Velkommen til Lørn.Tech - en læringsdugnad om teknologi og samfunn. Med Silvija Seres og venner

Silvija Seres: Hello, and welcome to Lørn conversation. My name is Silvija Seres, and my guest today is hitting a big spike and is CFO at DNV, Det Norske Veritas. Welcome Kjetil.

Kjetil Ebbesberg: Thank you, Silvija.

Silvija: I'll just say a few words about the series so people know what they're listening to, and then we'll jump into our conversation. This is a series of six conversations with people from DNV, that is going to be used as background listening, viewing, or reading at the course delivered by NHH, about sustainability and business. And what we're trying to do is actually look for concrete examples of projects that exemplify that good business is also good sustainability, especially now after corona. And in the year 2021, something really exciting is happening on the business of sustainability. I have actually chosen to have all the six conversations with colleagues from DNV, where I see both very interesting technical projects, technology-related projects in energy, oil and gas, shipping, business assurance, and now applies to areas like health and food, that combine sustainability with technology in a really inspiring way, but also because the whole strategy of DNV is circling around this concept of long term strategy and sustainability, both for the company, the environment and the planet. It's your role now to show us a little bit more about how finance people can think about this in a way that makes sense, both for current business and for future business. Okay.

Kjetil: Okay. I'll do my best.

Silvija: Excellent. So, my first question is always, basically, who are you that what has made you so personal profile in the two minutes?

Kjetil: Yeah, well, I'm a simple boy from the countryside, I'm 49 years old, I grew up in a small community called the Notodden in Norway, which was an industrial, small town, where I quickly learned sort of the importance of industry and building a country like Norway. Hydro was born in that small town. Therefore, also I joined Hydro as my first employer, and I've been with Hydro for more than 20 years and in different roles. After sort of finishing my basic education, I joined Norges Handelshøyskole, NHH, Norwegian School of Economics in Bergen, where I took my degree in Business Economics. And that was sort of the platform for me eventually ending up with DNV now, where I have been for less than one year as a Group CFO. My background with Hydro is really sort of 50% in finance, and 50% in operational line management roles, where I also spent eight years in corporate management board and different roles. Personally, I'm married, wife and two kids. A son of 22 and a daughter of 18. And I've been living in several places abroad and many places in Norway. So, I have a broad and interesting personal and professional background, I would say.

Silvija: I have to ask you about hydro. You guys were the company that managed to make aluminum sexy, because of a very strong renewable profile as well. Just say two words about this company. 

Kjetil: Yes. Well, Hydro was born based on Norway's energy resources, so it's really about the hydropower in Norway, which first all were created, produced fertilizer and new advanced technology at that time, which has later developed and evolved then Hydro has really started many of the today's important industries in Norway, where Hydro was a pioneer including the oil and gas business and also the light metals and aluminum business. So, in recent years Hydro has sort of gone from a very diversified portfolio to become a very focused energy and aluminum company. And the story around aluminum is quite simple. It's a very light material which in the right applications can save a lot of emissions. For instance, when building cars in aluminum, it is a very recyclable material that never loses its properties, it doesn't corrode the same way as steel for instance. It has very strong properties in terms of strength and shock absorbers and so on. So, it makes it very useable in many such applications as automotive and it is during the recycling. It is only consuming 5% of the energy that you need to produce aluminum as the primary from a mineral of bauxite. So, it is extremely energy efficient in the terms of recyclability and reuse. But of course, the disadvantage with aluminum is that you need a lot of energy to produce this the first time. So, Hydro has an advantage because all the energy that is used to produce aluminum out of Norway is based on renewable energy. And therefore, also the Hydro-produced aluminum has a very competitive footprint on co2 compared to the average or the worst sources around the world. 

Silvija: That's a really interesting background that Norwegians are perhaps not appreciating enough. The fact that Hydro is a company that has used our kind of heavy tech experience, add some unique natural resources to create several new industries. But they're also very important in terms of all these new sustainability goals that we are discussing. Fertilizers have another aspect but are super important for feeding the world.

