Ralph Lauren Corporation (RL) Earnings Call Transcript & Summary

Welcome back, everyone. Had a lot of fun. Great session. Both breakouts were excellent. Thank you so much. Really appreciate Lesley Ma and your panelists as well as [ Erst ], you did a great job on the boardroom ready panel, always deliver. Thank you so much, everyone. I flag discipline. I like that. Next up, we have our final panel session, Driving Cultural Change into 2021 and Beyond. I'd like to invite our panelists, Jennifer Hartsock, VP and CIO of Baker Hughes; Gerri Martin-Flickinger; Janet Sherlock, CIO of Ralph Lauren; and Angela Yochem, the EVP and CTO and Technical Officer at Novant Health. Good to you see, Jen?

How is it going, Hunter?

Jen, it's going great. How are you?

Fantastic.

Thank you for making it and being here. Really truly appreciate it. This topic -- when this topic comes to mind, you want to set a little context on Baker Hughes for folks who might not know the scale that you operate on, Jen and your kind of opening thoughts regarding the topic here.

Yes, absolutely. So Baker Hughes is an energy technology company. So we provide equipment and services into energy, and a lot of that is into oil and gas. Over the last 3-plus years of our existence, we have created -- been created out of a pretty significant merger of like-minded equals, which was a large segment of what was the General Electric portfolio and then what was Baker Hughes. So last year, we had $24 billion of revenue, 67,000 employees operating in 120 countries. So it's been a -- it's a pretty large organization to try and influence with a lot of different constituents and needs.

So the scale that you're working on is massive, right, across all of those countries. When you think about culture and the changing workforce and having an inclusive diverse culture, what comes to mind?

Well, I think, again, the 120 countries is absolutely really key in that conversation. But it's not the only contributing factor to how you think about diversity, equity, inclusion, how do you really use our role as technology leaders to influence that. It's you have to understand, certainly, the cultural differences of the different organizations around the world, different countries you work in, they understand different cultural needs of the different types of work that we perform across the company. And it is really important, of course, looking at the United States, our own set of diversity understanding that have to be considered as well. And, of course, as we look at the last several months and looking into 2021 and beyond, it has changed. And like our roles as technology leaders are probably even more critical now than they were a year or 5 years ago. And I think that most of us would agree that just deploying technology is not what makes our lives interesting. It's the adoption and the outcome that, that technology is intended to provide. And for that, we have to be change leaders. We have to be talking about the cultural factors. We have to help our colleagues across the executive team, think about how our changes are going to be received into each and every one of those demographics, for all of the constituents, employees, communities that we serve, our shareholders, our customers. And that means that we have to think absolutely as business leaders that happen to have responsibility for technology.

Excellent. Great. Thanks, Jen. We'll circle back to you in a minute. Janet, I know you have a broader message regarding the impact of diversity and inclusion in our tech industry. A little context of those -- for folks who don't know how big Ralph Lauren is and how you're printing visual?

Well, I do have a large message, but the pivot digitally has been largely -- well, we've all been in digital transformations, I think, not just in the retail industry, but across the board, but particularly with COVID, we've had to shift a lot of things, whether it's in our retail stores. And I'm looking at Gerri who can't sell a virtual cup of coffee. But in retail, we've had virtual appointments and lots of digital contact with the end consumers and a lot of different omni-channel kind of capabilities. But beyond that, Hunter, even things like going to the showrooms, wholesale partners buy from lines like Ralph Lauren or other lines, as they go to a showroom, they touch and they feel the product and they make their purchases from that experience. So we've had to create virtual showrooms. At a company like Ralph Lauren as well as other companies, we've been doing 3D product development for a while, but we would still bring in physical samples for our design teams and merchants to approve. They would look at them and touch them and feel them. And we now do product approvals through 3D virtual samples. So I believe that the changes that we have incurred in 2020 will continue through '21 and beyond. And what I just hope is that culturally, this culture of ingenuity, of shifting paradigms and not doing everything the way we've been doing it, will continue to progress for all of our organizations and our businesses and our industries. And I'm just so thrilled to be in the technology space getting to drive that change.

