Ecolab Chairman and CEO Doug Baker Jr. spoke to a crowd of more than 1,000 of the nation’s most successful entrepreneurs during the 2018 Strategic Growth Forum in Palm Desert, CA, this morning. Doug answered questions asked by EY’s U.S. Chair and Managing Partner Kelly Grier. Here are excerpts:
Kelly: [Regarding dealing with a transforming, dynamic period of time] how do you prioritize the totality of everything you and Ecolab are facing right now?
Doug: We use a metaphor at the company which is understanding what are the currents and what are waves. Currents are populations growing, middle classes emerging principally in Asia—their diets are shifting meaning they’re moving from cereals to proteins and as a consequence, that’s going to take many more calories to feed the world. The two biggest uses of water are agriculture and power generation. The middle class also wants all the luxuries we enjoy: air conditioning, refrigeration, plugging in 12 devices at night, etc. So we know water shortages are going to continue to increase regardless of what government states at this point in time. So that’s what we want to bet on: things that are certain in almost any [political/economic/other] environment. Then we get into the waves. They can knock you out of the currents. Regulations, immigration policies, the economy up and down…we know we’re going to have a recession, we just don’t know what year. I don’t think it’s 19 (trust me I’m always wrong), I don’t think it’s 19, but its 20 or 21—probability just goes up. So how do you prepare for that in a way that strengthens your position and doesn’t weaken your position or your capabilities of heading for the currents.
Kelley: [Regarding the duality of innovating and digitalizing and growing the business with optimizing, simplifying, delayering and taking costs out] how do you galvanize your workforce and leadership team around the duality of that agenda.
Doug: We are investing heavily in digital, and have been. We’ve invested over $600 million in the last five years and upped our investment on an annualized basis. That’s big for us. We view it as make or break. I get counsel sometimes saying, ‘well you’re not getting as much as you should out of your investments,’ and I say look, the mistake we can’t afford to make is not investing. If we invest a little too much or a little too sloppily, it’s not ideal but it won’t kill us. What will kill us is not getting on this digital agenda. A lot of this is trying to figure out what mistake are you willing to make. It’s hard to be perfect in all these areas; which one can harm you and which ones won’t?
Digital is clear and we’re pushing ahead on a number of fronts. We can now enable huge industrial sites, where our water business takes us into extraction industries such as mining, oil and gas. What comes out of the ground is mostly water. It takes us into steel production and aluminium production, and if you go from the best in class to the worst in class it can be a 10-x difference in water consumption. What digital allows us to bring transparency to that fact.. We can go to somebody running 80 steel mills around the world and show them here’s your best in class guy, here’s your worst in class guy, and when you use water you use energy because typically you have to heat it, move it and treat it. So reducing water reduces carbon and it reduces costs.
The other side of this agenda is that it will enable us to do more with less both for customers and ultimately in how we provide services. I don’t think we’re going to have fewer people in three years, but we’re going to have a more productive workforce in three years. We want to get in front of that.
Our other initiative is thinking through the ramification of delayering the organization. The problem is getting big is that you had one layer and then everybody wants to become a king, and then they need a staff, and then the staff needs support, it’s just mushrooms. If you don’t every once in a while as an organization go through all these layers and think about how all these layers are driving our people close to the customers crazy, you’re missing it. And you can’t last. You’ve got to continue to improve.
[More excerpts coming.]