Episode 4 - Business Realignment
Nadia: Welcome to the fourth edition of insights were together with Dr Roberta Lepre and our guests, we will be discussing business realignment today. Thank you, Kenneth and Roderick for joining us. Unfortunately, Roderick can only join us via voice but he's still with us. Whereas, Kenneth, it is with us here today as well, both via camera as well as via voice. Mr. Kenneth De Martino. He's the chairman and CEO of the KDM group. Mr. Roderick Scott is the Vice President of Operations on behalf of Hutchinson, thank you both for joining us today. Thank you.
So starting off today, by discussing business realignment, the changes which we have to go through whilst looking into our business models. Roderick, being responsible of a company within the manufacturing industry, whist Kenneth is responsible of a number of different companies within the service industry. And probably now we've been through examples of case studies where we'll be able to mention perhaps a few. So definitely different contexts, different scenarios all the industries, however, are going through a number of changes, we have received a number of different reports claiming drops in GDP both in Europe as well as in the USA, even across the world that actually that consumer demand and consumer confidence will take a long while to kick start. Best case scenario would most probably be late this year. And that's only the best case scenario. Whereas most probably, we will see some movements 2021, either q1 or q2, in different sectors.
So Roderick, perhaps starting from yourself, Hutchinson, you're responsible for different operations, not just a plant in Gozo, but also another one in the UK, Mexico and China. How this is affecting your operation, which is obviously very much dependent on both from a supply chain perspective, but also in terms of different contexts for different countries and terms of the health perspective, but also in terms of economies.
Roderick: So, my, the best thing is to understand also from the, not just from Hutchinson and because Hutchinson point of view, obviously will be limited to its strategy, but also as a global point of view. Obviously, at the moment the supply chain, globally regarding automotive, aerospace, and other manufacturing industries, they rely on just-in-time, in which in order to reduce their inventory, they try to make sure that their suppliers are delivering X amount of units as per their customer request. On a financial point of view is fantastic because you don't need to hold a lot of money in stock. And that gives you obviously more cash flow.
The only problem that the COVID 19 actually created when the country starts closing borders or closing plants, even when a single part is missing a car cannot be completely completed. Hence why we saw a lot of large OEMs assembly plants they had to shut down not just because they are fearing from a health perspective, but also because their subs their sub, sub, sub supply chain might have issues and hence they will stop them. And we have seen a shift of mentality from just in time, people will start shifting more to from adjusting time start shifting for just in case in which they start building more inventory and their locations. And also they start asking suppliers to have their manufacturing supply next to their customers. From a global perspective, as long as you are developed, the ideal is that you have your manufacturing supply for each region. So being geographically balanced, and a portfolio wide, it helps you to supply.
So obviously, from our group perspective, we were always geographically balanced. In fact, we did not focus only on the low cost control something but we focus on having manufacturing plants next our customers. So we were not really hit in that case. But when you go in more other industries, which they relied constantly in such situation, they had big issues. And we have customers actually asking us, there's something [unintelligible] customers, can you restart? What is the problems of restart? Well, we did not need to disclose because we had very good supplies. But and we did not interrupt our supplies for more plants.
However, a lot of other plants have to close. Now closing obviously, on certain plants, it's not just closing the door and go home for a week or two, certain plants even went bankrupt because they don't have sufficient cash. So being also their strategy of having only one supplier for a product, that that caused them an issue because they now need to find a supplier very fast in order to produce their item. And while we everybody says it's for example, x brand is made in Germany, guess what? I can assure you the parts in that car, they come from all over the globe. And this is not for example, one unit is the parts in that unit that will fail so currently there is a big, big strain and which I think the just-in-time model is being now questioned significantly, in actual fact. And we will see a big shift in the industry in which both from protectionism. And also because of the Coronavirus and risk mitigation, business continuity. We'll see manufacturing going back and certainly yes, even if it's more expensive,
Nadia: So more nearshoring perhaps Roderick?
Roderick: Yes, yes.
Nadia: So going more closer to where the customer is, rather than just having a plant into another country where perhaps costs of labour is lower. But now perhaps we're revisiting that business model is staying. Okay, that's, that's interesting. That's costly, however, as well, I presume, even for most manufacturing companies.
