Bram Schot: ‘Make Use of The Competences Of Non-Executives’

Schot lives in Milan where he works at the European arm of investment company Carlyle Group, is Chairman of Smart Mobility Lab MOBIUS and shares his practical experience as professor of practice at Università SDA Bocconi. Smiling: ‘Being given a hard time by a group of students every now and then is instructive.’ He likes the city. ‘The climate is pleasant, the food is good, the city has very good connections – it is an excellent base.’ Scot has had an executive life, mainly in the automotive industry. ‘I became involved in the automotive industry through my father. He was on the board of DAF Trucks in the 1970s. As I did not find my business administration studies very interesting at first, I started an internship at DAF parallel to this. I learned a lot there. Unlimited customer focus, for example. To know what is going on outside, it is better to talk to a customer for half an hour than to spend an entire weekend scrumming with the management team. That conviction was born there.’

Is that your motto? Always put the customer first?
‘What is most important is to think from the outside-in, rather than from the inside-out. In the end, directors all manage S-curves. While everything is going well, everyone is happy, but there comes a time when success flattens out. You always find the announcement for that flattening ‘outside.’ My adage when I was CEO at Audi was customer contact, customer contact, customer contact. It is second nature to me to talk to everyone anyway. I love talking to a taxi driver when driving from Schiphol Airport to Amsterdam. Then you hear how things are in Amsterdam. Or at least: you hear one side of the story. And that is the point: the truth has many faces. Thinking from the outside-in helps you distinguish facts from opinions, and thus form a complete picture.’

So that is more worthwhile than long sessions on the board?
‘They are not mutually exclusive. There is a lot of talk in management teams. About transformation. About sustainability. About digitalization. About artificial intelligence. And new themes are constantly emerging that we all want to manage. But of course, there are limits to what you can do. In the end, it is not about how many balls the organization can throw into the air, it is about how many of them you catch again. Every organization has limits, no organization can handle everything. That was also an important lesson for me. We all keep throwing balls into the air. The most important thing management boards need to do is provide focus. Prioritize. We are going to focus on these balls. We should not immediately get nervous if there are a few things we cannot do, as long as we get the important things right.’

How did you do that when you were CEO at Audi, for example?
‘I had to consciously take a step back there. Business units that needed more money? Find those resources at your own business unit first. Eliminate as much as you want to create. First explain what you are doing and what your plans are. Naturally, all business units will say that the activities they engage in add value. The point is, however, that there are other business units that may have even more added value. As management you must have the courage to make clear choices. That happens too seldom. Managers still think in terms of budgets too often: amount x last year? Then that is the basis for next year as well. Too much is done on autopilot. We really need to think more in terms of added value and priorities. I can recommend to everyone to take a zero-budget approach from time to time.’

You led Audi at an extremely turbulent time, in the wake of ‘the diesel scandal’. How did you handle it?
‘Customer focus, simplifying, burning fat, building muscle, creating transparency, building a new value system and, above all, taking ownership of your mistakes. We had to make a cultural shift as well as take tough HR decisions. We ‘rationalized’ heavily. Not purely to cut costs, but mainly to deploy and allocate resources differently.
I used the aftermath of the diesel crisis to fine-tune the company again. I did that by connecting two challenges: on the one hand, we had to bring the diesel problem to a successful conclusion and clear our reputation. On the other hand, the company had to go through a transformation anyway. Too much was being done without achieving the proposed added value. We made fundamental decisions about that, so that we could start afresh. When we finished, the company was healthy and future-proof again. There was energy again, people started ‘thinking outside’ and ‘working inside’. And then came the COVID crisis...’

Was it for you, despite the new crisis, mission accomplished?
‘The company was ready for the next step. Audi as a group needed to shape the technically innovative leadership more than ever. And with that, in my opinion, came a CEO with a different profile, a different kind of leadership. I see myself primarily as an entrepreneur. I find engineering interesting, and have an affinity with it, but I am not an engineer. I completed something successfully and could rightly hand over my tasks to someone else.’

Did you then make a deliberate choice for more non-executive roles?
‘After Audi, the door to the world stood open again. I had several opportunities to take on new interesting roles, but I was looking for a different balance between private and business. I was ready for a new phase in my life. After all, these had been quite intensive years. Of course, I also discussed it with the family, what do we want, what are we going to do? And then Royal Dutch Shell came along. They were looking for a new supervisory director, someone with experience in transition work in a technical environment. That seemed like a good fit. The energy transition undeniably is a top priority and immensely interesting. After that, things went rapidly, I was approached from several directions and then decided to focus on non-executive positions exclusively.’