Kjetil: Exactly. And I think the next wave now could be in the battery technology where I think Norway has a lot of processing competence in place, we have again, very clean energy, and battery production is energy-intensive. And I think the many reasons why battery production is in the natural environment within Norway and the infrastructure. The need for batteries is going to increase significantly in the future and Europe needs to have a production capacity inside Europe. I don't think that European producers of applications that require batteries will be happy to be dependent on other regions in the world for its critical components like batteries.

Silvija: Going from one company that works a lot with tech and sustainability, which is Hydra to DNV, which also kind of has its strength from the Norwegian historical advantage, which is in the space of the sea and then going from everything maritime, to energy, oil and gas, which in Norway is very maritime. And now digital. So, I mean, you're a relatively recent hired new CFO about a year, I think a year and a half now. So why did you choose the DNV?

Kjetil: Well, I need to work for an employer who has strong integrity who has a strong set of values and whether its competence in you know, in the platform of the company, I think in many ways as you indicate there is a strong similarity between Hydro and DNV in that respect. So, I really found similarities which was a foundation for me in further developing myself and my professional career. And that was sort of the starting point for me. And then once I got to learn and know the company from a little bit from the inside, spoke with the CEO, and got the feeling for how things really were done. In DNV, my admiration of the company just increased and it was easy for me to sort of accept being invited in here. And after being here for a little more than one year. I really am happy about my choice, it is really a good company as a strong company, it's really a future-oriented company, which has developed over many years, you know, a position, which I think is a platform for taking care of our purpose in the new world, with all the transition going on the digital technology, transitions on energy, I think it's at the core of what DNV is equipped and capable of resolving and helping our customers and tackle their transformations in this field. 

Silvija: Yeah, so very cool company. And what I think is that you're also a very cool finance guy. Because I think very often, I still find the finance world kind of divided. And there are still people who believe that they're their job, whether they are a stockbroker or a CFO, or is simply to optimize the top and the bottom line. And anything they don't do to just optimize is a neglect of their duty to their shareholders. And then I think other people can think about the triple bottom line, as a part of their duty, both to the company to themselves and the world. When you talk about the cost advantages of creating aluminum in Norway, or by digital inspections of ships, I think you think about more than one dimension, it's not just financial. I'd like you to kind of explain a little bit about how this works related to all the things you've been trained to do, which I think are very one dimensional financial.

Kjetil: Yeah, I think that as CFOs, we need to take care of business long term. I think we need to really understand what are the long-term drivers impacting the companies and for us, as it was for Hydro as in DNV really, we're in the midst of a lot of transformations. And we take active roles in that. By doing that, we are, first of all, we are living our purpose, which has been the same purpose more or less for more than 150 years. Since 1864. When the company was established, it's been to safeguard life, property and the environment. That is the reason for us to exist. We are as a commercial organization, of course, we also need to take care of our bottom line, and therefore also our top line. But I think that by understanding our purpose, and how we actually make a difference, how we can be something to our customers, where customers prefer to work with us, as opposed to working with others, we can also serve our bottom line and the commercial aspects of the organization. So, to me, a very clear cut. It's not only about being a good citizen, although, to me, personally, and I think to all employees in DNV that is also a very important aspect. We need to do what is right. But we also need to do what is right in a way where which serves the purpose of the company long term.

Silvija: this has to do with strategic work as well. I don't know if you could say a few words about how does the DNV incorporate this into their strategy? 

Kjetil: Yeah. So obviously, our strategy will always be founded on what we believe about the future, what will be the development around us which we don't have any control over. How are we adapting to those developments in a way where we take positions to the better for obviously for society, but also to the better for our customers and to the better for the company. We have recently had a process and launched our next five-year strategy which has been based on understanding the different segments we are operating in and what are the key influential drivers within those segments.

Silvija: Sorry. You're being very professor-like now. So DNV is working in segments like shipping or energy or oil and gas, which is now a part of energy. Help me.

