One IT service provider that has excelled in recent years is Capgemini, which posted revenue growth of over 20% in the first half of this year and is also experiencing an increase in operating margins despite inflationary pressures and high turnover across the industry pleased.
As the company nears its $20 billion revenue milestone, it's high time we caught up with Group CEO Aiman Ezzat to understand what has been driving this growth since he took the helm over two years ago ...
Phil Fersht, CEO HFS Research: So I'll get straight to that, Aiman. Always wanted to be the CEO of a €20 billion services giant? Was that what you always wanted to do when you started?
Aiman Ezzat, CEO of der Capgemini-Gruppe:I've been with Capgemini, Phil for almost 27 years now. I'm a chemical engineer but I started my career at IBM, actually IBM Europe, in the mid 80's. I stayed there for a few years and then did an MBA at UCLA. After that I was curious about consulting, so I joined what was then called the Mac Group, a strategy consulting boutique founded by Harvard professors, and when I joined, that company was acquired by Capgemini to create what was then called Gemini Consulting, a Transformation consulting arm of Capgemini. I stayed there for nine years, half the time in Europe and the other half in the US, living on the west coast. I left the company in 2000 to go to a smaller company that was supposed to go public, but it never happened. I stayed there for four years. I ended up running the business outside of the US; I was in DC based but headed Europe and Asia. I left the company in 2004 to return to Capgemini.
My career started anew at Capgemini, after this four-year separation, I was first in corporate strategy, I was deputy strategy director, I did a lot of transformation programs, I did a lot of acquisitions. And I moved to one of the acquisitions, which is Kanbay, to help create our global financial services P&L. I came as COO and after a year I became CEO of this company to make it a global company for Capgemini. That was in 2007 and I was born on January 1ststJanuary 2009, perfect time to experience the financial market crash. It was of course an interesting experience. I became CFO of the group at the end of 2012, remaining CFO until mid-2018. In the meantime, I was selected as one of the two people who might succeed Paul Hermelin, so I also became COO. And then you know the rest. In September 2019 I was confirmed as the next CEO and on September 20thMay 2020. So this is my career, very very Capgemini but also very diverse at Capgemini because I touch many things, strategy, operations, finance.
Have I always dreamed of becoming a CEO? No. There are people who want to be CEOs by the time they are 18. I wanted to do interesting things in life. So I followed my career from one thing to another, always trying to find a way to add value and learn something. I was quite successful in the CFO role, I was chosen as one of Paul's two potential successors, and it was only then that I realized that I could potentially become Capgemini's CEO. That's pretty much how my career went. So I'm not a big power man; I was interested in taking on the CEO job because I had ideas of what I could bring to the group. That's it. If you take the CEO job, it's for it. It's not about power; It's because you have a vision and see that you can add value and see what you can bring to the table.
Phil: Who have been your influences along the way that you can share, maybe some personal and professional, Aiman?
Aim:There are a few things that have shaped (ph 05.28) me throughout my career. When I was younger I was interested in strategy and read a lot, one of the people who influenced me was C.K. Prahalad with strategic intent and core competencies, that was in the early 1990s. In the late 90's Chan Kim was a professor at INSEAD who wrote an article with Renée Mauborgne entitled Value Innovation and Fair Process and later wrote Blue Ocean Strategy. This has influenced me in terms of how to focus on the customer and how to create value for the customer; a bit away from the notion of competitive advantage and much more of value creation focused on the customer. That influenced my thinking.
In terms of people, you look at a lot of people, you learn from a lot of people, I can't say I have a role model. But someone who has impressed me in terms of what he has done is Steve Jobs. He was passionate, he had a vision and people could tell him whatever they wanted, they didn't necessarily agree with him, but he believed in what he wanted to achieve. He created a lot of value. This is someone I like in terms of personality, in terms of their commitment to achieve, their vision. He pushed it to the end.
Phil: Yes. I enjoy watching some of his old videos, including when he first launchedWith the iPhone he could see exactly 15 years into the future. Unbelievable when you look at itLaunched in 2007.
Aim:Exactly.
Phil: But when he relaunched the Apple brand, he was about experiences, not products. It's like when you watch Nike commercials, you don't see any products being sold, do you? You see athletes, you see health, you see what this brand isstandsfor. And I think he brought that to the consumerization of IT, which is fascinating... he really changed the industry.
So Capgemini has grown a lot over the years, and with a lot of mergers and acquisitions, you've made a lot of acquisitions as a company. But I believe that Altran is one of the key acquisitions that you made. You've built this unique OT/IT focus that gets you really heavily involved in supply chain, engineering and sustainability. One, do you agree? And second, how do you see Capgemini's DNA now that you've reached that €20 billion milestone?
