 from theCUBE Studios in Palo Alto in Boston. It's theCUBE, covering IBM Think. Brought to you by IBM. Hi everybody, welcome back to theCUBE's coverage of the IBM Think 2020 Digital Event Experience. My name is Dave Belante. Manish Chavla is here. He's the Global Managing Director for Chemicals, Petroleum and Industrial Product at IBM. Manish, thanks so much for coming on theCUBE. How you doing out there in Saratoga, California? All good? I'm doing great. Given considering everything, they're all full of us. Yeah, I mean, right, it's tough times, but look, we can still, you know, have a smile every now and then, right? I mean, I know it's very tough times for a lot of people and our hearts go out to everybody there. So, I want to start off. One of the areas that you're steeped in is the energy sector, you know, generally, people are very much concerned about oil, price of oil, you know, drop below, you know, zero went negative, paying people to take oil. Now, I understand that was a technical, but still, the prices are depressed, people are concerned about credit risk and the like, but what's your take on what's going on in the energy sector right now? Yes, so I think the companies that have taken on a lot of debt and don't have a stable operating conditions will naturally suffer through this in the oil industry, clearly until the prices come back, which I expect will be as demand picks up, that could be several months or two more than that. As we can imagine, we'll see the more stable companies, the more, I'll say, companies that have a stronger balance sheet survive through this, for sure. In addition, you know, the other aspect of it is, of course, they're all doubled down on making sure the oil companies and the oil field services companies are doubled down on productivity, conserving cash, as well as considering how they accelerate, in my view, their transition to more, more profitable areas of growth as demand comes back. Muneesh, is there a silver lining here? I mean, in normal times, you know, oil price drops, it's like a tax cut. I know the government, the United States government anyway, has been beefing up its strategic reserves, it has a history of buying low. Is there any good that you see coming out of this? So I think the good that'll come out is surely that the stronger companies will come through more successfully, the companies that have taken less risk, the companies that have invested in more stable operating platforms. And at the end of the day, I think the companies that have taken a more future proof strategy for their business portfolio. So whether you take a BP, for example, or a shell that are actively working towards supporting the energy transition, I think that'll be the, you'll see an acceleration of companies starting to think of where they need to go in the future to support the energy transition. I think the silver lining at the end of the day will be that as is sometimes said, oil is a very precious resource, therefore should not be burned. And so the question at hand is, you know, what do you do with all the oil that's available? What do you build out of it? Whether it's petrochemicals, et cetera. I think that transition to a more future proof product portfolio and business model will be truly the silver lining. How about the broader industrial companies that you follow? I mean, they were sort of moving down a path of digital transformation, IoT obviously is the big theme within many industrial sectors. What are you seeing in the broader? So I think in the broader base, clearly, you know, supply chains under stress, clearly, you know, demand dropping, prior demand signals, which were sometimes ignored for historical reporting, that is now becoming more important, i.e., a sense and response supply chain. So as you step back and look at the need to maintain business continuities, of course, the highest priority. But as they come out of this, we expect that, and we're thinking of this as the future for industrial sector will be what we would call is hybrid. i.e., supply chains will need to be local and global. Manufacturing will need to be both traditional, as well as additive. i.e., you produce more locally. And in addition, products and services will need to be a combination of digital and physical. And at the end of the day, if you step back, I saw something recently that said, who's leading the digital transformation in your company? Now, the multiple choices were the CEO, the CDO, CIO, or is it, and this option was circled, COVID-19. So if you think of it in simple terms, COVID-19 is creating the acceleration of digital transformation, because the only valid response in my mind, as you look at these different hybrid models, is a consideration of technology being a fulcrum of creating a future-proof platform. So it would seem to me that the financial framework are going to change the notion of how you made money for the last 10 years is not going to be the way you make money going forward. There's likely to be some share shifts. In other words, those that figure out how to be profitable with this sort of new model perhaps could gain share efficiently. And maybe you're going to see some share shifts in the industrial. So what are your thoughts on that? Yes, so companies that are in what we would call essential or critical industries would definitely be the ones that continue to grow. You take a simple example of petrochemicals companies, companies that make plastics as well as chemicals that go into a variety of other applications. Plastics, interestingly enough, is now resurgent. And the reason it's resurgent is it's clearly supporting hygiene, packaging, medical packaging, et cetera, et cetera. You'll see industries that shift that way. Every step back and look at a broader study that was done actually about 10 years ago by Harvard which said the companies that survive a recession, I think it said about 9% of the companies actually flourish coming out of a recession. About 75% take three years to recover and the remainder which I think if you do the math about 17, 18% do not survive through such a recession. Now the ones that thrive through had a dual focus on both the customer experience and customer engagement and shifting to areas of higher value, i.e. thinking of what they should be doing and how they should be doing those things. And secondly, they also focused a lot on operational improvements and whether that's supply chain that's manufacturing, it's whether it's outsourcing, non-core function, it's automating, et cetera. But that dual focus on customer and operations is the hallmark of a successful outcome was what the study determined. So I think that dual focus is what will be the prime hallmark as we come through this. And interesting, now of course, biology sort of got us into this problem. Can technology deal with some of these issues and help us get out of this problem and what specifically is IBM doing in this regard? Yes, so we've identified seven areas of focus as we think of coming out of this crisis and we've referred to those seven areas of focus as being our emerged stronger areas of focus. The ones that I think are relevant are including