- May 14, 2020
A conversation between Windward CEO Ami Daniel and Keld Demant, Group CEO at Bunker Holding.
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Drastic global changes can rapidly impact even the most traditional businesses. While Covid-19 fast-forwarded innovation and talk of digitization, it also reminded companies of the importance of personal relationships and the value of people within a corporation.
Windward CEO Ami Daniel asked Keld Demant, Group CEO of Bunker Holding, and a global leader in bunkering, to share his insight on the importance of personal relationships when running a decentralized business, the driving power behind digitization, and how to create value within an organization experiencing rapid changes.
Below are our top five takeaways:
1. Invest in Personal Relationships
Suddenly shifting to a remote work model has a greater opportunity to succeed if anchored in a long term culture and investment in personal relationships, such as a meeting over a beer on company events. This fosters both personal and professional ties facilitating dialogue and making this transition – and any transition – smoother.
2. The Business Must Drive Digitization
If IT is what is driving digitization as a technical project, it won’t work. For digitization to be successful, the business must define what will create value in the long run, and take responsibility over the process. It needs to be a company-wide effort for the entire company could benefit.
3. Data Consistency Creates Value
Having data doesn’t help if it is not organized in a way that is consistent. If the data is uniform across a company, verified and organized, it makes sense to everyone, creating true value for an organization – and its clients.
4. Value In > Value Out
In trading, a core principle is that you need to put in more value in each transaction than you withdraw from it – or somebody else will take it over. In a competitive market that drives companies to be more agile and efficient, investing in technology can help provide better service to clients and stability for the business, particularly during times of crisis.
5. Decentralize Business, Centralized Risk
Even when running a global business with a strong culture of independent leadership in local offices, some functions, such as credit risk and compliance risk, should stay centralized. Enhancing overview of these core functions is key for enabling technological investment, improving operations, and protecting the business.
Want more than our top takeaways? Read an edited version of the full conversation transcript below.
Ami Daniel: Keld Demant, thank you for joining me today in this lovely Covid-19 afternoon. Can you say a few words about yourself, [and] about Bunker Holding?
Keld Demant: My pleasure, and also a warm welcome from here. My name is Keld Demant, I’m 53 years old, and I’ve been with this company for almost 22 years. Bunker Holding, as a group, is a house of brands instead of a branded house, meaning that we believe that whatever can be done decentralized rather than centralized is better off doing that.
Of course, we have a number of functions that we created, legal, finance and so on that makes sense to do centralized, but other than that we have 59 offices in 31 countries and they’re living a very independent life. They have their own P&L and have their own leadership in each of them.
As a group, we are positioned as the world’s biggest provider of bunkers these days. How have we come to this point? I think that all my colleagues are the reason for that. A strong and implemented strategy that has been developed is also part of it. And then, I think that the ownership – having one person owning this company – gives a very agile and very smooth way of taking decisions. To give you an impression of what kind of operation we’re running, then we are seeing around 100,000 inquiries per year. Of course, we have a system to handle this, and we are delivering more than 25 million metric tonnes in approximately 2,000 ports worldwide. So that’s who we are.
Ami Daniel: COVID-19 is impacting a lot of industries but ships are still sailing and trade is still flowing, although I think that’s also maybe starting to become a risk nowadays with some ports closing in the US and maybe some more limitations and crew changes. So what has the current situation done, if at all, to your colleagues around the world, and to your operations?
Keld Demant: I think we have to divide this in two ways. Short term, meaning right now, not much. It seems like the world is still going on, it seems like even in a declining market because we know that fewer ships out there on the water. We have been holding on to the same volume. In the longer term, we cannot close our eyes. There are some pretty dark clouds out there. Of course, I’m pleased that with the lower oil prices our customers have had lower OPEX, which is good for them. But I do fear that some of the customers out there will be in a financially difficult situation. which means that we might stop granting credit for them. And I also think that if we look at the industry, there will be those that don’t make the cut. It’s really important how you meet this; if you are in a good position, and if you have a strong foundation, it’s easier to meet with a crisis. If you have a plan, I don’t impose that we foresee in COVID-19, but if you, as a company, have a plan for when a crisis hits you and what you will do then, then I think you will be in a better position.
I think it’s about being agile. We have seen that when business stopped in the Far East, then it was still pretty okay in Europe and the U.S. And when Europe and the U.S. were hit harder, then we saw that business actually took off again in Asia. So, being agile and being worldwide has helped us through this first phase, but in the long run, we think there will be some dark clouds out there.