Aim:Yes, it was definitely formative, Phil! I think some others in Capgemini's history have defined in a different way. There have been many geographic expansions in Europe: Hoskyns took us to the UK, Volmac took us to the Netherlands and Programator to Sweden. So a lot of the expansion has been geographic, a lot of the expansion has been about taking us into new areas. After that we changed a bit. The Kanbay model was really about India and how to learn the Indian model and the one team model etc so we had to move from a western model to a much more Indian integrated model. IGATE was about scaling in the US. But yes, Altran was probably one of the more strategic ones as it was really about a vision that we had around the concept of smart industry and how the convergence between the digital and physical worlds is progressing and the need for people to embrace the physical world really understand to be able to create this value around the intelligent industry.
So I totally agree that this is definitely something defining in terms of Capgemini's development, also in terms of strategy. It is about a space that was created in the market. People are bringing it to Industry 4.0, and the concept of smart industry is going beyond that. Because it's not just about digital manufacturing and intelligent supply chains, but also about creating new products and services of the future and their platforms. A car is now becoming an intelligent product full of software that needs to run on a cloud platform. So it's not just about how we make the car and the supply chain that goes with it; this is how we create, this is how we design the car.
And this is where understanding the physical world becomes important. If you think about it, look at the financial services industry. What was specific about financial services compared to other industries from an IT perspective was that it was already in the product and the service. A credit card consists of IT. A bond, an equity, a payment system consists of IT. In most other industries, IT was not included in either the product or the service. IT wasn't in the car. And suddenly IT comes into the car. And what was specific about financial services is that they've moved away from horizontal needs. You weren't in finance, human resources etc. Of course you could do that. But when you're talking to the business, when you're talking about credit cards, you have to understand the credit card business. You cannot develop a product or functionality for a credit card if you do not understand the credit card business. And when it comes to a car, it's exactly the same. You can't develop a car's software architecture if you don't understand how a car works or what a car is made of.
And that is exactly what we have achieved with Altran. We had people who knew how to build cars, how to build airplanes, understand how a factory works, understand the pharmaceutical companies in terms of 3D manufacturing, engineering and R&D. And if you bring that with digital, you can really bring out the concept of smart industry, which, as I said, goes beyond digital manufacturing and smart supply chain.
Phil: The more we get into the manufacturing and supply chain, the more relevant the role of suppliers with sustainability becomes, doesn't it?
Aim: Sure, Phil. If we look at sustainability - we're pretty big on sustainability - of course there's the internal part. We do the job, but we're a service company, we're not a big issuer. Much of this is related to business travel; When you reduce business travel, your footprint decreases significantly. realizedTechnology, digitization and data play a major role when it comes to driving sustainability solutions. That's why we've committed to helping our customers reduce their carbon footprint by 10 million tons of CO2by 2030. Following that commitment, we began developing an offering architecture around “How can we achieve this? What added value can we bring to our customers?” Well, of course there is the strategy. How do you get to net zero? Depending on the industry, what levers can you use to achieve net zero? (? 13.17) This is the management consultancy, the strategy consultancy part, you need an understanding of the industry, understand the levers that people can use, energy efficiency or others depending on the industry. And from there you can say, "Okay, these are the levers, this is how you can get there, this is how you can save, this is what you need to change, these are the technologies that you have at your disposal to do it."
At the other end you have one of the most complex parts, which is measurement and monitoring. On the one hand you have to be able to measure the carbon footprint and I think that's an area where we've progressed, we're working with a number of technology partners to develop calculators and other tools and measurements, including the procurement side. On the other hand, you have surveillance; How do you monitor the development of your carbon footprint? And in the middle I call it thatagainPart. For us, the doing part has three legs. It's Green IT or Sustainable IT. We're definitely in this business, we're helping our customers reduce their technology footprint. The second part is sustainable operations, that's really from the industry. We will not cover all industries as it is very industry specific. There are common things to work on like energy efficiency and the energy transition, but there are things that are very industry specific and you really have to get to the heart of the industry to understand what levers you can use. And here, too, engineering skills are important. And the third pillar are sustainable products and services. We work to help customers redesign a gearbox to reduce its size and also the materials to make it lighter to reduce the carbon footprint. We worked with a forklift manufacturer for a completely redesigned forklift to reduce the life cycle carbon footprint. That's the doing part. It's sustainable IT, it's sustainable operations and it's helping clients redesign their products and services to make them more sustainable, with monitoring and measurement and of course the strategy part. We're starting to do a lot of projects, it's really taking off and I think it's going to be big business.
And another positive thing about it, besides being good for the planet, is that it's a talent magnet. Young people love working on these projects.
Phil: And on that note, I know you mentioned that this is a long-term shift in how we approach talent and work. Can you tell a bit more about your thoughts here, Aiman?