Roderick: Like it or not with the COVID-19 and now with the recession coming, there will be a lot of realignment of prices, prices are not going to decrease. Okay, yes, oil is decreasing because there's a surplus. But when you consider when you have a lot of plants that they need to shut down and stuff, obviously what happens is that the weak, the COVID-19 is stressing the industry, every single industry is being stressed while in 2019, it was only the banks industry which then just followed on the automotive, the COVID-19 is stressing every single industry and the weak those which have good cash flows will survive, those which have weak cash flows will go out. And those companies which were relying on very, very thin margins, and a lot of that they will they will disappear very soon, even with the government aid because from the statistics that we receive is that they will be… Actually [unintelligible] in the end of quarter four to those 19 there was already the industrialists were seeing a decrease in 2020. And the COVID-19 just pushed it further.
So it is not it is not a two weeks one month thing where it will be several years of pain. And obviously, now it's true that will be costly to ensure inshore materials. But guess what? People start to… even vegetables for example, if you cannot import foods to your country, what shall you do? So you start then having projects to have food in the country, you need to make sure that the food is delivered to the to the place of consumption, because if you don't sell it, it goes all bad. So there will be a lot of rethinking.
And obviously as we will see also further that the aviation obviously is heavily impacted also, but I won't go into that but we need to consider also the manufacturing of planes is being affected. Everything that we're talking is affected. And we will, it's an interesting unchartered territory at times. And it seems I think the world will learn a big lesson, but everybody's smarter afterwards. That's the problem.
Roberta: That's a good point.
Nadia: Indeed Kenneth, your situation, your companies might be slightly different in the sense that you're also responsible for all his Aviaserve, G4S security, Again, both different companies vote within different contexts. Also some travel agencies, how has this pandemic, the situation affected your business's going through it? I mean, even though I think we were discussing even two days ago, there are very different stages, and there will still be different stages of how it comes to be affected.
Kenneth: Correct. Thank you. Nadia, I think I think one of the most crucial things now there is to make sure that other people, particularly people who work in the service industry, have the right mind-set to move forward. And why do I say this, because if I look across all the different companies that I am involved in, in terms of the service industry, whether it is aviation, security, whether it is tourism, or mobility, there's one thing obviously very much in common that most of us, if not all of us started off with quite a big shock. What has happened? Where has my business gone? And automatically that shock, normally ends up into fear. You know, I have an issue, I don't know the future, I don't know where I'm going, I don't know if I'm going to survive, how am I going to make this work, and without realizing that has an effect, first and foremost, on all the people within the organization. And it doesn't give you the right opportunities to start understanding the present situation, accepting the present situation, and then eventually moving on.
And before all of us are capable of understanding that COVID-19 has made a big, big change for all of us, in whichever industry we operate. Unless that point of departure is not accepted, we will all find it very difficult to move on, to realign and to re-dimension our organizations, I think it is very important that any company would be in the in the lead in terms of moving on from what I call phase one, phase of fear and denial and anger to phase two, which is understanding, accepting and now moving on and reshaping those who are in the lead, are probably the companies who would be most successful.
And therefore what I am doing within the various organizations is making sure that one of the board of directors of each and every respective company has that mind-set. Lead, not only the board, but more importantly, the executive team, your managers, or with you have they accepted the fact that these changes are going to happen. And once that phase two, as I like to call it is accepted and done, then you can really sit down around the table and start the re-planning that you have to do. Because yes, all the businesses are going to change. The method of supply we were talking would be different, the processes probably would be different. It's very interesting to realize that over the past probably five years, I doubt if I've ever had a board meeting over Zoom or Teams meetings or any. Today, since COVID-19 has come along. I mean, we've used all the platforms you could ever imagine. Were they successful? Absolutely, in my opinion. And in my experience, I found them very effective. What does that actually mean? That's probably when I start looking at corporate travel, because one of my companies handles travel as a travel agent, you will see that a number of executives won't need to travel anymore, because they will probably be able to use an IT platform to communicate with others abroad…or travel less.