Kjetil: And business assurance, where we are offer certification and management systems in one part, but also supply chains of product assurance within many different industries. We’re also operating in a software house, where we have 1000 employees, basically just working on developing and supporting customers with software solutions that we are selling. And we also have established a new business area, which we have called accelerator where we have placed sort of the call its embryos in our organization which we intend to grow strongly where we want to build the future legs of the future DNV, which basically is relating to health and digital health and assurance, we think there's massive growth potential in health. And there is a significant role for us to play in that space. Not only Norway and Nordics but globally, and also in the cybersecurity area, which is based upon our technical knowledge. Now our knowledge is about operational systems, and also information systems, supporting our customers within maritime energy and the other industries that we are operating in. So, to sort of making, it a little bit less professor-like then, in our energies area we have now grouped together with the renewable part and the oil, traditional oil and gas part into a new business area. Which in combination, shall enable our customers to tackle the transition into the future energy systems. So, it's not about either-or, it's about how to bring the world from where we are today, to the future, where we need to be less than less and eventually, zero carbon-based. But this is not happening overnight. And we need to sort of enabling this transition to be fast, it's about an hour verifying new technologies, whether it's the wind technology, or solar technology, but also hydrogen and other more advanced and less mature technologies, and that into a sustainable system, which is enabling, ultimately, the world to get secure, safe, and sustainable, and affordable energy in the future.

Silvija: What I want us to kind of go into is DNV is a big company, 12-13,000 employees, 100 countries in the world, lots of cultures, lots of different perspectives, on very deep tech skills, and markets. And what really excites me is that I have the impression Kjetil, that DNV is taking a systemic view on many of these areas of development. When you talk about energy, it's not just, okay, here's a battery, here is hydrogen here is floating wind and floating sun, see what you can do with it and how we can make money on it. But it's more like, how do the value-chains look like in the future? How can we optimize the markets? How can we help people sell or buy this new clean kind of energy, and it's the systemic platform business platform view seems to be super interesting. That's my first half. And the second half is the assurance bit, where DNV is now in a position to define what good looks like, basically explaining what this should be like, and what it perhaps even should be regulated as, because nobody knows. We need to help people who are developing policies and laws and national growth plans, to understand what the future growth for the next looks like. It's that kind of systemic, and future-oriented development that I find very fascinating, not related to one technology, but whole areas of technology, but super difficult to predict and to manage financially.

Kjetil: Exactly, and there are many variables and many of those variables, we don't have a clear answer to today. We know approximately what the world needs in terms of clean energy, but also in terms of that we need energy for a purpose, and a future energy system must be able to serve the purpose of the needs of the energy, and how to do that in a way where you are delivering on both expectations or requirements. Ultimately, it needs to be done, financially economically viable also. It is about understanding how these different elements play together in a way where we can deliver solutions that serves the needs of the future. And there are significant differences between stationary needs, the mobile needs, and there are differences between needs in the different parts of the world. For different industries that are different needs, all these things need to sort of being put together into a system, which ensures both the sources of energy and but also the supply and the delivery system, the grids, the optimization tools to make sure that this is also economically viable. For the users, for the providers of the energy, and for the society as a whole. And then there will always be a role for regulators also to come in and to facilitate either permanently or at least on a transition basis, whether it needs to have some sort of oil in the machinery to have new solutions, you know, comfortable with and get the grip anyway.

Silvija: It's so interesting as well. I'm going back to this idea of the triple bottom line, basically people planet profits in some order. But you're also planning on making money in new ways. I sit on a few other boards, where the board is very much unhappy with any business proposal that involves this so-called ARR, the Annual Recurring Revenue, to the point where the people who are experienced investors say this seems like a casino game to me. Because it's very much based on optimism and a vision of a future where money is made based on these platforms. And we don't know when the customers are coming, or the users, but we know they're coming, etc. But you seem to be able to make both, you make money the traditional way, and you plan to make money this flat, I just want you to talk a little bit about this old business and new business, and how do you manage both, from the same company? 