Aim: Two different things are happening at the same time, Phil. On the one hand, a huge shortage of tech talent as we move toward a digital economy. Businesses are impacted across the value chain, and they all need technology talent. Whether you're talking about your customer relationship, how you run your business, how you design your products, how you manufacture them, or how you move them through the supply chain, the entire value chain now requires technology, not just managing the business. This has significantly increased the demand for technological skills in most companies... in the economy as a whole. Technology spending is becoming a bigger and bigger part of the economy, and it takes more talent to drive it. That talent doesn't exist. Demand is growing way too fast. We have a huge imbalance between the supply and demand of talent. This is one page.
The second side is the evolution of the new generation, Gen Z, that comes with different expectations, and the overall evolution of the workforce and work model that comes from Hybrid. You have to combine both, both are happening at the same time, and you have to deal with both. First, there's definitely talent retraining, and we've done a tremendous amount of talent retraining internally, and we also help our clients retrain talent. We go beyond retraining and train people without a technical background. We work with universities to develop new curricula. We even tried to influence some of the governments a bit by saying, 'We have to think differently. The technology talent is not just engineers.” Otherwise we will never have enough talent. You need people who can program. You don't have to do five years of engineering to write code. We can train people if they have the right math background or logic to write code, we can train them in 12 to 18 months or 24 months. We need to find a way to diversify the education model to get more people to drive this digital economy.
Further training is therefore important, as is the creation of new talent. That's why we hire and train many more young people, sometimes people without a technical background. In our industry, we are big employers when it comes to technology; With all of our big competitors, we're the ones who can educate really massive amounts of people and bring those people into business, into startups, into other tech companies, and into our customers. That causes attrition as there is nothing you can do about it due to the imbalance between supply and demand. This turnover comes because the demand for talent is so high. You have to learn to live with that for the time being, until we get to a more balanced environment in terms of supply and demand. Fluctuation will likely remain high for a while. It will likely come down a bit quarter to quarter as this imbalance unwinds.
The second part is the overall development of the interaction between employees and the company, but beyond that, it's people you want to associate with what you're doing who won't necessarily be your employees. That's why I'm talking more and more about the talent ecosystem. First, of course, there's your people, and that's where people join because of your purpose, because of what you're trying to do, because of interest in the work, because you care about them, people's whole experience becomes important, the whole trusting work culture becomes important. The leadership model needs to evolve. You have a generation that doesn't want to be told what to do, but wants direction, motivation, nurturing, and some freedom in getting things done. Which is very different. . So it's much more of an alignment and leadership model than a management model. I go a bit from one extreme to the other, it's somewhere in the middle, but there's an evolution in the way you have to lead with this whole generation if you want people to stay with you.
And also the realization that the workforce is becoming more fluid, that people can easily move from one company to another, you have to learn to live with that. The fluidity of the workforce will increase and that is a fact. We will not go back to where we were before COVID, where people will stay in businesses for a long time. You definitely need your core of employees, of people who stay longer, but you'll also have people who move faster. That means you have to start living with what I call a talent ecosystem that includes not just your employees, but also people beyond your employees, gig workers, potential retirees, potential students, people, who only want to work three or six months a year. All of this is an ecosystem of talent. You are not an employee. But I put a very important concept into it; that you have to identify them. It's a bit like personalized marketing. I can work with them if I know who they are because I know when to call them and they may or may not be available. In a way I have to identify them, I have to get to know them. And maybe I'll get to know them because I certify them. I give them a Capgemini certification, they have been trained by me, and they can upgrade that certification elsewhere. This also allows me to get to know them and ping them if necessary. It's at will. But after identifying a much larger talent pool beyond my own employees, I can connect with them and connect them to my work.
So it's really an evolution, the foundation will be your people, but you augment it with an ecosystem of talent that you know and are connected to. We really can make it happen.
Phil: My final question, just a quick one, is how do you feel about the future given the chaotic times we're in with geopolitics, inflation and things like that? Do you feel slightly positive? Do you feel negative?
Aim:Of course, like everyone, Phil, we're closely monitoring the situation. There are a lot of complexities today between geopolitics, inflation and the big development in terms of what's happening in the economy: we can't ignore that. On the other hand, I'm optimistic because the fundamental trends, the structural trends, are positive. It used to be the industrial revolution, now this is the digital revolution. Everything is moving on a technology platform, on a cloud platform, we will have many new digital services, we will be able to use quantum computing to discover new medicines. So there are many positive trends. As an industry, we are right in the middle, we are right in the middle of changes in the economy and society. I can only be positive about the structural trends of being part of digital transformation, being part of inventing new products and services, being part of inventing new public services, being part of improving people's lives, being part of finding solutions to be for sustainability. I am very positive about the fact that we are creating a digital economy. Structurally, the long-term trends are good. In the short term, we need to keep a close eye on what's happening and learn to be agile and adapt to what's going on in the market.
Phil: Well thanks for your time, that was really enlightening, I look forward to sharing this with everyone...it was great spending some time with you today, Aiman.
Aim:Thank you Phil
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