00:00:07 Introduction and Axelle Lemaire’s background.
00:01:44 Overview of Axelle’s new role as the global head of Terra Numerata.
00:02:24 What is digitalization and its impact on companies.
00:03:50 The evolution of digitalization and the role of startup culture.
00:06:16 Challenges faced by startups in today’s world and the importance of the go-to-market strategy.
00:08:00 The role of investment banks in the French tech scene.
00:09:25 Challenges of supply chain network effects for tech startups.
00:10:48 Advantages of data analytics and transparency in global supply chain.
00:12:00 Negatives of digitalization and increased fragility of systems.
00:14:01 Changes in IT department governance and risk management.
00:16:00 Embracing non-zero risks and the importance of smart prioritization.
00:17:54 The challenges and drawbacks of password rotations.
00:18:17 Digital trends for the future and the impact of AI and machine learning.
00:20:02 Inventing new use cases for machine learning in various industries.
00:22:45 Tech for good: utilizing technology to create positive impact on the environment.
Summary
In this Lokad TV episode, Kieran Chandler interviews Axelle Lemaire, former Minister for Digital Affairs, and Joannes Vermorel, Lokad founder. They discuss digitalization, the role of startups, and the importance of strategy, mindset, and culture. Lemaire emphasizes digitalization as a transformation tool for businesses, while Vermorel notes that funding is no longer a major issue for startups. They agree that the true potential of data analytics and supply chain optimization can only be realized at a global level. The conversation also touches on IT security, embracing risks, algorithmic developments, and “tech for good,” emphasizing the positive impact technology can create.
Extended Summary
In this episode of Lokad TV, host Kieran Chandler interviews Axelle Lemaire, former Minister for Digital Affairs under François Hollande’s government and current Global Head of Terra Numerata, and Joannes Vermorel, founder of Lokad. They discuss digitalization, the role of startups in the digital industry, and the importance of strategy, mindset, and culture.
Axelle Lemaire has a background in government, serving as a Minister for Digital Affairs between 2014 and 2017, and as a Member of Parliament representing French people living abroad in Northern Europe. She has contributed to the development of digital policies for France and authored a parliamentary report on Europe becoming a digital power. Lemaire now serves as the Global Head of Terra Numerata, an open global platform and ecosystem network of technologically advanced and innovative companies that work with Roland Berger, a strategy and transformation consulting firm, on various projects for clients.
The discussion begins with an overview of digitalization, a topic they have addressed in previous episodes. Vermorel points out that companies in Europe and North America have been digitalizing for decades, with few still relying on paper records. However, the crux of digitalization is not merely replacing physical records with digital ones but rather seizing the opportunity to reinvent and rethink business operations, leveraging computer and networking capabilities for greater efficiency and competitiveness.
Lemaire adds that digitalization has evolved over time, with initial efforts focused on dematerializing processes and documents, particularly in the public sector. The next stage involved integrating e-commerce into traditional brick-and-mortar businesses, followed by the growing importance of information and the power of social networks. In all these stages, the emphasis has been on change and how it is shaped by strategy, mindset, and culture.
Regarding the role of startups in the digital industry, Lemaire acknowledges the vibrant marketplace and the numerous startups promising to revolutionize the digital landscape. She suggests that the stakes are high for these companies, as their success relies on their ability to adapt to and drive change, not only in terms of technological innovation but also in terms of mindset and culture.
The discussion begins with Axelle Lemaire explaining how digitalization is transforming business models, turning traditional industrial companies into service-oriented platforms that operate within open ecosystems. This transformation requires specific training and an understanding of startup culture, which emphasizes testing, learning, and collaboration. The main challenge for startups nowadays is their go-to-market strategy, as it remains difficult to work with large clients and to scale up pilots or proofs-of-concept to be applied across different business departments.