Kjetil: Yeah. DNV consists of 12,000, very smart, highly competent people. And we could sort of sell the services or those people by selling hour by hour. They apply their services by direct advice. But if we can bring this competence into a system, where we actually can provide much broader use of this competence, applying this competence, without having to sort of spend every hour together with the customer, obviously, then we are delinking the value of our services from the hour spent serving the customer in a way. By putting this into software, putting it into systems where we can continuously deliver services and continuously utilize our competence for the better of the customer. I think there is scalability in all the competence of our 12,000 employees, which is to the benefit of, obviously, the customers, DNV, and society as a whole. And I think that is sort of what you're referring to in terms of understanding how to scale up our inventions, our knowledge, in a way where we are getting more recurring revenues without selling hour by hour. And many companies have been, in the forefront of developing business models, there are lots of talks about the high techs and Silicon Valley. I think we have a lot to learn from them. I think that we can do a lot of the services we are offering today, we could offer differently tomorrow, where we would use a lot fewer resources to provide the same value to the customer or provide much more value to the customer. By doing it and thinking smarter in the way we are actually delivering the services.

Silvija: So, it's going from being very much service-based to being productizing that service in a digital framework, but also developing the customers so they are willing to buy the digital alternatives. I don't know if you can talk a little bit about that. For example, we have created the digital ship inspection product. How is the transfer from the physical to the digital and where does it work best? 

Kjetil: No, no, I think when we are doing our job remotely, we can deploy the competence in much more real-time. We can be available much faster without necessarily scheduling in a long time and advanced like, we have to when we are needed to be physically present. By having advanced tools, we could perform such surveys in an equally or even better way, by being able to have the benefit of being physically present with the right tools and is available with the tech with the competence at the right time in full. I think there is additional value to the customer from that. Until they can replace physical presence altogether, I think that will take time because we are talking about people and relationships with people. But for me, it boils down to trust. And as a company, we are 100% dependent on trust from our customers. And when they trust us, when they trust our tools, we can do a lot more of sort of the traditional work and services in new ways and in remote ways.

Silvija: I think as you said, there is access to a broader team, more cross-functional, and it's more timely, perhaps. And it allows you to use also all the new tools, have machine learning and data-rich analysis, etc. But customers still need to be convinced that this is a better service. Do you think that the last 12 months and corona have had the helping hand there? 

Kjetil: I think we have been forced to think new ways during this last year. And I think we have surprised ourselves; I think customers have surprised themselves, the whole world has been really a bit sort of positively surprised by how well we can manage without being physically present. I think that has been an excellent sort of kickoff to further development in this area. I think there are lots of savings' opportunities not only sort of cost wise, but also for the planet, by not having to be physically available than travelling around. Wasting so much time and valuable resources spending time on the road or in the air from one point to another point in the world, when we can be equally or even better accessible by not travelling. I think that such a pandemic has been, I wouldn't say a lifesaver, but that really has triggered a lot of understanding of how actually we can operate globally without physical presence.

Silvija: So Kjetil, we've also been talking about sustainability, but in a perhaps different color than what people expect when they hear the word sustainability. People talk about sustainability and think about climate and nature, diversity and carbon capture and clean waters. I describe that as the green sustainability. And then there is the red sustainability, which I think is all about the society and anti-polarization and equality and fairness. And then there is the blue sustainability, which is about economics and the necessary innovations for the future. We've talked most about that kind here. I still want to hear you a little bit on the red sustainability. Because once you manage to convince people that, let's say, there is a real transition happening in their field of work, and there are new tools that they simply have to start using a new service that they simply have to start delivering. Or in spaces like energy where there is this really quite a sudden transition, I think for an oil-driven country like Norway, to renewable, people are scared and worried. They're worried about their future jobs; they're worried about their company's identity. How do we manage that? 