So the concept of travel might change. If you look at the aviation industry, we've been talking for the past years of open skies. I don't think we know anything but open skies. That is of the past as far as I'm concerned because the first step into reality is going to be what we are probably calling corridor travel, where you will have countries to governments who would agree that both the respective countries are safe enough or free from COVID-19. So we could start seeing some travel happening and we will see this concept of corridor travel.
Now that is going to have an effect on the company of yourself who does most of the ground handling at the airport is going to affect the low cost carriers who a big change to the industry when they were originally introduced into Malta. So, all these points which are crucial have to be very much in the forefront when we sit down and start saying okay, let us practically start the process of re-strategizing re-planning. How do I want to manage my business? From basic things, even how do I want to manage my rosters, because the concept of all rostering is going to be different, the number of people at the airport is going to change. If you move into another industry, the security industry and a lot of people might not realize, but a lot of companies move cash from point to point. With all the retail closed, most of the retail closed, there was no cash movement. That is also going to change because people are using more credit cards, there will be less cash out available to move from one company to another. So we experienced the role possible at this point in time is probably an eye opener of where the business is going to lead itself in the next couple of years. And we need to take that on board to make sure that our realignment is in line with the expectation of our customers, with the expectation of how the various indices are going to pan out.
Nadia: This is really interesting Kenneth, especially the first thing which you've mentioned, regarding mind-set, especially, which we've discussed at length with Robert and Robyn last week during our webinar. And even though mind-set might seem to be a bit fluffy for most, because mind-set, what is mind-set? What is this mind-set? Why do we need to change our mind-set and shift our mind-set? However, I do, really tend to agree with you in in the sense that either, especially within the local context, I find that most companies are still at a standstill, because of the fear because of the questioning of why it's happening or what is happening. They haven't perhaps realized that their business model is going to change.
Obviously, there is a little bit of reluctance in investment or investing even both in terms of skill set, let alone and investing into a new technology perhaps or new, innovative methods, because the fear of the unknown obviously tends to keep boards as a bit more risk averse even more.
However, by shifting that mind-set, it's like we were discussing the timelines as well, Kenneth, in the sense that we also have March and April were a little bit of the Dark Ages for us in the sense of we didn't really know what was happening, how we're going to get out of it. But it's going to we're going to have some release of some measures. But in fact, we did. So it's important. I think that that companies and together with the leaders, as you mentioned that the executives of those companies, not just the boards are aligned with the boards themselves to be able to manage and take this through.
Kenneth: I agree with you Nadia. But I also think it is so important to approach the situation with very much an open mind. And I'll give you some very clear examples. Certain industries, particularly the industries that I am involved in all got hit in a negative way. Why? Because we are in the service industry, we employ a lot of people, we are as good as the weakest link in the chain. Alright, so you spend a lot of time money and effort in training, and then the business just disappeared. Now, it would have been very easy for me. And I would imagine very easy for other companies similar to ours, who would say okay, I don't need a workforce of 1000 people anymore. Let me downsize. Because I think everybody is talking and looking at about downsizing. Downsize from 1000 to 500-600, whatever the numbers may be, to try and explore if I could survive better, and plan for the future.
Now, that in itself is not wrong. But in my opinion, from what I have learned through the processes of the various meetings and discussions we've had, is that one of the downsides of that is that you are going to lose a lot of knowledge, experience and loyalty, people who have been with you for a long time will you have invested time, money resources to bring the way you would like to bring them now because of COVID-19. You have to tell them. Thank you. I'm very sorry, the work has just disappeared and offload.
There is another option and this is what we are exploring at the moment as much as there are industries who got hit negatively. There are other industries who got hit by positively. And a lot of them, as we speak, we are actually talking to two companies, where we are trying to find the right mechanism to outsource 400 of our employees, give them to a company who at the moment are very much in demand loan than 400 people on an outsourcing proposition for six months or 12 months on the foundation that after that period of time, people will obviously come back to you. Now, are there any guarantees? Absolutely not will everybody wants to come back, absolutely not. Step behind it is that rather than making people redundant, you are supporting them by giving them another opportunity, actually trying to give them a placement elsewhere. And at the same time, you are also giving them the opportunity, the whole the training that has happened in the past and all that experience for that particular tech that they were operating in, whether it is aviation, or security or any other any other industry, that knowledge and experience is not lost, hasn't gone down the drain. But it has been parked, so to say, for a period of time until those people could come back. Now I think this is the type of mind-set that I'm referring to move to phase two.