Excellent. And you have a broader mission or idea now regarding this -- a new initiative that you're taking part of?

I do. So thank you. I'll take the moment to bring up that initiative and thanks, Jen, for bringing up diversity and inclusion, I've been working since the [indiscernible] of George Floyd, and we've all been focused on diversity and inclusion, I believe. But there's just been such a spotlight since this summer. So I'm working with about a dozen technology executives and leaders, some from Novant Health, where Angela is from, as well as from Estee Lauder and Deloitte and Boeing. And so we got together and we said, we really do need to make a difference in the technology space. We all -- all of our organizations, I'm sure, are working on how we can increase diversity and inclusion. But if you have a look at the statistics of a technology organization, they're different than what you will see in the rest of the organization. We still lag further behind in representation for women in the -- in just the managerial and individual contributor roles and especially in the executive roles. We also lag behind Latinx and Black and African-American. Further than a lot of our other tier professions. So we've created a group called the Tech Pact, which if anybody is interested in agreeing, it's going to be a pledge, a personal pledge that you'll take to support diversity and inclusion. And the vision of the Tech Pact is to create a world where everyone with the passion for technology has the ability to succeed. So there's been a lot of programs, lots of partnerships with groups like NPower and Year Up and other groups that support diversity inclusion. We believe this is going to spread like wildfire throughout the technology community. I would love it, always seeking for everyone to be agreeing to the Tech Pact pledge, and if you want the information on it, we're going to launch on October 29. In the meantime, please reach out to me [email protected], and I will make certain to make sure that you get the information about the Tech Pact, which we're launching, and I'm so excited about. And thank you for allowing me to speak about it.

Excellent. Great. Thanks, Janet. Angela, good to see you. It's been a while.

Great to see you.

Yes, you've been through quite a bit with the digital pivot and had quite a bit of success in really kind of racing into that digital space. Any updates in terms of what you're working on next? What's next?

Well, okay. So just a little bit of background for people who may not know what Novant Health is. We are a super regional integrated health care system based in the southeastern United States. So we have about 30,000 team members and 700 locations, and we directly provide health care to people. So we have hospitals, we have clinics, physician centers, outpatient centers, that sort of thing. So health care itself as an industry is under quite a bit of change and has been for a while. It's a highly fragmented industry. It's rapidly evolving due to changes in the regulatory landscape, changes in the payer community, certainly, consumer appetites as has affected, of course, all of our industries. And my company recognized this a few years back, and hired me and gave me the remit to do a pretty significant transformation of the underlying digital capability to bring us into where we think health care is going. And so when you think about some of the things that have been discussed thus far, and I'm so glad we're having this conversation about culture, on cultural change, it's particularly impactful and important inside of health care organizations because not only do we have -- have we historically had so much to do, at least in Novant Health, to bring our technology capability up to where it can make a significant difference in patient access to care and quality of care, but also the industry itself is shifting around us. So you have to very intentionally manage your culture. So that's -- it's just been a thrilling activity. And as throughout COVID, we, of course, did what everyone else did. We already had a strong digital health capability. So we had up to 10,000, 15,000. I think we had 1 of our days, we may have had over 20,000 virtual visits in 1 day. So we have tens of thousands of visits on a daily basis throughout the course of the crisis, the shutdown. I think we're averaging about 2,000 a day today. So that's about 1,900 more than we would typically average a day before the COVID crisis. So it's nice to see people being willing to access care through unconventional means. And of course, we enhanced this through devices that have advanced sensor capabilities that allow us to give very detailed exam remotely, which has been very helpful as well in adoption. And we do things, like, let's see -- well, you know what, I could go for much longer than anyone who care to listen, but things like a significant AI investment that are doing some truly remarkable work in stroke care and heart failure and breast cancer and all the rest of it. So if and when you have a panel about this sort of advanced tech things, I would love to tell you a little bit more. And [ drugs ], don't forget the [ drugs ].

