Podcast #232 Frictionless Innovation

TRANSCRIPT

Ken: This is Ken Forster, Executive Director at Momenta. Welcome to our Digital Thread podcast produced by, for, and about digital industry leaders. In this series of conversations, we capture insights from the best and brightest minds in the digital industry - executives, entrepreneurs, advisors, and other thought leaders. What they have in common, like our team at Momenta, is deep industry expertise. We hope you find these podcasts informative, and as always, we welcome your comments and suggestions.

Good day, and welcome to Episode 232 of our Momenta Industrial Impact Podcast. Today, we're pleased to host Annika Ölme, Chief Technology Officer and Senior Vice President of Technology Development at SKF Group, the world's leading provider of innovative solutions that help industries become more competitive and sustainable. Annika is a member of SKF's Group Management and is responsible for the company's overall technology direction. She has more than 20 years of technology leadership and business management experience spanning mechanical and electrical engineering, tribology, software, and data science. Before joining SKF Group in 2022, Annika held senior leadership roles at Arcam, now General Electric Additive, Saab Radar Solutions, and worked at SKF Group earlier.

Annika is passionate about diversity and inclusion, STEM, and nurturing, enabling ecosystems to encourage more women's participation in the workforce. She chairs the board of directors for the Jacob Wallenberg Foundation, which supports research in material science. She also serves on the board of Image Systems AB, a Swedish-listed company in image handling, and chairs the technology committee as a board member at Grundfos. Additionally, she co-chairs the CTO roundtable hosted by the Royal Swedish Academy of Engineering Science. Annika holds a Master of Science degree in Electrical Engineering from Chalmers University of Technology in Sweden and earned her international Master of Business Administration degree from Waikato University School of Business in New Zealand.

 Annika, welcome to our Industrial Impact podcast.

[00:02:24]

Annika: Thank you, Ken. I'm very happy to be here. Thank you for the invitation.

[00:02:28]

Ken: I'm so happy to have you as well. In a moment, we'll talk about how we met, which will set the context for the conversation. But I'm always curious about how somebody got to where they're at now, and I like to call that the digital thread, so help me out here. What would you consider to be your digital thread? In other words, the defining interests and experiences that brought you to this point in life.

[00:02:52]

Annika: Now, that's an excellent question. I want to start from a professional perspective and then maybe come in on the personal side, but there are three pillars. Three digital threads have been with me throughout my work and early school days. It is really about technology. It is about making a difference with business and customers. The third pillar or thread is the people and leadership side of things. I remember that even when I was young, at the age of 12 or 13, I had one of these friend books, and I wrote in this friend book that I wanted to be the leader of people. I want to do innovative things, so it was part of my mind very early on and has evolved since then. Those are my three professional digital threads. It's the technology, the business, and the customers and making a difference with technology, as well as the people and the leadership. From a private perspective, I'm a person who's very much dependent on my good friends. My family is essential to me, and what we do in our spare time is spend time at our summer house on an island; the ocean has always been important. I did a stint of professional sailing once, so I'm also a competitive person by nature to a certain extent, but that's short about me.

[00:04:10]

Ken: There are definitely several pillars there that make a lot of sense in terms of where you have come now as CTO. We had the opportunity to meet at the Bank of America Industrial Event in London. It's funny because being in the audience, in a sea of presentations on financial results and forward-looking information, all of a sudden, you get up, and you have this presentation focused on SKF's technology and innovation competitive advantage. I was really impressed to listen to some of the digital innovation work that you are doing as well in what one would consider to be a traditional mechanical business. What inspired you to make this the mainstay of your presentation for what really was traditional institutional investors?