Joannes Vermorel agrees with Lemaire and adds that funding is no longer a major issue for startups. He cites the example of Station F in France, which houses several venture capital firms and provides startups with significant funding. The public investment bank in France has played a major role in this development, investing alongside private VCs and helping to push the startup scene forward.
Vermorel then discusses the challenges faced by his company, Lokad, in scaling up pilots for supply chain optimization. He explains that supply chain problems are inherently network-oriented, and small-scale pilots often fail to demonstrate value due to this complexity. Conquering large companies is difficult, as they operate in many countries and require localized solutions.
Lemaire adds that the true potential of data analytics and quantitative supply chain optimization can only be realized at a global level. Starting a pilot at a local level may not take full advantage of the potential impact of integrating such technologies.
The conversation then shifts to the potential negatives of increasing reliance on digitalization. Vermorel acknowledges that digital systems can introduce fragility and security risks, using the example of ransomware attacks that spread rapidly through large companies in 2018. He suggests that companies need to take action to make their systems more resilient.
Lemaire agrees and notes that there is now greater awareness of cyber risks than there was five years ago. Companies are becoming more willing to invest in protecting themselves, and IT departments are playing a more significant role in ensuring security. However, the challenges of scaling up pilots, working with large clients, and addressing the potential drawbacks of digitalization remain ongoing concerns for businesses and startups alike.
The conversation revolves around digital technology, embracing risks in a digital world, algorithmic developments, and the role of technology in creating positive impact.
Firstly, the interview explores how IT departments have transitioned from merely saying no to everything to becoming a strategic asset within organizations. IT departments now work more closely with innovation departments and business units, leading to quicker deployment of solutions.
The discussion then delves into the concept of risk. Axelle Lemaire asserts that leaders need to understand that zero risk does not exist in a digital world. Joannes Vermorel adds that embracing risk implies smart prioritization of investments and mitigation strategies. For instance, the idea of perfect demand forecasts in fast fashion is wishful thinking. Instead, companies should adopt probabilistic forecasts that accept a certain level of risk. This involves prioritizing the most impactful problems and addressing them accordingly.
The conversation also touches on the topic of IT security. One example is the debate around password rotation, which is now considered harmful in some cases. Forcing users to change their passwords frequently can lead to unsafe practices, such as writing down passwords on easily accessible notes.
Joannes Vermorel agrees with Lemaire, emphasizing the importance of inventing new use cases for technologies in areas like supply chain management. He shares an example of a fast fashion CEO who expressed interest in using technology to predict the genesis of new bestsellers. The goal is not to replace designers, but to help them focus on the areas that will have the most impact on their business.
Lastly, Axelle Lemaire highlights the trend of “tech for good,” which involves using technology to create a positive impact on the environment and society. By finding the right use cases, technology can help mitigate negative externalities and generate positive outcomes. For instance, leveraging technology in the fast fashion industry to produce locally and according to demand can reduce overproduction and lessen the environmental impact.
Full Transcript
Kieran Chandler: Today, we’re going to get her views on the topic of digitalization and understand how in her new role, she is bringing together both startups and technology companies alike in order to bring them together in what is an increasingly more competitive digital world. So, Axelle, thanks very much for joining us today.
Axelle Lemaire: Pleasure.
Kieran Chandler: Perhaps you could start by just telling us a little bit more about your background. It sounds very interesting and very varied.
Axelle Lemaire: Yes, I did work as a government minister between 2014 and 2017 for three years in charge of innovation and digital affairs, digital policies for France. It was an extraordinary job at a moment when the world was discovering the power of startups and how digital innovation would transform business models. Before that, I was elected as an MP, a Member of Parliament, to represent the French people living abroad in the north of Europe, and this is when I wrote a parliamentary report on what Europe would need to become a digital power.
Kieran Chandler: And now you’re working as the Global Head of Terra Numerata. Could you tell us a little bit more about that as well?