Wow. So a little bit more though, Angela, on the responsibility regarding culture, learning and research as part of your senior C-suite duties.

Well, so you know Misti Fragen. She is our VP of Culture, Learning and Research. As she and her team have been extraordinarily helpful, not just in helping us, as I mentioned before, be very intentional about the way we manage the change and keeping everyone engaged and invested in shifting and making more contemporary, the ways in which we operate our digital products and services organization, but also in the longer term, preparing for that shift that we talked about a minute ago. It is inevitable and the change -- and the cultural change required is going to span many, many years, not just the next few months of continued transformation. So it's a good foundational capability, idling to have in place if you are in an industry that is rapidly changing.

So it's actually a part of your role, though, right? This new expanded responsibility?

This has been part of my role for years. So yes, I've been with the company just under 3 years. And so I hired Misti to run this part, probably 6 months in, wasn't it? I think? Yes.

Excellent. Thanks, Angela. Gerri, back over to you. You were early on one of a conference call with me back in March, and you said Hunter, realize what we're going through here on a global level, this is not a sprint, it's more like a marathon. I might even say it's more like an iron man, getting more and more extended, right? How long this is going to play out? When you think of leading massive cultural change and a global pandemic in a global organization, what's that like for you?

Yes. Well, it's funny. Janet said, you can't have coffee virtually, but we can get you almost to your coffee pretty virtually. So I'm betting everyone is doing that now. You're ordering your coffee through the app, you're doing curbside, you're doing delivery. So without a doubt, I mean, from a business perspective, our channels saturation around digitally-enabled orders is huge. It's happened very quickly in a growth, and I can't really say more than that. But I think we're all experiencing that. We're experiencing that in all parts of our life. I want to shift though for a second and talk a little bit about the culture at Starbucks and what this pandemic has felt like inside. I think most people know that Starbucks is grounded in the sense of community coffee house culture. You come to a Starbucks, it's always been the place to sit and visit with people, to grab your coffee and be there on a weekend or to have a meeting, whatever. And the same is true of the culture in the corporate headquarters, which is in Seattle, in a really old historic building. In fact, it was probably one of the most shocking things to me when I joined Starbucks 5 years ago because really, when they say there's a corporate building, there is a corporate building. And that's where most people who are in any kind of corporate functions sit in Seattle, in this historic building. The idea of having video conference meeting 5 years ago was pretty novel. And I would say it was not a cultural trend that the actual corporate way of work made easy. It's the kind of culture where people really mean meeting at the coffee machine. You actually meet at coffee tables. Inside the corporate building, you have coffee tastings to start nearly every meaningful meeting that you have. So I would have coffee all day long, probably a case being at least 4, 5 or 6 times a day. Talking about the coffee is much like talking about wine. You talk about the taste and the smell. And so you can only imagine, when all of a sudden, one day, literally, we walk into an all-hands meeting, and we say, we want everyone to go work from home now. Starting now, like not a month from now, not a week from now. Now. Right now. And we did that earlier than most other businesses. As you know, Washington state was very early on the entire U.S. pandemic experience. And so we really did overnight go home. And the number of phone calls I got from executives throughout the company really, really worried was quite insightful. People were really, really worried about how is this going to work? How can we possibly function? And as we all know, as technologists, of course, we could function. We had a Teams license. We were totally ready to have everyone on Teams and people didn't really believe it. And then lo and behold, the next day, we just started working remote. And as we went through those first few weeks, people were truly amazed at how quickly the culture shifted. It wasn't slow and tedious. It was literally overnight. So much so that when we did our first pulse survey shortly after we all start working from home, most of our partners, which is what our employees are called, immediately responded with, they really like working remote, and they could see doing that for a very long period of time. We recently announced that we will not be going back into our Seattle headquarters until next October. So an entire year from now. And we're not worried about getting work done. We want to make sure we refit the building so that it's prepared for a new way of working when we get back because now that everyone is loving this new digital mode of connecting, we even have coffee tastings. We still have coffee tastings. We just do them a little differently now. But I don't know. So I always thought culture took a long, long time to shift. And I think I've been excited that we've watched this pandemic, a silver lining is that a culture that believes they really couldn't maintain community and connection virtually has just discovered they can. So I probably talk too long about that. But boy, it's been really amazing to feel it.