[00:04:55]

Annika: My thought process revolved around an investor's perspective: you want to truly understand why your investment or the company you are considering is competitive, and you would like to know whether that company will sustain or even enhance that competitive advantage. In my mind, this is what I would like to hear about a company. If I invest in something, I want to understand why it's competitive and how it can improve for the future. If you have that, then the financial results will follow. It inspired me to talk about this; it was simple. What would I want to examine if I invest? If I were to purchase stock in a company, what would I ask myself? This information is not always readily available. I saw it as a golden opportunity to tell the story about SKF being a traditional, over 100-year-old industrial company. Our core business revolves around rotation and rotating equipment bearings. At the same time, we also provide services and lubrication systems, seals, and so on. But really, it's about lifting the hood a little bit and understanding why. Why is this company competitive, and why will it be even more competitive in the future? For me, it was about providing you with the narrative that you can't always derive from the numbers, and that could be what contributes to the numbers in the end.

 [00:06:17]

Ken: That's why we're having this conversation today instead of having the CFO from one of your peer companies at the conference. Interestingly, we're close to BofA. We've interviewed both Andrew and Alex on separate occasions. In fact, I was with Alex last week at the Hannover Messe, and I joked with him. I said, "You know, we ought to have more CTOs on the stage at industrials." I hate to say it, but fewer CFOs. I love CTOs. CEOs are great, and the CFOs, you know what you're going to get in terms of the conversations there, right? Maybe they'll listen to me because there were a handful of CTOs last year. This year is similar in that regard; they've chosen this platform to delve into forward-looking perspectives rather than solely focusing on financial metrics. I genuinely appreciate our conversation for its insightful depth. Look, you have a rich background in technology leadership. Great companies: GE, Saab, and, of course, SKF. But in a sense, those are just the table stakes. You've got to be a good technologist, a good leader, and a good people person to truly play the role of a CTO, especially at a critical time like it is for SKF right now. I'm curious. What is it that you uniquely brought to the CTO position to take on the role and help SKF grow at this critical time?

[00:07:36]

Annika: First of all, you're absolutely right that to serve as a CTO, you must have a genuine interest in technology, be fascinated by its possibilities, and understand how to leverage it to advance a company, product, or customer value. My extensive history with SKF, knowledge of its technologies, as well as insights gained from my other experiences, have all contributed to my readiness for this role. I've actually been with SKF for 15 years, and my previous tenure here has played a significant role. But even more crucially, I firmly believe that driving change and achieving results in any organization, especially a technical one, hinges on people. Innovation and change thrive when individuals feel psychologically safe to experiment and try new approaches. Building a culture of innovation and enhancing the company's competitive advantage comes from fostering psychological safety and trust throughout a global organization.

Moreover, with a diverse background in software, management consulting, and business management, the role of a modern CTO extends beyond just understanding a single core technology. It entails delving into IT and even approaching the realm of a CIO. It requires staying abreast of emerging digital solutions and being intimately familiar with the realities faced by customers. A broad background is essential for excelling as a CTO, and my varied experiences have certainly aided me in this regard.

[00:09:14]

Ken: You're absolutely right touching on the CIO topic, and I'd add into that Chief Digital Officer relative to the digitization of products and services, right? That really good CTOs are naturally taking on those mantles to have connected products and services as part of their offerings. I keep coming back; SKF is such an interesting company in terms of being a world leader in the bearings business and a master of their core technologies in terms of material sciences. But what do you see as the key innovations and capabilities that you're really looking to develop on this solid foundation to take the company forward?

[00:09:51]

Annika: That's a great question, and I'd like to start with a significant driver for us: new technologies, solutions, markets, and sustainability. Sustainability is integral to our company, where we have our sustainability targets for our operations. However, the real opportunity lies in the business potential presented by sustainability and the technologies we need to master and develop to seize this opportunity.

One example is electrification. While electric vehicles are a well-known growing market, electrification extends beyond automobiles to various industries, with electric motors increasingly being used in new applications. From a technological and innovation standpoint for us as a bearing company, this has led to the development of a hybrid bearing product. With ceramic rolling elements, this bearing prevents electrical current from passing through, thus protecting electric motors from failure. This presents a significant growth opportunity for us, driven by sustainability trends.