Ami Daniel: I hear you have got quite a global geographical spread. How do you find communication with your team nowadays, and what’s in your company culture? Because you can have a great plan, but people might break down and not be able to do this plan because they’re stressed, or because they don’t trust their managers. So what is it in your culture and your organizational strengths, or the way you run the company, that helps you actually execute at this time.
Keld Demant: Let me give you an example. Last week, one of our managers was celebrating his birthday, and of course, I gave him a call, and we had a good chat. He was saying “Keld, I’m actually quite impressed with how well these Skype, team meetings, and so on, are working. I think we can save a lot of money, in the long run, doing this.” I said “I hear what you’re saying, I do agree that we are in a very good position that is working very well, both from a technical point of view and from a human point of view, but I think that the investment we have done over time, getting people together, getting to know each other, getting to trust each other, is now paying off. That’s the reason that we, on a distance, can make the wheels turn. So the culture is very strong. People know each other, we have had gatherings beforehand at least twice a year, where we get to know each other. I think it’s a good meeting, and it’s a good agenda, but honestly, a lot of what happens in the coffee break and over a beer in the bar at night helps a lot in linking people to each other and knowing each other. Someone who you’ve been sharing a cup of coffee or beer with is much easier to have dialogue and discussions with.
So I think that the balance is somewhere in between. Yes, we have a strong culture, we have a long history, but we also have seen that people very much appreciate being in a company that is well-financed and well-organized means a lot. Actually this chap who was celebrating his birthday, I spoke to, say “Keld, I tell everybody, even my family, that we should appreciate working for a company that actually helps us out.” One of the things is that when your company goes worldwide and you’re used to traveling. I mean you often sit in a hotel or the airport working and then you’re set up for working remotely. If you should start planning for that when a crisis hits you, it’s probably too late.
When you, as a company, understand that data is not worth anything if it’s not well organized – meaning that you collect data, that you have it verified so it’s correct, you have it organized in a way so the output comes out, it makes sense to people, and that’s really important.
Ami Daniel: Can you tell us a bit more about your approach to data, data science, and modeling? You spoke about credit risk, for instance, of counterparties, what, as a company, have you invested, and what’s your thesis about how companies should think of investment? Because bunkering, at least from the face of it, is quite a traditional business. In the very simplest way, it’s fuelling vessels. Correct me if I’m wrong. So this doesn’t have to be a digitized, super-advanced, data-science oriented company. So why did you create it and what made you do it?.
Keld Demant: First of all, let me be honest and say that my board of directors has, a couple of times, asked for the expenses we’ve had in IT over the last couple of years, and say “is it really necessary?” I think this is the logical approach to spending a lot of money where you cannot immediately see the effect of it, so that’s been fair enough.
As I alluded to just a minute ago – it’s really important that it’s not the amount of data you have, it’s how you go about it. I mean, having more than 100,000 inquiries, more than 300,000 prices… if that’s put-in in a mess, it’s worth nothing. If it’s well organized, if you know, no matter where in the world, that [when there is] a cheaper calling, no matter which remote port it is in, you can actually click a button in your system and that curtain will come down, and it will help you, tell you who the supplier is, what is their claim rate, how they are pricing wise, are they actually approved to deal with… Such a system has been worth a lot these days. If you’re sitting remotely, and your customer is sitting remotely, they’re left in the dark. They want to call someone who can actually assist them, who can actually help them, and who can tell them what the real-time price is.
So from my point of view, digitization is not a technical issue. If digitization is not driven by the business and supported by IT, it’s probably worth nothing. It’s a cost and you won’t get the benefit. So I’m a strong believer that, like anything else, it should be a team effort. When we talk about digitalization, it should be driven by the business. And the business should define what you need, and what can actually provide you with value.
I think it has helped us to come from a trading background. And why do I say that? Coming from a trading background, it’s important that you acknowledge that if you do not put in more value in each transaction then you withdraw from it, then somebody else will take it over from you. We have been in a very competitive market for a long time, and we know that being lean is important, and being efficient is important. As such, I think we learned a lesson over the year. So this has been the proof in the pudding for us – that the system we have, the input we have, the way we go around it, has been beneficial for our clients, and that has enabled us to stay on a stable course in these difficult times.
