Because you're a subscriber to this Bloomberg podcast, we thought you'd be interested in a sponsored podcast called The CEO Radar, produced by BCG and Bloomberg Media Studios. It analyzes almost forty seven hundred earnings calls worldwide to assess what topics merit a CEO's time and attention. Here's a recent episode. The CEO Radar is meant to be a tool for CEOs to compare their own agendas to those of their peers,
as well as the market as a whole. To do so, it took a look at the topics that were discussed on almost forty seven hundred earnings calls in the fourth quarter of twenty twenty four. I'm Edward Adams of Bloomberg Media Studios on this first episode of the Ceo Radar podcast to unpack the topics behind the numbers. I'm joined by Christoph Schweitzer, CEO of BCG, and by Judith Wallenstein, who heads the firm's CEO advisory practice. Between them, they speak one on one to more than six hundred CEOs
in the course of a given year. Let's begin with AI. It's clearly still a top ten topic for CEOs. And we certainly saw a huge increase in the number of mentions of it when chat GBT was released in twenty twenty two. However, in twenty twenty four we did see the number of mentions begin to plateau, and in fact, there was about a seven percent dip in the number of mentions of AI and machine learning in the fourth
quarter of last year. So while it remains a big topic, it seems as if something is afoot here, something is changing the way that it's being deployed in companies. What are you hearing from the CEOs that you speak to.
About Overall, it's about three quarters of company data say AI is a top strategic priority for them, but only about one quarter feels that they are seeing the value that they were hoping to see. So there's a meaningful gap between ambition and reality. And I do think what that in uces is you're just a bit more careful in your earning call as you talk about it. I think that's what the number suggests.
Judith, We've seen some regional differences in terms of the mentions of AI and machine learning. It's held relatively constant in North America, it's actually gone up in Asia, but it's been down significantly in Europe. It was mentioned thirty nine percent less in quarter four than in quarter three. What do you make of that?
In general, we do see some topics that are fairly consistent. The whole struggle and challenge too, from the proliferation of use cases to real impactful programs is something we hear from European CEOs and the same way we hear it in other parts of the world.
It's an interesting window because companies are now in our observations, separating into those that are real within us in THEI space and others that are laggards and struggled to get the value out of it. The winners, for sure, are a lot more focused. They don't have one thousand flowers bloom. They have fewer use cases, fewer functions that they focus on.
They invest significant money in a really focused, concentrated way, and very importantly, they double down on upscaling their organization, on upscaling their team so that they change the way they really work in every single day, and then they measure it in a quite systematic way operationally and financially. That's what separates the winners from those that are lagging.
Probably three data points why I think the topic remains as high on the agenda. One is the whole excitement about agents is very consistently in the Bloomberg BCG radar across all geographies. The second one, if you look at the companies that have upskilled more than twenty five percent of their workforce on AI, there's Japan and Singapore very much on the top. But then actually you have a
number of European markets where these companies are headquartered. Before even you have the US and European CEOs who were surveyed on their willingness to invest find themselves pretty much in the same ballpark range than other markets that that
are ready to invest. What is more pronounced is the insecurity on regulation, and in a continent that's a lot more where policymaking and regulation are more prominent and visible, you actually see that CEO say, look, I have no idea what to expect of this, like the EUAI Act, and how is a company we're going to navigate.
My anticipation for twenty twenty five is that we are actually going to see quite some bifocation. I think there will be fantastic success stories. We are starting to see some of those. For example in biopharma research and development. We see it in some of the coding for big software companies, but also for banks and insurance companies and similar We also see some great examples in field services. We see great example in customer service and kind of
customer interaction management of all sorts. So there are some great success stories emerging, but it turns out it is harder than many CEOs thought when they went on stage in their earning scool year or eighteen months ago go and make big promises.
So you mentioned AI agents, which is something that we saw in uptick in mentions of this quarter. I think quarter three there were about twenty four mentions of agents globally, hardly on the radar at all, and this past quarter there were one hundred and five. Is that sort of the new flavor of the month for AI. AI agents is going to be what we'll be talking about in twenty twenty five.
Well, we believe that AI agents are going to be an important next step of evolution of functionality and also impact potentially for the companies that really adopted in a productive way. So it's going to be sizeable. However, it's also still very early days, and I think it's important to calibrate, and we have about more than one hundred mentions of AI agents, but we have about one thy four hundred mentions of AI, So it's it's the next thing.
We believe in the potential. We expect that you will hear it more frequently mentioned in twenty twenty five earnings releases. But between that and the substance in the P and L, I think there's quite a bridge to cross.
A lot of companies in recent years have been saying that AI is not going to be a job killer, that it's going to be something that changes the way in which a lot of people work, but it's not going to eliminate positions in their enterprises. I'm curious what your view on that is.
Well, our observation is in line with what you just said. There are not many companies, In fact, there are less than ten percent of companies where AI deployment has led to redundancies and people being let go. In fact, it's a bit kind of the classical pattern, right, I mean ten twenty years ago, we were all speculating that digital and the iPhone and similar devices would completely make parts
of the workforce obsolete, and that has not happened. In fact, it has created anti new industries, new functions, new things.
Let's certain of these new agendas that CEOs are facing, As you guys know, the Radar found that CEO mentions of environmental topics such as cloud exposure or greenhouse gas emission targets and ESG topics as well like board independence and diversity. All four of those topics declined in Q four and that's really a continuation of a decline that they have been seeing in recent quarters in prior years. What do you think explains those declines?