Furthermore, we're seeing a trend where customers demand information on the CO2 impact of our products throughout their entire value chain, not just a generic number. This necessitates having a secure digital thread to provide this information. CO2 content and energy efficiency are now becoming currency, with markets like automotive and railway industries willing to pay for lower CO2 content and better energy efficiency.

Another area is helping our customers achieve their sustainability goals. Through a technology acquired a couple of years ago, we offer filtration technology capable of filtering mineral oil down to the nano level. This means clean oil indefinitely, eliminating the need to purchase new oil. This presents both a significant business growth opportunity and a chance to contribute to a better world.

Sustainability encompasses energy efficiency, CO2 reduction, and intelligent solutions. We'll delve deeper into these topics later on.

[00:13:24]

Ken: That's a good hook because I'm very interested in the intelligence side of it. I know you had some great examples at the BofA event, so let's delve deeper into digital tools. Over the past decade, numerous startups in the condition monitoring and predictive analytics space have emerged, almost all of which focus specifically on rotating equipment. I was intrigued. You mentioned something on stage about bearing companies being better positioned to provide such services due to their inherent knowledge of the mechanics already in place. To what extent do you think bearing companies are better positioned to offer these services, and what is their competitive advantage?

[00:14:13]

Annika: That is a very true statement that there are so many smaller and bigger companies that have entered the space of predictive maintenance and analytics. Everyone wants to predict when a gearbox will fail, for example, when a pump fails, how long until a compressor needs servicing, etc. There's a lot of money on the table, which is why we see a lot of movement in this area.

The thing is, if you don't understand the minute details about rotation and where tribology - as you mentioned earlier - comes into play with two metallic surfaces touching each other in a rotating bearing, it's tough to develop the right algorithms to make sense of sensor data, even if you have a lot of it from the gearbox. You need to understand the rotating equipment, the bearing, and the minute mechanics of how it works to interpret those sensor signals correctly.

What any startup or company can do, especially with the rise of AI, is analyze the trend of a signal and infer from historical data when something failed in the past. However, they lack the capability, unlike bearing companies, to predictively understand through algorithms based on the physical realities of rotating equipment what that means. What is the root cause? What is the predictive maintenance schedule needed? When will this equipment fail? This is very challenging without deep knowledge of rotation mechanisms.

Our core competitive advantage in this area is built on our long-term detailed knowledge of rotating equipment and bearing technology. This is difficult to replicate for those who approach it solely from a software and data perspective.

[00:16:15]

Ken: In some sense, it is the data that forms the digital twin, the models that the systems ultimately utilize to predict what is normal or abnormal behavior. It's interesting. You guys are a component provider, providing bearings to mechanical OEMs who provide the CapEx, if you will, large goods that ultimately sell to end users. What I appreciated about your position, particularly, is that you're also on the board at Grundfos, the largest pump manufacturer. Naturally, a potential client for somebody like an SKF, if not an actual one. I'm curious. As you think about the role at SKF, you think about the viewpoint from Grundfos. What are potential collaboration opportunities between a bearing company and a rotating equipment OEM, and specifically thinking about connecting these end devices and providing digital services along the way?

[00:17:11]

Annika: It ties in closely with your previous question. For example, let's consider any pump, gearbox OEM, or windmill manufacturer. We can broaden the statement to encompass these types of customers, where we typically collaborate, and where our partnership can be particularly beneficial. This is where we can help.

Firstly, we aim to design their equipment to ensure longevity, leveraging our expertise in their design processes. Regarding your query about the digital aspect, as we discussed earlier, predictive capabilities are limited regardless of the number of sensors or the volume of data extracted from their equipment in the field without a deep understanding of the intricate tribological contact within the bearing. We excel in providing this predictive insight, which is invaluable in anticipating equipment lifetime or service intervals. This is where we deliver significant value, a practice we implement in the railway industry and across sectors such as pumps and gearboxes. By combining the strengths of both companies, we enhance our offerings.