Ami Daniel: So I think that’s helpful. Last week I spoke with Guy Mason, the Global Head of Shipping in BP, and we spoke about the implementation of technology, and the fact that broadly, it can either help you either outsmart the rest or reduce your risk. You spoke about the fact that you guys have already invested in worldwide IT and how seamless integration works for your colleagues globally, and can give your customers trust that you know how to deliver the right bunker, and they can trust you, and you know the source, you know the origin… But what is your approach to risk in this market? You spoke about credit risk and there’s also some sanctions risk that I think it’s getting more and more attention nowadays globally? So how do you run a global operation with fifty-nine offices right? And making 100,000 bunkering operations and 300,000 price inquiries a year?
Keld Demant: This time with the credit risk I think that we all know being in shipping that credit risk is one of the major risks. We centralized that years ago, which means that we know exactly who the counterpart is, and we know which company this counterpart is related to. We know that if one counterpart is getting into some kind of trouble, who they’re dealing with, so will it have any spillover effect on them? And then we have divided all the credit decisions from the commercial people. That’s definitely important.
When we talk about compliance, compliance has, over the last five to ten years, every year, become more and more important. I would say that the systems that you can actually adhere to, among others, your very good system, is crucial. Today we are having information from more than 2,000 sources to make sure that a ship is compliant and no-one in the commercial department can touch a ship if it’s not compliant. It’s simply locked in the system. I think that’s really important. If you could paint a picture maybe it would be easier to understand for people outside shipping – I would say that just as cars have always had brakes, because you need that to get them approved, then came ABS brakes, which were a great improvement, and I think it reduced the number of accidents, and today you have distance control on the car. We’ve seen the same technology development in compliance and sanctions, and that has helped a lot. So no doubt that this is important, especially in shipping where things take place far away from where you are sitting in the office.
Ami Daniel: To wrap it up, one last question. I think we’re all impacted on a personal level, not just on a business level. Everything has changed in the last 40, 45, 60 days, depending on where you are in the world. And some people are very stressed about that. How do you, as the leader of the company, inspire those around you to look at this as an opportunity, not just a threat? What do you actually do, not just what you talk about, but what do you do to make them feel more comfortable, have more psychological safety, and be more productive, because there’s a good chance this is not going to end tomorrow. There’s a good chance people will be working from home, on and off, for the next year, 6 months, 18 months? I guess any number might work. So what do you do?=
Keld Demant: There have been many measures taken, and let me touch on some of them. I think the most important one was that, at the very beginning, we told everyone please follow the local rules. I mean, you cannot sit in Middelfart [Bunker Holdings HQ in Denmark] and know exactly what’s going on all around the world. So we empowered the local manager to make sure that everybody was following local rules. Next, we made sure that everybody was up and running and felt safe, and knew exactly who to contact if they were in doubt. Thirdly, and I think this has been one of the real big game-changers here, is that we said everyone needs to be in contact with the team at least once a day. These contacts have helped a lot, both from a personal point of view, because a lot of people have felt alone and have felt insecure, and from a business point of view.
One thing in the crisis that we’re seeing right now is lower oil prices, but the visibility is really low. I think it’s the lowest that I’ve seen in my 30 years in business, and that created a lot of insecurity for people. So by telling them very clearly how we are doing, where we are heading, what we should do and what we shouldn’t do, has helped them out a lot. We call it Tuesday Talks – it’s on Tuesday morning, and everybody can sign in on a group level and then these managers go out to their teams and make sure that they are informed. It’s crucial because if you feel insecure, if you don’t know where your company is heading, then you might make the wrong decision. It has been a good thing all in all, and I would say that being accessible, being open, don’t be the pessimistic one, but being honest about what’s up what’s down, shows people the way and that’s really the leadership that has been needed here. I have to say that the appreciation that people are showing, the commitment, the dedication that people show, has surprised me. I have to be honest, I feared that someone would see it, don’t get me wrong, as a part-time vacation being at home, but I have to say that all the tasks that need to be done have been done as fast as normal. So big applause for people really chipping in here.
Ami Daniel: We do some of the same things, so daily check-in and a weekly company meeting. We also give a lot of people the stage to speak and share what they’re doing, because a month ago you might have seen what a person has been doing, but now you don’t see them because they’re at their house. You need to be overly transparent, you need to be clear, you need to be decisive but not too fast, you need to share the knowledge but also share the dilemmas with your team as things develop, right? I guess things are still developing.
I’d like to thank you very much for your time, and thank you, the audience for joining us, and let’s wrap this up. Thank you so much.
Keld Demant: You’re so welcome and all the best.