Nadia: Do you think that there is something perhaps, beyond what we're used to what we're usually used to?
Kenneth: Absolutely.
Roberta: It’s important acting from a place where you're not in a panic situation, because I think the automatic reaction when people panic would be to dine to downsize as you were saying, but because perhaps the mind-set is one which is slightly more resilient. You're looking beyond the immediate future and towards, you know, the medium to long term when you might actually want those employees back.
Kenneth: This happens to everybody, it happened to me, I can assure you that the first two to three weeks, when the shutdown or the lockdown came around, I had all the imaginary thoughts that you can think of how am I going to survive? We're not going to have the cash flow. Did I ask for support from the government? Of course I did, like everybody else did. Why? Because at that point in time, the lack of the unknown, how long is this going to survive? is going to put you in that mind-set that I am in trouble.
And when I am, what are you going to do? I'm going to do you go into a small hole and try to disappear. That's the wrong, you need to get over that. And it's not an easy process to get over it. I mean, what you need to do is understand the situation and accept it. It's there. It's going to change. And then once that has happened, if you say okay, I am now ready. Rather than looking at crisis management and see how I'm going to manage this crisis. I say, Okay, I'm ready to move on. I'm ready to realign. Let's start putting a lot of thoughts and ideas on the table. Will all of them work? No, not all of them are going to work. But you need to experiment in better than normal times, at the moment we are not living normal times. But that concept of change, understanding, moving on and keeping the theme.
Another interesting point is and again, I experienced it purely because we work in the service industry. The management team needs to talk to the staff. Remote working. It’s true, people have taken up remote working, has it worked, in my opinion, in certain instances it has worked absolutely, yes. But does that mean, I don’t need to communicate with my line manager? Does it mean I don't need or I would not like to listen to my general manager and see what he has to say? So a totally different process happens where, for example, I know that every Monday morning, I have a session with all my people, it's a zoom meeting, you've opened up, any staff can sign in, they can come in and they can talk, listen, understand, see where the company is going. That communication now that we are living more apart from each other has become even more crucial in my opinion.
Working just leaving them to what they have to do and just being results oriented is in my opinion, just not enough.
Nadia: Yes, Kenneth, we mentioned as well the importance of communication in the past webinars. I’m happy that you’re mentioning it again Kenneth because it's critical the consistency of communication, communicating like you're saying managers at the same time, even if they don't really have a lot to say or a lot to to communicate. But that is important that at least themselves to the staff. Roderick Yeah, I haven't I haven't forgotten, you
Roderick: Actually I added some notes. So going…
Nadia: Especially, one thing I wanted to ask, in a manufacturing cell manufacturing setup and where things are more scheduled and everything is more schematic. How does the concept of mind-sets work? Is this is this relevant, that's important in your in your context? Or is it completely something, which people can’t really grasp?
Roderick: When you're talking with wherever people are in service, and manufacturing, whatever, there are a few they are human beings, and people think they are rational, and people are not rational. They're very emotional. So one of the biggest things wherever, as Kenneth mentioned, yes there was a big shock, people wasn't expecting this coming, and maybe certain governments to get a faster stand or slow stand. And whatever is happening, there will be people complaining against it or not. The real fact is that we don't know how long this will happen, and what we're going to do to recover. And why I hunted, I understand 100%, with Kenneth, that you will try as much as possible to save the jobs of your people, because you have invested in training, you want to keep your brand as the employment branding good.
However, there is a limit how much you can actually go deep in your pockets, the deeper your pockets, the longer you can sustain it. But there is a limit.
So if it was a seasonal thing, it's not a problem and income of mind-set in manufacturing, seasonality is quite normal. So you will have bad months, good months, and hence why manufacturing have over time, and in certain periods, you have shutdowns, they do them purposely. So you have your manufacturing going in systematic, or you can say in a constant speed, and you have your stocks and adapting for as a buffer and you start having your manufacturing adapted also to the demand.