You're correct; SKF and Grundfos may indeed have a customer-supplier relationship, and I ensure that these interactions remain distinct and separate.

[00:18:29]

Ken: Well, of course. But it's interesting that you have a foot in both perspectives. I always think about things from a value chain perspective, especially when it comes to digital because it creates a whole new potential. As an example, there's a digital twin of the bearing in a digital twin of the pump, in a digital twin of the factory or wastewater facility that the pump happens to be in, right? It creates interesting hierarchies and partnership potentials.

[00:18:55]

Annika: To expand on that, what you're saying is quite intriguing because digital collaboration indeed presents an entirely new realm of possibilities for working across the value chain, which is fascinating. It also underscores the increasing interdependence among companies, particularly as we navigate the digital landscape. One initiative we're undertaking involves creating digital twins of our products and integrating them into calculation tools used by our customers. This enables them to leverage the digital twins of our products in their designs. This tangible approach exemplifies how we are collaborating with OEMs.

[00:19:32]

Ken: That ties in well with sustainability and, as you called the digital thread earlier, even down to CO2 contributions and emissions. It's interesting to see how all of this is converging, and thus, I thought your presentation at BofA was prescient in terms of how it started to look at things digitally. I wouldn't have traditionally associated digital with a bearing manufacturer except for their own uses, so it was great. Now, you became CTO in October of 2022, and so I'm curious. What were some of the early wins at SKF?

[00:20:08]

Annika: A couple of focal points for us from an R&D perspective over the past year or so have been actively refining our R&D portfolio to ensure its value in digital and physical products aligns with trends such as sustainability within our industries. Strengthening our R&D portfolio from a product standpoint has been a significant endeavor.

Another crucial aspect I touched upon during our meeting in London is our technology strategy and innovation direction. We aim to establish a long-term competitive advantage by mastering existing technologies essential to leading the bearing business while also identifying and embracing emerging technologies. To this end, we've implemented a technology radar to anticipate future trends and evaluate their relevance, particularly in the digital and software domains. It's worth noting that the pace of change in digital and software far exceeds that of materials and steel, requiring us to remain agile and responsive.

Additionally, I must emphasize the importance of our diverse team and cultivating a culture of psychological safety. Building a robust R&D team is foundational to our success. Without the right people and culture, other efforts may not yield the desired outcomes.

[00:21:40]

Ken: Very much so. I love your words relative to that expansion of R&D. I'm curious; the industry is really at an important crossroads, as you said, just the rapid digitalization of so much, but reshoring the energy transition, labor challenges, and culture, as an example. What are some of the key trends that you're watching relative to SKF in the future of your industry?

 [00:22:05]

Annika: Over the past few years, resilience has emerged as a key topic amidst the uncertainties of the world and the unpredictable behavior of markets. Building resilience in our supply chains and businesses has become increasingly important. For us, this has materialized through regionalization efforts aimed at strengthening our supply chain and manufacturing value chains closer to customers geographically—a significant trend, I would say.

Another significant focus area is sustainability. Sustainability, along with digitalization, drives both our internal behavior and presents significant opportunities. We discussed some of these earlier from a business perspective. Digitalization not only allows us to introduce more digital products but also brings forth new competitive challenges, making it a double-edged sword.

Moreover, the rise of AI over the past year has had a significant impact on us. Generative AI now plays a more pivotal role in many customer-centric activities and internal efficiency efforts. These are the main trends I wanted to highlight.

[00:23:30]

Ken: All small, inconsequential trends.

[00:23:33]

Annika: Exactly. Easy to manage.

 [00:23:36]

Ken: Exactly. This is precisely why SKF reached out to someone of your caliber and talent in the industry, I'm certain. Another aspect you brought, which I deeply appreciated, was your passion for advocating diversity and inclusion. Could you share some insight into your activities in this area and how you incorporate it into your everyday leadership at SKF?