Axelle Lemaire: Of course. Roland Berger is a global consulting firm specializing in strategy and transformation, German in origin but very international now. Terra Numerata is a sort of open, global platform, an ecosystem network of companies, mainly very technological and innovative companies we work with on projects that we deliver to our clients.
Kieran Chandler: Okay, great. And as always, we’re joined by Joannes. Today we’re talking a bit more about digitalization. It’s a topic that we’ve spoken about in a few previous episodes, but it might be nice to have just a quick overview of what digitalization is.
Joannes Vermorel: It’s interesting to note that companies, at least in Europe and North America, have been digitalized for decades in a way. I mean, there are very few companies that are still using paper trails. For example, nowadays invoices, payments, and records all live through computers. But they have been digital for decades. Yet, the crux of the change is whether companies just digitalized what was the physical paper trail or did they take the opportunity to reinvent themselves with computer capabilities, networking capabilities, and really rethink how they operate. I believe the crux of digitalization is not thinking of digital capabilities as just bookkeepers to record your stuff, just like you were doing it with papers, but slightly faster and less error-prone. Instead, it’s to completely rethink how you do things in a way that is vastly more efficient and vastly more competitive.
Kieran Chandler: And you sort of mentioned at the start, Axelle, that you worked a lot with startups. I mean, it’s a really vibrant marketplace now. There seem to be new startups every day, promising to completely revolutionize the digital industry. What’s your take on that?
Axelle Lemaire: Well, in the history of digitalization, I agree that we’ve come to a point where it’s not only about these wonderful startups, but also about change that depends on strategy, mindset, and culture. Digitalization, years ago, still meant dematerializing processes, documents, etc. Even in the public sector, in government, you would think of dem
Kieran Chandler: E-commerce has increasingly become about how a physical business can also have an online dimension. It’s also about information and the power of social networks. How, as a citizen, government member, or business person, do you integrate that dimension? Maybe by introducing a collaborative work tool for your company?
Axelle Lemaire: Now, digitalization is really about transforming business models. A classic industrial company has become a service-oriented company, a platform providing services thanks to an open ecosystem. This can only happen if people receive specific training, understand the startup culture, test and learn, and accept that it’s right to fail. It’s probably more collective and collaborative. So that means injecting that new culture within larger, complex organizations, which I think is the biggest challenge. The startup scene is vibrant in France and the rest of the world as well. We’ve reached a point where funding is not so much a problem anymore. The main challenge for startups now is their go-to-market strategy. It’s still difficult to make them work with their big clients all across the world, to transform their pilot or proof-of-concept on one use case into a potential application for all the different business departments, and to really take advantage of the potential of technologies to help with that transformation of the business model.
Kieran Chandler: What are your views, Joannes? Ten years ago, you were one of these little startups. Now you’ve grown up a bit bigger and are located near Station F, which has plenty of startups as well.
Joannes Vermorel: I completely agree with Axelle. Funding used to be a big problem, but not so much anymore. At Station F, which is 200 meters from here, there are half a dozen VCs with their own offices on site, and there are dozens of startups with direct access to VCs who have significant funds at their disposal. Collectively, we’re talking about several billion euros. When I started Lokad 11 years ago, I think the entire yearly budget for French VC funding was something like half a billion euros. The public investment bank in France, Bpifrance, played a big role because it fueled the investment scene and co-invested with private VCs, including foreign funds that were initially skeptical. It really helped give that push. Regarding the transformation of a pilot, one of the biggest challenges we have in supply chain is that it’s all about network effects. In supply chain, the naive resolution of problems mostly doesn’t solve them but displaces them. For example, if you have a retail network with plenty of stores and you decide to focus intensively on one store for inventory allocation, that store may run smoothly but at the expense of the other stores. So you’ve solved a problem in one place but created problems in another. That’s what supply chain is about: whenever you allocate inventory, there are network effects to consider.