So people usually short term issues, they're not afraid. It's quite common in manufacturing, you hear of 4-day weeks, especially there were a lot in 2009, you will start hearing them now also, and in every countries. So manufacturing people are used to much more than the service industry.
However, the biggest problem is, how long does it take? And how much do you have sufficient cash? Don't forget that a lot of companies they are not owned for, Mr. Kenneth obviously, he is the chairman, the owner, and he's running this company. Now, if the company was in a stock exchange was public, the expectations of their investors are very different from private ones. So you need as a manager, as a director as a chairman, you are responsible for your investors also. And the investors do not like to burn cash when they know this going to be in the pit. And this you will see it obviously in different stock variability.
So I am partnered and all always partnered with multinational which we need to respect that, we need to respect the employees. So we need we are in a very, very, very difficult situation at the moment to balance the both ends. Taking care of the investors because they don't want to lose the money. Because if you lose their money today, they're not going to invest any more in you. And you don't want to lose employees. And this is why governments are giving furlough stuff. But how long can they support the furlough? Two months? Three months? Who's going to pay them back?
The taxpayers will pay them back, which are all of us are taxpayers. So we need to be quite understanding now. Obviously regarding mind-set, including all of us which are employees, even if you are Richard Branson as a billionaire, guess what your cash if you burn it, who's going to give it to you back? So in fact I take Richard Branson, he just close the Gatwick flights from Virgin. Now obviously everybody knows that Richard Branson has is much more than all of us together for sure. He owns the company. And so why did he do it? Couldn't he give some of his billions to his company? In actual fact, he actually took a mortgage on one of his islands in order to support Virgin, but it was say two months of bad business I don't think that they will close the deal with Gatwick but they are seeing that the Coronavirus is going to be there for years, not two months, not four months.
So unless you are ready to restructure to get your business strong enough, and you are maybe in denial, we'll come back into market we'll come back in two months, you will end up destroying your company. And unfortunately, then you will end up destroying not only say 20% of the people, but 100% of your stuff, and your investors who believed in you in that.
So unfortunately, why do we see multinationals taking action very fast? Usually multinationals, don’t forget they don't like to sack people because they have their name reputation all over the world. And if someone like a Virgin airlines are sacking people, Lufthansa, British Airways, they are doing it's not to become like another Fly-Be, fly they just went bankrupt. So why can they survive? Now, Ryanair have used a different method I understand. But again, my point is this, we can keep. It's like keeping your breath, you can hold your breath for X amount of minutes, but you cannot not breathe for long. So we need to find a way to restructure, unfortunately, a lot of us you can say marketeers when I say this I mean like these think tanks, are looking that there will be quite a devastation in certain businesses, not all of them. But unfortunately, unlike other issues, which was specific to one industry so people could have shifted from one industry to another one. It so it is all over the industries. And this is this is this is the problem. And it's tough. It's tough. And honestly, for sure, today you are saying something six months down the line, we might say something totally different, because we will learn more of it. And on a hindsight we will be smarter. But currently, I can assure you everybody is like watching it like the World Cup final they don't know the outcome. They wish the outcome would be like this. So they don't do it on their tiptoes. But they need to take action fast. If you don’t take action fast, you kill your own business.
Nadia: Roderick In terms of staff and roles, specific roles within your companies, your respective companies, do you see a shift in roles in the sense of reskilling of people?
Roderick: So this is something this is something very interesting. And so when you are in manufacturing, but it's not only manufacturing, but it's also service industry, you have what is called lean, manufacturing. So it's a philosophy that was invented by Toyota in 1940s, 1960s or so. But what is important is that one of it is that you need to constantly teach your operators, your management team, to be able to do other jobs for example. You have a small company and you have one accountant, and two clerks, for example, one of the clerk, she's sick, she's throwing up, and she cannot make it for 1 week, for example, but you need to close your books because you need to have a deadline, say with the tax authorities, blah, blah, blah. So if you did not teach anyone to do her job, you end up missing not meeting your deadline. So what you do you have the other person trained how to do it. Now will she do it perfectly? No. However, in order to overcome it, you make very detailed procedures to educate the person or reminded person very fast. And in fact, if you want to see one of the best organization that do it very fast, very good. And do not laugh about it is the fast food industry. KFC, Burger King, McDonald's. They have a staff turnover of more than 100% per year. However, if you go to eat McDonald's, London, Paris, Malta, Shanghai, it will stays the same. How do they do it? Very simple, very structured procedures. Simple training and everybody's trained. And when you go to McDonald's during the night, you find a manager cooking the burger. In the morning you find 20 people in peak hours.
