.

And most recently, at COP26 – the United Nations Climate Change Conference – in Glasgow, 41 countries, including the United States, the United Kingdom and India, launched a program to work together to in place of clean energy, zero emission vehicles, near zero emission steel and carbon dioxide as a new efficient and affordable standard by 2030.

In addition to carbon removal, Cote also highlighted the importance of adaptation to climate change.

“Even though we’re going to be net zero by 2035, we’re still adding carbon to the atmosphere unless we find a way to get the carbon out of the atmosphere,” he said.

“[While] we should be focusing on how to get to net zero, we have to spend some time looking at what the ramifications of climate change are, what exactly is going to happen and what we are going to do.

Digitization – “a long, long way to go”
Autonomous vehicles moving seamlessly, people sitting in a living room-like car without having to worry about safety, traffic, parking – this is Cote de la’s “very long-term vision”. future mobility.

Speaking of modern industries built around the internet, artificial intelligence, big data and 5G networks, Cote believes digital transformation will continue to last for at least 60 to 70 years, with disruptive changes taking place on “every physical manufacturer. While the amount of impact will vary from one to another.

“It will be very different for manufacturers, from the digital to digital environment to the digital to physical environment,” Cote said, adding that the complexity of the latter will challenge manufacturers to extend their knowledge of digital to different domains, like as well as physical environments.

“You can fix an error in an app two weeks later, but you can’t fail something if the plant isn’t running for two weeks,” he said.

Despite the unpredictability of the speed and extent of digitization, Cote sees a tendency for traditional manufacturers and tech companies to team up to optimize their capabilities.

“Not all companies have the Honeywell or Vertiv advantage where digital and domain knowledge is usually internal. There are companies that understand the domain but don’t have digital capabilities, I think companies will be. best if they find a way to marry someone and a partner in a way that allows us to be able to do the right kind of interaction to make both things happen, ”t -he declares.

In October of last year, Honeywell and Microsoft announced that the former would bring to market its domain-specific applications built on the latter’s cloud platform to generate new levels of productivity for industrial customers.

The conglomerate has also developed its software presence in sectors such as real estate, life sciences and aviation. Earlier this year, Honeywell launched its quantum computer for commercial use.

“When you look at what quantum computing could do and how we can use that 20 years from now, we can’t even imagine everything that will be possible,” Cote said.

“We can’t predict where it’s going, I just know it’s going to be big changes, and all the incremental steps will get us to this point someday.”

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