Kjetil: I think it's a very interesting question. Silvija. It's a huge task to embark on, I think. All through throughout history, we have changed, but we have changed at a much slower speed. Although the first Industrial Revolution was maybe felt like a high-speed revolution or change at the time. But you know, the speed of things now, it's meaning that changes happen faster than people can sort of readapting or adapt to it in a way and the transfer of values are posing a real threat to stability to a fair share of our value creation among individuals, I think the world is moving towards more and more people having better lives. But also, there is a risk that more and more, there will be inequality among people, and I think we see definitely see that in the western part of the world happening fast. So that is a challenge, not necessarily to the financial stability as much as it is to the stability of social, economic and political stability, which all hangs together, ultimately. You need to find solutions to that. But if you're thinking big, we have enough renewable energy to go around for the whole world to have a good life, we just have to capture it in a way that enables us to utilize that. But it's not only about energy, but it's also about a good life in terms of having people finding purpose in life, and that and sharing the values of our natural resources, and so on. So, there are many aspects here political aspects and financial, social, economic aspects that need to be played hand in hand.

Silvija: I think finding that purpose is going to be a very important part of what we're doing with lifelong learning. Because I think it's really important that everybody feels invited into this exciting future, and it will entail a lot of learning, and we need to start enjoying the tour, we need to convince each other to enjoy that. And that brings me actually to your education, Kjetil. You're an economist, through and through, from what I can understand. And the models that you've learned at the Norwegian School of Economics, I think might not work 100%, at least for this new economy we are going into, which is why I brought in this whole idea of annual recurring revenue and exponential growth and digitally driven economies. So, I would like to ask you, how should your fellow CFOs and other financial managers think about sustainability, but also about the digital future?

Kjetil: I think as you say, my background is in finance, but for half my career I've been working in operations. I think that it's the advice I would give to other CFOs, to seek other experiences beyond sort of the pure financial line. Be open and be curious about how things are connected in the company, but also in society, and to be curious about what the future might bring us. And none of us can tell us tell for certain how it's going to be like, but I think we need to be open and flexible to adjust to whatever the future will bring. I think the better we are in a sort of understanding that and the better we are in having the adaptability embedded in ourselves and in the organization, the better we could utilize opportunities that arise and avoid falling into the pitfalls of risks. So, if I should advise my fellow CFOs, it would be exactly that. Don't be stuck on sort of the traditional ways, but the open listening to new ideas, new perspectives, and so many good people can give us as CFO's a better understanding of the world. We need to embrace that and foster such sort of open communication and learning in the other organizations. 

Silvija: If I'm to expand that, I asked you what you believe are the necessary future skills. I really am impressed by how you, but actually the whole of the organization believes in this cross-functional future so you might be a super established CFO, with all the financial background you might need, but you still feel that you need to learn about technology, about digitalization, about the business of sustainability, etc. So how does one get going with this cross-functional way of learning?

Kjetil: It's a good question. It boils down to how you as an individual seek experience, obviously, then it's a matter of how the company are putting that on their agenda and how important that is. But I think individually also. I learned a lot from my kids, they are much younger than me and much more skilled in areas where I need to learn through others in a way how things are working. And they make fun of me from time to time, and that's okay. I mean, it's part of the learning that you are stepping into areas where things are unknown. That's what brings you that learning ultimately. I think to be humble and curious, that's the way to go about it. And as a company, we need to facilitate that. I think DNV has been excellent in how it has placed digitalization and digital development of digital skills among its employees. I'm not only talking about the few that needs to execute that, but really all employees need to raise their competence in this area. I think that is really important. That's what we can do as a company. And then individuals need to sort of jump onto that and be curious and be willing to learn. And this goes fast.

Silvija: When it comes to incentivizing the organization, to do more of what's good. Some of the stuff that we talk about, developing services that are building the sustainability of the world, etc., whether it's the transition to untested energy. Not necessarily untested, but let's say we're working with energy sources and energy models that are still not as efficient at scale as profitable at scale as the established old stuff. How does the CFO, or even the regulator creates the will to start doing the new stuff, even though the old stuff is more profitable?