And something similar they did it also in hotels because of erratic.. For example, sometimes you go in a hotel and you find out that the desks you have six desks all fully occupied checking in the guests, One hour later, you only see one person. So what they do they train, for example, multiple people from the back office to be able to check-in. So multiskilling is more important, and what is going to be even more important. Now, it's not just multiskilling, but people in general, because of their fearing of losing their job, or unfortunately, some people will be losing their jobs, they will start retraining in a different rate.
Roberta: and be more willing, more open.
Roderick: And I will see a very big opportunity for eTraining companies, which when I remember when I was doing MBA, there was a particular Professor in Malta that was studying eLearning and nobody was actually wanting to go to eLearning over the webcam and stuff like that. But guess what, now my children are at home, they are actually doing primary lessons and kindergarten lessons over the tablet. And, and so it's a new normal that is going to come. And another thing that I see that is going to cause also a problem, people will start challenging that industry, if it is worth continuing in that industry, because of its volatility there, how risky it is. And also they will start considering even working from home, working habits will change considerably. It will have its pros and cons obviously. But obviously, as Kenneth mentioned, doing board meetings over the phone, being from a multinational, we need to do these things because we cannot be in 20 places all at once. So we are constantly back to back with meetings and video conferencing for us, it was already normal. But it's it will become a normal also for the small companies, which before they didn't even consider it such an investment because they saw it as useless.
Nadia: However, as we discussed with Kenneth before this started, nothing beats the face to face when we're finalizing or landing contracts. I think that is something which we still have to overcome, especially when most deals happen not in the board room, but they happen mostly either at a meal during a meal or during not flying meetings or to so to speak. So that is something which I think is very difficult to replicate online, in my opinion.
Kenneth: I think whether it is a public listed company or the private sector, nobody, nobody would want to run the business at a loss. Whilst the corporate governance on a public listed company is what it is, I am convinced that under the present circumstances, we will probably see a bit more of corporate governance coming in to other companies, even smaller companies who are definitely going to have to be more focused to make sure that they survive.
And whilst yes, I do agree that everybody will do as much as possible to get the workforce to survive and to be retrained, yes, you will find that there is an element of more flexibility and willingness from staff to be retrained. But it's also getting the right balance and accepting the fact that there could be the possibility the necessity of downsizing I have because yes, having been one of the companies in the aviation sector I follow very much Virgin Atlantic and what they have done, I can come up with quiet and number of airlines who have already downsized and they have downsized not only because of the present situation, but because they have already understood and they have overcome their own fear that the new normal is very different from the old normal.
So, they know that travel plans are going to change, they already know that what the customers are going to need are going to be very different. So they have no other choice, but to start looking at what the future holds. How am I going to downsize? How will I survive? What do the customers really require? I mean, probably quite enough people have seen what airlines are already doing in terms of trying to look at the new seat configuration to have different seat configurations with Perspex around the seats. People are already on that mode of thinking. Why? Because I will repeat, we know that the new world is very different from the old. COVID has come and we'll do it for a relatively long period of time.
So yes, it's a matter of how much you can survive the present situation, not only by putting your hand in your pocket and digging deep, because as I said, I don't think anybody would be comfortable to run the business however small, medium, or large it is at a loss, you will have to re-dimension, you have to have the capability of finding new ways of surviving and changing the model to make sure that at the end of the day, we all work to have decent bottom line and that's what everybody will be looking for survival.