Kieran Chandler: In one place, the same inventory can be missing from another place, which for Lokad makes the problems even more complicated because small-scale pilots tend not to work at all. Precisely due to the fact that supply chain problems are all networking problems, and you cannot really locally demonstrate the value of what you’re doing. Nonetheless, the problem is the same. We were struggling to conquer larger companies because they are complex, they operate in many countries. We’re still doing the venture idea for turnover outside France, but we don’t have a physical presence in many countries. We are still only located in Paris, France, which is a nice place to be, but especially in the supply chain field where the environment is complex for a multinational company with different offices around the world.
Joannes Vermorel: Then, what data analytics and the power of quantitative supply chain can bring is actually revealing the reality, its transparency. Once that is revealed, decisions at a more global level can be taken accordingly. But then, if you stick to the lower or intermediary level, you don’t take advantage of the full possible impact of integrating such technologies. That’s why it’s so tricky to start a pilot at the local level when you know that the potential will be fulfilled at the global level.
Kieran Chandler: Can you see any negatives to this kind of increasing reliance on digitalization? I mean, because you kind of look at an example like last year at Gatwick Airport, where the whole departures and arrivals system failed, causing huge delays with flights and people writing flight times on whiteboards, causing absolute carnage. Are there any real negatives to this digitalization?
Joannes Vermorel: Clearly, few companies realize that, but there is some kind of fragility that comes with highly sophisticated digital systems. They can be made very resilient, but it doesn’t necessarily mean that many companies have taken action to make them super resilient. For example, I know that there was a wave of ransomware in 2018 that impacted many large companies. It was very impressive to see that within 24 hours, the ransomware, which is a virus where you have to pay ransom in Bitcoin to restore the situation, had spread to all the countries of the companies within a single day. Precisely because it was the same system deployed everywhere, the upside of having systems that are completely compatible and completely aligned is that if you have a security problem, it’s the same security problem everywhere. In contrast, if it’s a complete mess with different ERPs and incompatible systems, then if people gain access to a system, they don’t by default gain access to every system.
Axelle Lemaire: What I get to see in terms of the governance of organizations is that now, yes, there’s clearly a real awareness of the cyber risks in particular, which wasn’t the case five years ago. Believe me, when we launched the national strategy for cyber protection in France five years ago, it was still pretty new, and companies were not ready to spend the investment necessary to protect themselves. So, this is progressively changing. What it means is that the IT department is not seen any longer just as the unit that will say no to everything. They’ve become a strategic asset by themselves, so they’re also regaining power in some ways and working more closely with the innovation department and with the business units.
So, it’s interesting to see, and I suppose maybe the pure players don’t have an IT department. Digital technologies are so much at the heart of their business model. But in more classic organizations, we’re seeing this change of IT working closer to the chief data officer, the chief digital officer, the chief innovation officer, and they
Kieran Chandler: Together with a shorter time to market, it’s interesting, but I still believe that leaders do not understand that risk zero doesn’t exist. So, in a digital world, we have to admit and accept that, in spite of all the necessary investment for protection, we live in a risky world. That has a lot of consequences in terms of contracts, right?
Joannes Vermorel: That’s very interesting because the risk question is very interesting. For example, we see one of the key elements of Lokad is probabilistic forecasting. We give up on the idea of having perfect demand forecasts; it’s like forever fuzzy. Especially, I suppose, when you think of fast fashion. It’s a bit like wishful thinking to imagine that you will have perfect forecasts and then you can have zero risk of stockouts. And yet, when we move toward something that kind of embraces the fact that risk zero does not exist, we are still facing difficult situations because companies need to come to terms with the consequences of that.
Axelle Lemaire: So, you need to deeply embrace that it’s wishful thinking to have risk zero. Then, it boils down to having very smart prioritization of your investment and trying to mitigate your risk. Because giving up on the zero risk doesn’t mean that you don’t do anything to assess risk. Our perspective is that, on the contrary, it means that you need to be very smart on prioritization. If you say zero risk, you don’t have to prioritize anything. That’s the beauty of it; you say we are going to address every single problem, period. So, you need to embrace the fact that risk zero does not exist, which leads to smart prioritization of what you do.