One of the companies where you recently became a supervisory director is Signify. This gives your portfolio, alongside all the international companies, a Dutch touch…
‘Signify is an insanely nice company. They are tremendously good at R&D. The more complicated it gets in the technical field, the better they are. But the big challenge for them also lies in marketing the products. You are going to have to demonstrate to the market that your product is better than others, you will have to show the added value of the product and that it is well worth its price. This is familiar to me from the automotive world. We struggled with the same challenge there. Our cars were packed with technology; we used the very best premium components. But in the end, a potential customer visits us virtually or at a local dealer, and then you need to highlight all the wonderful things you put into the product. If you fail to convince the customer, the term ‘discount’ often crops up. I am allergic to that word. Discounting is often compensation for incompetence on the sales side.’

As a board member at Cognizant Corp. in New York, you bring with you extensive experience in the field of digital transformations. What are the key lessons there?
‘That you must approach digital transformation thoroughly: half pregnant is not an option. The key issues are: be ‘experience centric’, virtual first, then physical, ask yourself what makes your company exceptional, what does it mean to have set the new standard by 2030, enable one-to-one communication, make sure your company is ready to implement and absorb change, but above all, deal with legacy systems in the new environments.
If you consider all digital transformations, I think 50 per cent do not go without flaws. It often goes wrong as early as defining the process landscape and operational model. What exactly are we going to digitize? That is where I see too little focus. There is a big difference between a thorough digital transformation and ‘softwaring’ the business. You have to ask yourself: what makes us stand out as a company? How does our economic machine function? It is precisely that part of the business that needs to be powerfully expressed after the transformation. It does not make much sense to digitize parts that have no added value. Yet that is what often happens: complex systems are built around parts that are not going to make a difference. Then we start doing very efficiently what we really should not be doing at all. I have also often seen that the IT department takes the lead in a transformation. That cannot be the intention. The functional boss should take the lead. But the most important thing really is focus. You cannot dance at several weddings at the same time. I certainly do not want to underestimate the process. You drive at high speed; you need to change the tires and also deal with your legacy. But I also learnt that mediocrity creates unnecessary complexity. Therefore, you need the right people for a successful transformation.’

Artificial intelligence (AI) is likely to completely change the retail landscape. You are on the board of Richemont, owner of many luxury brands such as Cartier, Van Cleef & Arpels and Panerai. What is your view on this?
‘The retail landscape will not be the same in the long run. Implementing AI is a big challenge. That is the harsh reality. There is one aspect I would like to highlight. It is crucial that, with the introduction of AI, we continue to see the world behind the algorithms and average numbers. That we really keep in touch with what is happening outside. If a prime minister says his country is in the top 10 richest countries in the world, that is great news. But in the end, it does not say everything. What matters is how that average is composed. The fact is that, despite the top-10 position, many people are struggling to make ends meet. Two per cent growth may be fine, but if that ‘two’ is composed of a ‘minus four’ and a ‘plus six’, you have a serious problem somewhere. It is up to the board to keep in touch with reality.’

I saw a YouTube video where you discuss things you think are important in your leadership, and you came up with the lovely German term Konsequenz Management. Is that something you also bring with you?
‘There must be a continuous link between what you do today and what you want to achieve in future. The strategy must be reflected in the short-term priorities. But everyone will understand that in today’s time, the road to a successful future is not set in stone. If you want to be successful, you need to be fast. And ‘fast’ means simple processes. Simple processes are created by people who are confident. Mediocrity creates complexity.
Early in my career at Daimler, I was the project manager of a project we set up together with General Electric. I then met Jack Welch, the legendary CEO of GE. He taught me an important lesson. He said, ‘If you run a business, run it horizontally, Bram, not vertically.’ It is not so much about hierarchy, he said, it is mainly about the process landscape and the interplay between process owners and functional bosses. Running up and down the organizational structure can be deadly in turbulent times. I very much agree. If you want to develop speed, the strategic end goal must be clear to everyone, at all levels. Everyone knows then what to do, your momentum will lie deeper in the organization, and you can gain control by letting go. That has always stayed with me since that meeting with Jack Welch. Speed comes from the horizontal. I want the organization to be ‘flat’, so to speak. Manage the business, not the structure.’

Did you always get your people on board with that approach?
‘In more formal cultures and countries, people find it harder to let go and hand over authority. That was quite a challenge. But it eventually caught on. And beware: as leader, you have to be clear about what you expect and where you want to go at all times. It cannot be that everyone has their own strategy. And of course, things go wrong sometimes. But if you stand in your business on both feet, you will see when things go wrong. And in time. And then you can intervene. You then actively manage your S-curves.’

Can you do the same as a Supervisory Director?
‘In the boards where I sit, the executives fortunately really make use of the competences of the non-executives. That suits me. I think you also have that responsibility: you have to contribute, you have to use and exploit your network, establish connections, engage in cross-pollination. Recently, as an extension of my work for Richemont, I spoke to one of the largest companies in the container business. That resulted in contacts that could be important for Shell, but also for Cognizant. We talked about the future of powertrains in ships and the digitalization of the business model. This is how I like to operate, as a person and as a non-executive. I do that very intensively with all my boards, although you have to be careful not to get in the way of the executive management. And you need a chairman who supports and executives who appreciate that.’

This interview was published in Management Scope 01 2024.