Roderick: As Charles Darwin said, it is not the most attractive species, or the most intelligent species that will survive. But the one that adapts the fastest. This is this is in a business term, in a mentality term, because let's face it, guys, its video conferencing, it's something which the, the older generation were afraid of this technophobic sort of, and now guess what? Either use it or you don't see your grandchildren. So we need to adapt in everything from our expectations, regard how to work, our expectations, how to mingle together, and from a business perspective, we need to say guys “here’s my product is my service”, is the right business model that we're doing? If we’re not going to change very fast, we're going to sink very fast.
So those that are going to accept the difference as a suit the as Kenneth mentioned about the change model. So there is the Kubler-Ross model, which seems first people are anxious, that they start being in denial, and then they start, you know that they have different phases of sort of like grief, eventually, people which are the one challenge the first one, accepting it and challenging the current situation, and try to see the positive in that, in that, because let's face it, opening the news at the moment is so depressing if you feel like nothing.
Roberta: Roderick, there are aspects of the news, which are positive. In fact, as someone who works a lot in the corporate sustainability sphere, if we look at things from a sustainability point of view, both the environmental impact, the negative impact that our businesses were having, you know, locally, but also globally, but also the social impact. And we've mentioned a number of things today, which are, to a certain extent positive from a sustainability point of view.
So moving the production of supplies closer to the consumer that is positive from a sustainability point of view, you know, having businesses invest more in rescaling and retraining, that is also something positive, less global travel. So we're reducing our carbon footprint that is also positive from a sustainability point of view. So my question is, in this process of realignment, do you see that maybe there is scope to adapt our business models to criteria of sustainability such as the ESG criteria, for example, which factor in the cost, which we were having on the social and environmental capital, at the end of the day, because I don't think we were factoring that in very much?
Roderick: I 100% agree with you, and thankfully that we are also seeing the bright light. As a human being we are the most adaptable species. And this way, we thrived so much, obviously, when, however unfortunately with that we destroyed also our source, which is Earth, like carbon footprint, and infection, social responsibility, as you mentioned, the carbon footprints, a lot of a lot, I do believe as well. So with the millennial generation, which are much more environmentally friendly, as people and they are not afraid to voice their opinion about the environment.
I think there will be more concerned about the CO2 emissions and not just for the car for the phone but also about how to produce it, and how to transport it. And transportation, for example, in actual fact to tell you the truth Amazon also caused quite a big issue because, for example, they say we're sustainable but using the one mile transport, in which the last mile or few miles are given to another distributor that comes with the parcel at your home, it's increasing carbon footprint.
So the further away the parts are made, the more carbon creation in transporting it. And I think that is bringing manufacturing to home will help us there. Hopefully, we need to, I do believe that we need to get from the mentality in which not to get everything cheap, cheap, cheap, there is a cost for everything.
It's not about the financial cost. And in America. So I used to live in China, I used to live in America several times, now I'm living in the UK. So in America, when the current President went up, there was a lot push to localize insight, because now irrespective of political views, so I'm not talking about those that is not my views or something. But when you squeeze it, the most important thing that was if you want to have jobs here, you need to you need to start buying local, and even environmental, environmental people have a considerable similar system, which are where the one mile, one mile food or something like that they buy the food within their own community. So they don't create carbon transporting fruit from another continent. So again, yes, you're paying more. And it's like, organic farming, in actual organic farming is giving you much less output. But do you if you don't want to use pesticide you to adapt to pay more.
Nadia: So definitely, there was something positive Roberta. Kenneth, what are your views about this? Sustainability and sustainability measures?
Kenneth: Yes, I totally agree. I'm not convinced that in the past, all companies took into consideration any ESG guidelines. I think some companies did, others didn't, with what has happened, I think the story is now totally different. I think so many people are now in a position to change their focus, and understand that moving forward would mean looking at things in a very different way.
There are a lot of interesting, interesting statistics that were already published in terms of air pollution, the difference, we've seen it, we felt it purely because obviously, less cars on the road, dramatically less cars on the road, much less airlines are flying practically zero airlines. And now first-hand, we actually felt the difference. So what was heretical has now become more realistic. I think people are now in a better position to say, absolutely, yes, we need to survive, we need to move on. But we need to take into consideration the new model of how we do things, how we make things happen. And that for me is yes, a fairly big plus a very big part.