Joannes Vermorel: And here, it’s very interesting because what we see is that it entails so many things that are quite different. For example, frequently, it’s very concentrated when it comes to pure IT security. In the US, as an example, the recommendation that forces people to rotate passwords is now considered harmful. It actually generates more problems than it solves because when you ask people to change their password every month, most people would have a sticker attached to their computer with their password written on it. They have observed that no matter how much training you give to people, they will still do that. So, let’s stop rotating those passwords all the time; it actually creates more problems.
Kieran Chandler: I definitely agree with what you’re saying about the passwords. I seem to have passwords coming out of my ears at the moment, and I don’t know what to do with them.
Axelle Lemaire: You can just buy a nice license with a good app that will automatically generate your passwords, and then it’s settled.
Kieran Chandler: Let’s start wrapping things up a little bit now and look at some of the digital trends for the future. What’s exciting that’s coming up, and what are the opportunities that you can see coming from them?
Axelle Lemaire: Now that I work as a consultant, if I talk about AI, people will start laughing, right? Because when you ask data scientists about artificial intelligence, they’ll say AI is for PowerPoint presentations, not real life. But still, I would say I get to see many startups every day, and what I realize is how transformative the algorithmic developments based on machine and deep learning are to transform organizations. So again, that might not be the very long-term trend of quantum informatics or quantum computing, but within the next two to three or four years.
Kieran Chandler: The biggest exciting challenge will be to manage the adoption of these technologies and adapt them to organizations. To me, it is around machine learning and deep learning, right? Because we’re still so much only at the beginning, we’re struggling to identify not the easy use cases, usually around cost optimization or cost reduction, but it’s really about inventing new use cases and added value. Helping companies switch to new business projects thanks to the right algorithmic development. So that, to me, is the most exciting trend. We’re right in the middle of it. Would you agree with that to a certain extent, with the rise of differentiable programming and things like that?
Joannes Vermorel: Absolutely, it’s a challenge to invent new use cases. For example, in supply chain, you have the decades-old use of statistical learning and machine learning for demand forecasting. The classical perspective is very narrow; you take a product that is already selling and extend the time series of sales into the future. That’s machine learning, but it’s also taking a very narrow and quite ancient perspective. One week ago, I met with the CEO of a dynamic fast-fashion brand, and this person was interested in the same sort of tech applied to the genesis of new bestsellers for their fast-fashion brand. It’s a different problem because, what’s the point of forecasting the demand of a bad product? It’s not going to become a success in the market. Yes, I will get the forecast, but it’s not going to make anything super good for my business. It will limit the amount of excess inventory I have for this poorly performing product, but it’s not solving the crux of the problem, which is how to gain market share by launching products ahead of competitors that really capture the mood of the time. Can we have a machine that won’t replace designers but help them to pinpoint the area where they should focus?
Axelle Lemaire: That’s very interesting because it’s not radically new tech-wise, but it’s still kind of new in terms of thinking about how this technology should be applied to this business. To conclude, one of the trends I’m seeing is tech for good and positive impact technologies. Trying to think about the case you just mentioned, fast fashion and tech for good, how can technologies help fight climate change? If you find the right use case to help fast fashion producers produce locally according to local demand and the quantities that are needed, then you don’t overproduce. That’s a good example of how to mitigate negative externalities and even better create positive impact, especially for the environment, thanks to technologies but also by addressing business challenges. To me, this questioning of how technologies can serve a broader interest, not only business, will be the key for the future in the coming years.
Kieran Chandler: Great, a nice positive way to finish things up. Thanks both for your time this morning.
Joannes Vermorel: Thank you.
Axelle Lemaire: Thank you.
Kieran Chandler: That’s everything for this week. Thanks very much for tuning in, and we’ll see you again next time. Bye for now.