[00:23:57]

Annika: The way I approach this in my everyday leadership is by dedicating a significant amount of time to discussing why diversity and inclusion are crucial. I firmly believe in leading by example, so I've implemented key performance indicators (KPIs) for all managers in my organization regarding diversity within their teams. These KPIs serve as personal goals for each manager, ensuring that everyone is accountable for fostering diversity. It's not enough to set expectations; I also emphasize the importance of understanding the "why" behind these initiatives.

For me, the rationale for prioritizing diversity and inclusion boils down to three main factors. Firstly, it's about achieving better business outcomes. Countless research studies demonstrate that diverse teams and businesses tend to perform better financially. Just like any other aspect of our business strategy, we set solid goals and KPIs to drive these results. Secondly, it's about creating a fair and equitable environment—a fundamental moral imperative. I firmly believe in fairness and equal treatment for all individuals, and I want to ensure that our company reflects these values. Lastly, diversity brings dynamism, enjoyment, and innovation to the workplace. When you have diverse teams that bring unique perspectives to the table, it fosters creativity and leads to more engaging and fulfilling work environments. Ultimately, it's about nurturing satisfied and motivated employees.

As a woman in a leadership role, I recognize that I'm part of a minority—only about 8% of CTOs are women. I'm determined to change this for future generations. At SKF, we've partnered with organizations like the Swedish Science Center for Youth and Universe and researchers focusing on women in STEM fields. Research indicates that girls are just as interested in technology as boys, but societal influences often discourage them from pursuing technical careers. To address this, we're implementing a comprehensive plan aimed at girls aged 10 to 12 in the Gothenburg region to expand it later nationally. Our strategy focuses on addressing influences from parents, teachers, role models, and social media to encourage girls to pursue STEM studies and technical careers. Through these efforts, we aim to normalize the presence of women in leadership roles like mine, ensuring that it becomes the norm rather than the exception.

[00:27:21]

Ken: It's interesting when you think about impossibility. People would think climbing Mount Everest was impossible till somebody did it or- I was listening to Arnold Schwarzenegger's autobiography recently, and he talked about lifting- I believe it was 400 pounds, bench pressing. Everybody thought it was impossible until somebody did it, and then all of a sudden, everybody's breaking records. In some sense, you are establishing the normal in just what you're doing, the fact that you're holding the role, and the fact that you're contributing, and thus, it removes that exceptional aspect. Just by the very act of being in the role you are, you are already a trendsetter and setting that stage further for all the women who come behind you. Congratulations, and you're really doing a great job at what you're showing there. As we wrap up, I'm always curious how you maintain your edge as a leader. Any recommendations you'd like to highlight for the audience?

[00:28:17]

Annika: I would recommend "The Fearless Organization" by Amy Edmondson as a book that has sparked significant discussions worldwide. I've read it multiple times myself and found it incredibly insightful. Additionally, I believe in the importance of staying curious and continuously listening to others. In the midst of daily business operations and the pressures to deliver results, it's easy to become complacent and stop seeking out new knowledge. Therefore, I make a conscious effort to remind myself and encourage others to remind me to stay attentive and open to learning from those around me. There's always more to discover and understand.

[00:28:53]

Ken: It's a great recommendation. I definitely have to take a look at that. Annika, thank you for taking the time to share these insights with us today.

[00:29:02]

Annika: Thank you for having me. It's been a great conversation. I really appreciate it.

[00:29:06]

Ken: I appreciate you taking the time out of what is probably a very busy schedule these days. This has been Annika Ölme, Chief Technology Officer and Senior Vice President of Technology Development for the SKF Group. Thank you for listening, and please join us for the next episode of our Industrial Impact podcast. We wish you an impactful day. You've been listening to the Momenta Digital Thread podcast series. We hope you've enjoyed the discussion, and as always, we welcome your comments and suggestions. Please check our website at momenta.one for archived versions of podcasts, as well as resources to help with your digital industry journey. Thank you for listening.

[The End]