Roberta: Excellent, though, hopefully, we'll have it as well, you know, a better balance between all the different considerations, ultimately. So I think it's also an opportunity to realign our businesses, our mind-sets, our thinking, and the time and effort that we invest into having a positive impact on all fronts, because perhaps, we're only focusing on one specific area, which is the bottom line rather than what is called the triple bottom line.
Nadia: And I think if anything, Roberta, as well, and Kenneth, what you mentioned, even before the government support was critical, even to give the opportunity for companies to be able to think and rethink. So if we know that it can't be there forever, and the government can't sustain businesses endlessly. But having that support, giving the opportunity for companies to allow them to think, and overcome this fear and overcome that context of Okay, so at least we have some cash coming in. We are sustaining our cash flow, somehow, at least, to a certain extent, at least it gives the opportunity and hopefully there will be more companies as well, that starts actually going into the rethinking of the business model, which I think is very important.
Kenneth: Yeah, you're absolutely right. I think it has made a difference. I think having State Aid, I won’t go into the merit of whether it was enough or not enough because I'm sure everybody has a different opinion on that. But I think point is we need to make sure that we can carry on sustaining our businesses and getting paid until we actually realign and position, because a dangerous thing in my opinion is that we declare that we are COVID free. So basically, most of the lockdown disappears. And we expect that we're just going to switch on the light, again, the light comes on. And we all go back to business. And it's not going to happen. I think that isn't. So to phase out from the old model and phase into the new model means that you need the right tools, the right support, the right State Aid for a period of time to be able to adjust and make sure that you are then contributing very positively to the economy of your own country.
Nadia: And I think that the message has already been that there will be the tapering off of measures. So I think that's, that's good. And that's positive. And hopefully, like I mentioned, Kenneth, most companies take the opportunity to revive and take the opportunity. In fact, I've had discussions with a few companies this week that have actually asked some of the members to go back to work and go back to the office. However the question is, does anything change? Are you changing something in the way you're operating? Or is it just was it a two month hiatus or something? What it was it? What was it exactly what was it? How can we define how can we learn? What are these lessons which we which we have learned? It's not like we're not going back to anything? We we've known before, prior to these two months. So.
Kenneth: I think it's crucial that we take some lessons out of what we have passed through. I mean, nobody wanted a COVID-19 to come upon us. But it has all their lessons. Absolutely. I mean, one of the lessons that comes to mind for me is that at this point in time, at this point in time, cash is king companies, as Roderick said companies will have the money will probably survive the bumps.
So does that mean that people are looking closer to how they manage their debtors and their debt control? And how much credit they want to offer? And what is the cost of Finance? These are all areas where in the past certain companies might have taken for granted. And today, you say, Ah, really, you know, money costs big money, if you know what I mean. So what is this question? Do I need to change company policy? Do I need to change my approach? So looking at this for business now perspective, from a customer perspective, because yes, as Roderick said, always be the right balance. And there are quite a number of lessons that we have learned. And we need to maximize and use a thinking of the new others and on how we want to manage our businesses in the months ahead of us.
Nadia: indeed, and I think like, like Kenneth mentioned, it's an overarching lesson. It's not just finance, but finance operations, HR, it's, for once we're going to rethink the processes of the whole organization from the service, we offer the customer, not only internally, but also externally, just because we have had so many different facts.
Roberta: I think it's so interesting how every topic that we this discuss each week ties to the previous topics that we would have discussed. So really, and truly, as you were saying every aspect ties into each other. And we need to really start looking at things from a more holistic point of view rather than compartmentalize or, you know, put issues into boxes and separate compartments.
Nadia: Indeed, because like the situation of Roderick situations, there's a value chain, there's a supply chain, and everything is important within the chain, even though other organizations, similarly it's very important that we look at the organization as a systematic in a systematic view rather than a linear order view. So I think that's, that's, that's very important.
So I think it has been a very interesting conversation. Roderick, Kenneth, thank you very much for joining, Roberta, and myself today. Thank you, whoever joined this webinar as well. And wishing you all a very nice afternoon.