Kjetil: It's a good question. It's very tempting to always auto-optimize short-term on what you have at hand. I think the only answer to that is you need to be willing to sacrifice to get long term value. Then it's a question of understanding enough what you are sacrificing what you're getting in return. No sort of big revolution or change has come without taking risks, I think we need to be willing to take risks. It's really the sum of the knowledge we have as an organization who can bring forward the basis for making the right decision in this area. And that's why I think, as the CFO, I'm very limited in my experience and my knowledge base compared to the 12,000 employees we have in DNV. But together, we are processing a lot of the leading knowledge in our fields. I'm sure if we have the right processes, we will come forward with the basis for making the right decisions long term. Then it's a question of being close with the board so that when we make decisions, which may have a negative impact short term, we bring along the board to see and back up that this makes sense longer-term.

Silvija: You talk about something that I think is perhaps one of the hardest concepts to communicate, but also the most important that needs the courage of long term. You have to be a big optimist, but also to have a lot of confidence to be able to believe that you'll be still there in that job 10, maybe 20 years from today. Be able to manage this process for long enough and still understand both the goals. That's a very big pedagogical task. And it's a very big strategic task. I think it shows also the value of this continuity in companies, in politics. Because if you're only thinking four years at a time, it's really difficult to have this courage of long term. So how do we create more room for long-term-ism?

Kjetil: Another good question. I'm lucky enough now to be part of a company that is owned by a foundation. And the foundation has only a long-term view. We are a commercial organization, and we need to make commercial sense. We need to build financial strength for us to be able to live our purpose long term. But we don't have the sort of pressure from the stock market, which potentially could tempt you to make shorter-term decisions on what you choose to do, but I've been working most of my career in a stock-listed company, still with a very long-term view. I've been looking at and experiencing from role models, and the founders of Norsk Hydro were really thinking big, in a small country was really taking a huge risk, and that has been sort of a part of the DNA for the company. So, I think that is part of what we need to do also here to have role models to lean on and to there to think longer-term when, whenever there are forces around us who want us to think the shorter term in a way.

Silvija: Very good. So, towards the end of our conversation here, I'm actually going to refer to your recommended literature. And I don't even know if they're albums or if they're a book. So “Bruce Springsteen: Born to Run” and “The Ride of a Lifetime”. What are they? 

Kjetil: It was simple enough. I got the question from you. And I listed two of the more recent books I've read. I could choose a lot of other books but to keep it short, Bruce Springsteen has written his biography. I like rock music. One of my favorite things to do in my free time is to go to a rock concert and to listen to music together with good friends who share the same music. I've been to many Bruce Springsteen concerts, I like his music, I come from a small town and industrial town like he's singing about. So, I can easily identify with a sort of lyrics. But even more so I think he is a good person, he is a complex person, he has been very open in his book about his sort of struggles. I think he is a good role model for many people in terms of how to live lives and how to deal with dilemmas. I think from a political point of view, he has had a massive influence in terms of speaking against the world, those I believe in the US who have been leading the country in the wrong direction, coming back again, to what we have spoken about. He is very close to Barack Obama, a president which I rate very high. He's really been a voice for good in the US. Democracy in a way. So that's sort of the personnel like, and I liked reading his book and listening to his music. And the other book I mentioned is Robert Iger, he was the previous CEO of Disney corporation for many, many years and he has sort of written a book where he explores his time with Disney, through all the changes that Disney has gone through. They have been unsorted in the middle of the digital revolution within the entertainment business. I really enjoyed reading that book basically from a business point of view. Understanding how one person at the top of an organization can make a big difference, choosing the right strategies, choosing how to implement the strategies, and making a difference. Also, all the personal struggles, all the dilemmas he was faced with, all the failures he went through as a leader. Very inspiring from a professional point of view. 

Silvija: Very cool. I think I know what to add to my Audible. Kjetil, thank you so much for spending your time with us here. It was very inspirational and very educational. Thank you. 

Kjetil: Thank you Silvija, thanks for listening to me.

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