Gerri, perhaps one of the more innovative companies in the past few decades, Starbucks, when you think about accelerators and innovation and inhibitors, where do you fall out on that topic at Starbucks?

Well, we've done a lot of pretty innovative technology and continue to. And I think one of the things that has helped us is we spent several years really rebuilding our architectural foundation. So that when we got to the point of needing to accelerate like we've done in the last 9 months or so, we were able to do things like unlock new channels, delivery, curbside without rebuilding anything. We literally put a little bit of icing on a cake and leveraged all of the foundational infrastructure and technology we've built. So I mean, I think everyone on this call, we're all technologists, and we're all in leadership of technology. We know how important good architecture is and architecting for the future, not to respond to your needs today. And it does feel like it's been a bit of a case study for when we did that, and we took our time to do that the right way. We have been able to go faster.

Excellent. Thank you. Jen, over to you, when you think about this whole pandemic that we're in and working from home and so forth, it puts a lot of challenges on diversity and inclusion, but there are also some opportunities. What's the upside and the downside?

Yes. And I think -- and I appreciate really all the comments of the fellow panelists because I think we're all nodding for a reason because there's so much commonality even across all these different industries that we represent, the different geographies that we work in. And Hunter, I think that you're right, there's both an opportunity to level the playing field with remote work. There's also an opportunity for us to potentially leave some folks behind. So I think from a diversity, equity and inclusion perspective, we have to be every bit as intentional as we are right now. And Gerri, I really appreciated you sharing the Starbucks story about really taking another year to refit the work environment. And one of the things that I felt like was a big enabler to diversity, equity and inclusion this year is that we put everybody remotely. Now I have a globally diverse team. We're all over the world. So there was a bit of a headquarter versus perspective in our culture, where if you aren't near a center of gravity, sometimes maybe your voice didn't get heard quite as clearly as if you were. So with everyone moving remotely, we kind of took away the advantage factor of face time, hallway time, et cetera. So we had to be a little bit more intentional. Now if you were outside of that center of gravity, this felt like fantastic opportunity to step up and be seen differently. So I hope we don't lose that. That's one of the things that we're trying to retain is that how do we make sure we have a really intentional inclusion. The other part that I would say that we've had to be a little bit more thoughtful of is as a global team, we're heavily reliant on global travel to bring people together for ideation and innovation. Now it's episodic. So we bring people together. They work for a little bit and then they go back to their corners of the world. But when you're trying to do that across 16 time zones and you're trying to make sure that people who are in an apartment with 2 or 3 generations of family, it's the middle of their night, really thinking through how do we make sure that we don't create undue burden on those with different life circumstances or different geographies, has also been a part of our journey. So we've had to find some creative ways. And candidly, we don't have it all figured out yet. So we'll change shifts. Like sometimes, we make it really convenient for those that are in the U.S., sometimes really convenient for those in India or Malaysia. And we try to do that in a way that, that way we're accommodating people working from home in different scenarios. We've also found that, in some cases, we were willing to open up an office for people a little sooner because it really was more effective and more productive for them to be in a physical office and maybe away from some of the chaos that some of our home lives looks like right now. So we've had to work through a lot of different scenarios. And I think that just like non-COVID times, it really is a function of being incredibly intentional about making sure that you're creating the right opportunity and then giving people the right opportunity to show up and be successful. So for us, we've actually seen some really great progress. And one of the things that I think that we're trying to really grasp a hold of is, how do we not lose this ground on creating this level playing field for people to more equitably compete for really great work and great opportunities for promotion and advancement.