new ways of working, cyber resilience, thinking of extreme automation and intelligent workflows, thinking of making sure that we are aiding our clients with having more systems that are available on demand helping them create platforms and applications that can work regardless of a location. At the end of the day, we step back, the three areas of focus that we see will be new ways of working and supporting worker working or remote working. Extreme automation when industrial companies come back to work, safe distancing is going to be the norm as well as allowing for the fact that you want to be prepared for the next crisis. Therefore, extreme automation, whether that implementing robots in factories or implementing solutions that guide to worker safety, workers being close together, as well as supporting customer engagement or customer experience as being digital, putting that extreme automation layer through so that the reliance and the ability to operate without a workforce becomes far more important. So I think it's really that acceleration that we expect we'll be able to support our clients with as they come out of this and as they adapt to the next normal. Do you see software robots as being a part of that sort of automation trend for RPA and the like? For sure, that's an important part, especially in back office functions. That would be software robots. And I think layered on top of that, when you apply AI, then you'll have AI augmenting a lot of professionals, whether it's chatbots in customer call centers or technical service centers, or it's a greater increase in automation on processes that could be automated. But then AI would support the rest that can't be simply automated but need intelligent support as well. So if I go back to your Harvard study, the last thing I want to be, if I'm on a board of dustbills is in your 17%. I either want to be in the 9%, which if I'm well positioned right now, I maybe have an opportunity to do so. But if not, I'm in that fat middle. And I really want to be able to come out of this stronger even if it might take a couple of years. So my question is, it seems like companies are going to have to, at least in the near term, potentially sacrifice profitability in order to gain that sort of business continuance, business resiliency that you talked about. Can they have their cake and eat it too? In other words, can they maybe take a near term hit on profitability, but can they ultimately become more successful and more profitable, maybe using data? Data would be one thing. I think the other part of this will using data, for example, to predict demand, to forecast where the puck is going. And the use of data on a monthly basis is going to be inadequate really, right? Getting more capability for real time demand sensing, to create platforms that allow us to allow companies to understand where needs are emerging so that they can pivot their product portfolio accordingly. Collaborating with customers in a far more, I'll call it co-create crowd source way, would create more resilient customer relationship that come out in the future as well. And at the end, I think there'll be also an element around asset-like strategies, which requires partnering with OEM suppliers, et cetera, which then allow data to be the foundation where you can essentially say, I'm using this much of this capability, versus I'm investing in insignificant capital outlays. So when I talk to executives, I'm hearing consistent themes. We very much are concerned about the health and well-being of our employees, getting remote work-home infrastructure going. Once we ensure that they're healthy, we want to make sure that they're productive, getting staying close to customers for sure, making sure costs are in line because there's so much uncertainty. But not a lot of time right now is being spent on sort of the long-term strategic aspect of the organization that maybe will come back slowly. So what advice are you giving to organizations right now in this situation? Yeah, so I think the biggest focus would be, as I think Winston Churchill said this, never based a good crisis. So considering that as being the backdrop, these are the times when recognizing what would be the sources of value. Like I said before, making sure the dual focus is kept in mind, apart from, of course, employee health and safety and engagement. Then in addition to that, keeping in mind that the localization of supply chains will need to be a big topic, keeping your, as they say, powder drive for the opportunity to acquire and merge. Would also be an element, start considering how you reconfigure your supply chain. And at the end of the day, another important element would be making sure that you are, you, as you come out of this, don't lose sight of sustainable development, as well as you go back to think of the fact that since digital will be an important fulcrum to come out the other end, apart from the other elements we talked about, that you start to prioritize those digital transformation programs that focus on both operations, and supply chain as well as customer engagement. And that becomes a key focus and no longer just driven by, let's say the straight business case, but also assisting and aiding the resilience to come out and deal with future crises as well. So Manish, many of those things that you just mentioned might have been kind of culturally challenging for a lot of organizations prior to COVID, but in a way organizations kind of get a COVID mulligan or the CEO, you know, the boards of directors might have felt like, okay, we had to make some changes, but we got to be careful. Now, with COVID being such a disruptor, organizations can really drive forward and set up for the next decade. Bring us home. What are your final thoughts? Yeah, I think boards and CEOs have to really think of this in stages and start to, of course, the start of this crisis was not planned, but recognizing that the recovery will occur in stages. So we think of it as a respond, which is where most companies are. The next stage being recover, which is getting started back up, dealing with demand and so on. And the third stage being reinvent, I think boards and CEOs need to start putting perhaps three work streams in place around these three different time horizons and keep that planning in place so that they can effectively work through recovery while they have a separate stream that's focusing on the reinvent, so that they're more resilient and they're more prepared and they are able to take advantage of both the opportunities as well as creating a more resilient company for the future. Many great insight and awesome advice. Thanks so much for coming on theCUBE. Really appreciate your time. Appreciate it. Thank you for the opportunity. You're very welcome. And thank you for watching everybody. We're seeing the pattern emerge where we're not just going to go back to the last decade. We're really going to have to prepare for the next decade, business resiliency and business continuance and flexibility. It's a whole new world, folks. This is theCUBE covering IBM Think 2020, the digital event. We'll be right back right after this short break.