Ju I think it useful that high water mark of talking about climate emissions companies climate targets in twenty twenty, and it has declined ever since. If we reflect what we hear from CEOs, you frankly have the full spectrum. You have those who say, thank god, I mean, my board's letting me off the hook on this climate thing now.
And you have those who actually feel, in a moment where the topic might have less public attention, it's a fantastic moment to double down and invest to outcompete in the long term, specifically in those areas in the energy transition where CEOs feel they can invest in technologies where scarcity will prevail in the to long term and where
they will be better positioned. You also see that in the radar you see that mentions of individual green technologies go up, such as clean hydrogen, but actually quite a margin in all regions. You also see that climate risks and natural hazards are one of the topics that have risen to the top, actually grown by more than one
hundred and ten percent, probably not a big surprise. Eighty percent of these mentions come from US CEOs, who also have seen the highest number of the basically natural hazards and weather phenomena happening in the past year that have created damages of a billion plus in each and every case.
My observation, in line with what Judith said, is that within the companies there is still largely a commitment to inclusion. There's a commitment to managing climate risk, to decarbonizing and setting up the company for the future. And so I do think substantively CEOs and companies are continueing to steer in that direction, but they do it in a much more selective, in a more calibrated, and certainly in a
much less vocal way. It's one of the topics where I think substantively behind doors, there's a lot more action, a lot more commitment, as you also describe you to than you hear in the earnings calls.
As environmental and cultural issues have declined in importance, trade and taxes have seemed to have taken their place. Right. There were over forty national elections last year around the globe, and generally, if you were a challenger and you were focused on economics, you won the day. In those elections, CEOs mentioned supply chain shifts and tax policy. Those mentions rose by almost double digits in Q four. But oddly CEOs talked less about tariffs, which we know is going
to be a huge topic this year. They spoke about sixteen percent less than they did in Q three, whereas the analysts spoke about it one hundred percent more than they did in Q three. Christoph, what's going on there?
I think the analysts understand that there will be meaningful impact on the P and L of major multinational companies, and they are starting to model that and put it in a kind of their assessment of the quality and rating of companies. I think CEOs are staring at tariffs and they know something is going to happen, and they watch as Q one evolves how it will impact their business, and then they're going to talk about it. I expect they will talk a lot about it in twenty twenty five.
But I mean, what could you say in twenty twenty four You were waiting in anticipation of what the first quarter would bring, and now here we are.
Right when we look forward to twenty twenty five. One of the things that you were mentioning before we began taping was a rise in M and A activity, and certainly discussion about that on these calls. What's driving that? What's behind the increase that you expect to see come the first quarter this year?
Well, our own word at the moment, as BCG tells us that there will be meaningfully more M and A in twenty twenty five. It's not a topic that you talk about in your earnings call until it happens, right, Neither if you're an acquirer, nor if you're potentially a target. You talk about this until the moment when it happens. But fundamentally, we do believe there are some very important factors that are going to drive activity. First of all, we had a number of relatively low MNA years, there's
pent up demand. Number Two, we expect that private equity is going to put some of its dry powder to work in twenty twenty five, but also private equity are going to exit some of the assets that they've been holding longer than they anticipated. Third, there will presumably be some moderation of interest rates. In fact, there has been a decline in interest rates and important parts of the world. A bit less in the US than people would have thought last year, for sure, But I mean the trend
is the trend. And lastly, I think many companies do anticipate that the regulatory environment from an anti trust perspective is going to be easier to navigate. And you take those factors together, we expect there will be meaningful M and A and not only acquisition but also carve out of business units and divisions in twenty twenty five. For sure. It's one of the topics where we feel the demand that we experience as PCG is ahead of what they talk about in the ONEX cours.
Judith, when you think about the way in which CEO roles have been changing in recent years, what's your census to the way CEO should sort of approached their task in twenty twenty five, if you had to give them a sort of thirty thousand foot look at what the way in which they should do things, perhaps differently in the coming months than they have in prior months, or be a recommendation if you look at.
The last years, I think CEOs have gone through these waves of deciding where to take positions in a much more divided, polarized world, often with very passionate workforces that literally wanted their CEO to take positions on everything from a local community issue too political turmoil in the world, and a lot of CEOs have done so because they felt this is what it meant to have the back of their organization. And I think most of them have
realized that's a very very slippery slope. It's very difficult because that could keep you busy the entire day. It also exposes your business quite a bit. And I think most of them have gone back to say, how do I strike that subtle balance of empathizing with my workforce where people live the exposure to hate speech, political division
a lot more every single day. How are you the great unifier in a way internally where you promote the values of the company's civil dialogue, the need to really exchange and listen to each other while not taking positions on everything and anything. And I think that's a very
fine line. I think it's also a really noble task because even a more chaotic, more insecure world, you can provide purpose and direction to organization, and if you can give them the feeling that in a world where they often feel powerless, they can contribute and have impact on something that matters for the company, for the community, and to larger society. In the end, I think that really mobilizes an organization and that gives everyone a place to rally around.
It's an interesting notion that they function as a unifier in chief in a very divisive time. I mean, I think it's clear that we're at an inflection point here. We're not just changing years or not just changing quarters, but business is headed in some kind of a different direction. Clearly, twenty twenty five and beyond, these topics are going to be playing out in it's very very interesting ways. I
want to thank you both for your insights today. For those of you who would like to explore the CEO radar in greater depth, you can see the entire report at Bloomberg dot Com slash CEO Radar. If you like what you're hear, we recommend that you subscribe on YouTube or the podcast platform of your choice to get our second episode, which will drop in early Q two with an entirely new batch of data. I'm Edward adams On, behalf of BCG and Bloomberg Media Studios. Thanks for listening.