Thanks, Jen. Great job. Janet, over to you, when you think about the technology and driving cultural change and how we'll work today and into the future, what comes to mind?

I think it's a lot of the things that we've spoken about, which has -- my screen is doing something strange there, which Jen brought up a really good point. There's some really positive outcomes from the COVID situation for organizations. The -- and this is not just at Ralph Lauren or Baker Hughes or it's been in every company, which is there's the corporate phenomenon. And when you're not a corporate and it's a corporate phenomenon, this has made it so that, that really minimizes that. So I love that there's a few things that are going to support recruiting. If you don't need to actually be in the office any longer, it does that open up where you recruit people from. This whole equalization of the corporate centers of gravity, as Jen put it. I think that culturally, we're all going to be more nimble than we were before. I think that -- I think we're -- the paradigms of we had to do things this way has been broken this year. And the other thing as well that's interesting is that I think our partners have just realized, we all had a snap to it. When COVID hit, in technology, like I had a very similar situation as Gerri. Fortunately for me, I had architecture in place that I was poised for curbside. We hadn't delivered it yet. It wasn't high on our priority list, but I had the architecture ready for that. So I guess what we showed our partners was is when the pressure is on, we can really deliver. So I think that there may be an expectation that we're going to be a little bit more nimble and be able to deliver a little bit more quickly than maybe in the past. So I think that there's a lot of changes for our business partners as well as expectations for us in technology that we're going to see continue into 2021 and beyond.

Well, thanks, Janet. We have about one minute to wrap up here, just a quick comment. Exciting time to being technologists and probably one of the most interesting times, right? I would say it's the best time but it always seems like the next day is the best day, but very challenging, but do you love what you're doing? Any comment? Gerri? Jen? Gerri?

My gosh, it's an amazing time. I think that in addition to everything else we're dealing with, this time when diversity and inclusion is forefront for all of us and all of our companies is going to make the future a very different place in a very, very good way.

Awesome. Jen?

Just wanted to add, yes. Like for us, we had this nice phrase that we say, which is who is our how, we're entirely dependent on really great intellectual capability, diverse perspectives around the world. And what better time to take the who of technology and bring it to really incredibly impactful how. So yes, never -- I'm with you, Hunter. Today is a great day to be in tech.

Love it. Janet?

I've been inspired all day today. Did you notice how many people spoke just from the heart about -- and being very transparent about confidence and feeling like you belonged, I think that there is an exposure to our true selves and in openness that I think today as women we bring to the table. But I believe this time, this year, 2020 has just opened up this environment that really helps us to be empathetic, more patient and more kind to each other. So I thank you for this forum for us to speak as women and I believe that, that is going to help carry us through to all being better corporate citizens and better partners in our work environment.

Thank you, Janet. And well said, brilliant. Angela, final word?

Well, I think 2020 has really separated the wheat from the chaff. The folks that you've heard on this panel, on all of the prior panels, have described how the diversity of thought and the inclusive culture that they've cultivated and the good forward-thinking technology decisions and investments that they've made up to this point allow them to thrive during very difficult times, unanticipatable times that we've encountered in 2020. So I think this sort of event has been extraordinary for all of us to share stories and to celebrate the good work done here so far.

Yes. Thanks, Angela. Thanks, Gerri, and Jen and Janet, for all of your engagement, support over the years and sharing your experience, right? You guys are all really world-class rock stars. It is the most challenging time ever, right, in our careers, but you're right, Angela, I think and Janet, Jen and Gerri, the folks that we had show up today on the agenda and the attendees they were all really leaning in and living that kind of a champion moment, right, what, 8, 9 months into this, could be another year or 2 because it plays out the long tail. And that kind of vision and leadership encourage and authenticity and leading authentically with humility and a balance of a certain leadership, it's all part of a -- kind of a style, leadership style that you've all developed over the years, decades, you've been in this. But in the last 9 months, it really pushed it to the edge, right? So great thanks to you all.