Dr. Reddy's Laboratories Limited (500124) Earnings Call Transcript & Summary

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 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 appreciate again you are joining this conversation. And Francisco, over to you.

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 the organization. Enno, over to you.

We have one more panel discussion for you today, featuring 3 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.

Thank you, Enno. Environmental sustainability is 1 of the top 3 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 3 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's 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've 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 in helping Cipla achieve your goals and pledges around sustainability?

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 onto this network, and we're hoping that many of the other sites could also take this example and follow, but what a phenomenal effort by the team there. I just want 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 would say that we would be water positive, carbon positive, and we'll have 0 waste to landfill all in the next 5 to 10 years. And some of these will get done before. Some 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 within 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 power consumption that we use in our factories. And I think there are 3 ways that we've done it. One is just to optimize the amount of consumption that you use. And that happens to 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 3 things we've done effectively at Indore. The results are 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.

Thank you very much, Umang, and congratulations again. Mike, let me turn to you, and congratulations for the work that you and your Singapore site 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?

Well, first of all, Katy, thank you. It's really good to be here with you today. And first I 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 that 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 2 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 3 steps, all enabled by 4IR approaches. First, we implemented a building management system that draws on industrial Internet of Things. Climate control accounts about 50% of our energy use in this facility. So that presented an opportunity for us on conservation. Our cloud-based system optimizes the chiller load, allows automatic scheduling and also then there's need for manual data collection. The second thing our team did was create a big data, analytics platform, leveraging the cloud, AI and 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. Third, we have transitioned to renewable energy sources. The 6,700 solar panels on our factories flat rooftop produce about 27% of the site's 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 0 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've reduced carbon emissions by 34% per square foot and municipal water use by 22% per square foot since 2014, while [ turning ] 94% of our waste from landfills.

Mike, that's incredible, and it's exciting...

You can do both...

Oh, go ahead, please.

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

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 -- have to be an environmental winner or be cost efficient and productive. And you all are really demonstrating how we can do both. Now 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 sustainability is increasingly a license to operate. How have you also made it a competitive advantage?

Yes. First, Katy, thanks for having me. And I really want to start with congratulating Agilent and Cipla both for this award, and it's exciting to be in such a good company. I want to thank the Lighthouse team for doing this amazing work. Have been in manufacturing all my life and to have 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 it 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, can be high mix, low volume or high volume, low mix. So as 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 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 that everywhere you went in the factory, it's all connected end-to-end. And through all of that achieved not only a fantastic kind of safety record, but supply chain transparency, so really connected 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 those, they do while reducing manufacturing costs, at the same time, helping with greenhouse gas emissions, making sure that we're focused on 0 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 a tough thing to do. But I think, like Michael said before, it's -- these days, you're 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 what happens in our Flex Sorocaba team. I'm honored to be talking on their behalf.

Well, congratulations to you and to the whole team. You know what I'm really struck by is how you described end-to-end change. And all of you are 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 and really making this transformation and allowing you to scale?

Well, that's a great question. I think there are effectively 2 types of -- well, 2 people -- 2 sections of the 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 have really been the change and the torchbearers for this change within the organization. And then we've also worked to move the other set of people who are a part of our organization to a level of capability, which is very important for their performance. So I think if we 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 do 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 do they get trained to get to the next level of proficiency. And then the rest of the users who use this system on a day-to-day basis, what do we do for them? So we segmented the whole population into 3 parts and worked on all 3 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. We try to make sure that the culture and the passion stays in what we do across the 2 sets of people, but also creating flexibility in 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 because it's always keep improving. So I'm hopeful that this will go a long way with the 22 other sites that we're trying to focus on.

Thank you. I love what you said about culture. We used to go around and hire for "culture fit." And I think increasingly, we all recognize in our organizations that we need to figure out 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 and your organization structure with agile ways of working with new digital roles. How have you been able to drive changes with workforce engagement?

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 is 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 our way of working. And I think it's enabled us to quickly implement innovations at scale as we've 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 provide a 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 these really kind of engaging digital educational events for employees to network and exchange ideas. There's, of course, a lot of fun activities such as digital carnival, roadshows, 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, upskill and then 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, empower them and engage and offer ideas. Now we're all driven by this goal to build the factory of the future. In that factory of the future, everyone has a role and they can see the results. So 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 multidisciplinary task force directs our agile approach to minimum vial product methodologies. And the importance of this work is underscored regularly by the most senior leaders across the organization. We'll also recognize and celebrate milestones achieved at each stage. All this is grounded in the strong Agilent core values.

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 and the other Lighthouses have demonstrated that this is a way to really improve people's jobs, to improve engagement 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 would love to hear kind of your perspective on how important is workforce engagement and where does this go next?

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 the manufacturing floor, 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 the 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 operation. 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 a low, no-code digital tool. So all the usual stuff, right, workshop, training, a 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 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 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 and 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. But looking at a lot of AI in processing field returns for plastic automation and things like that. So 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 side, 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 change the entire value stream, and that's the journey that we're in at Flex, Katy.

That's super. I have found the stories from all 3 of you just to be very, very inspiring. The stories of how you're scaling, looking at the whole ecosystem end to end. At McKinsey, we talk a lot about the importance of driving sustainable and inclusive growth. And I think all 3 of you have demonstrated that that's possible. That's not a paradox. You can do all 3 things at once and super inspiring. let me end with the fun kind of lightning round. We'd love to hear from each of you 1 or 2 words about what being part of the Global Lighthouse Network has meant for you and for your companies. Umang, go ahead, and I start with you.

If we stick to the script and it's just 2 words, then future ready.

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

Oh my goodness. I have the same 2 words. Good thing for me, it is future ready. And I really don't think that a big change like this happens without intention and commitment, and this form has been a very important part that journey for us. And I just want to thank you for having me on today's forum. So Umang, I didn't copy off your paper. That's what we came up with as well. So...

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.

I'm very grateful to all 3 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 remarkable progress. Enno, over to you.

Thank you, Katy. Great to see confirmation from the Lighthouses 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 3 takeaways. Number one, Chapter 1 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 4 new sustainability Lighthouses. Francisco, back to you.

Let me thank you, Enno, in New York, and thank you to all our colleagues at the World Economic Forum and McKinsey for the amazing dedication and hard 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. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]