[MUSIC]
Sam Allen, welcome to Stanford University in the Systems Leadership Course.
Thank you so much for coming.
>> Yeah, it's a great pleasure to be here, Rob.
>> Now, as the CEO of John Deere, tell us a little bit about the company,
where it is today.
A history of a company that's founded in 1837, but
also where it's headed to over the next decade.
>> So as you indicated, we're 181 years old.
We're a company that started in ag and specifically in ag implements.
We're celebrating actually this year the hundredth year
of acquiring the water route gasoline engine company and getting into tractors,
which today we're known much more for tractors.
But over the last number of years we've also diversified a lot.
So if you look at our businesses,
we're clearly number one in large ag equipment, globally.
We are also number three, globally now, in construction equipment.
We're number one globally in forestry equipment.
We're a large provider of turf equipment, both here in the US and in Europe.
And then we've got about a $40 billion captive credit company as a part of that.
So the company is much more diverse and I think that showed up in the last few
years, in that we just finished 14, 15, and 16.
Three years in a row of revenue reduction, 34% from the peak to the trough.
That's only the second time in the last 50 years that's happened.
The first time we lost a lot of the money by the end of the third year, and
quite frankly, the company almost went under in the mid 80s.
This time we had came right out of it with our tenth best year ever and
we're strong enough that we could buy this, put five billion dollars to buying
this construction equipment company, road building company called Verkin.
So the company today is much, much stronger, it's growing,
and it's growing on a lot of different fronts, not just in traditional ag,
even though by far our largest business is still large ag.
>> Now, when we think of John Deere, we think of big green machines and yet
the world is changing as these devices become increasingly connected and
digital's playing a much stronger role in your business.
You've been doing autonomous systems for many, many years and
you recently acquired Blue River.
>> Right. >> Founded by a Stanford graduate.
Tell us a bit about how digital's changing your business.
>> It has in all parts, if I take a more holistic view,
certainly, the Internet of things is having an impact on us,
on how we're thinking about working with our supply bases,
our manufacturing facilities, how we're communicating with each other.
We have since about 2010 been putting telematics solutions on our equipment.
So our equipment's been, we have more pieces of equipment out in
the marketplace with a telematic solution than anyone else,
which was the foundation for a lot of this for us.
And then over the last few years, specifically since 2012, we've really,
really have created a vision for us and where we want to go with precision ag,
which digital is the foundation for all of that.
And it really has taken as from the stand point of looking at agriculture and
ag equipment, and farmers managing by a farm field, and
managing for insights by capturing data through the course of the year, looking
at it during the winter time period and then replanting in the spring time.
We're really on a journey now with digital where literally from managing farm fields,
where insight of seeing us managing plant by plant.
>> Mm-hm. >> Which is what Blue River will help us
do, and getting real time information off the field and creating insights and
intelligence from that, that causes us to do things different with the equipment
right there at that moment, as opposed to having to wait till the following year.
>> Now, you've been with the business a long time.
As the CEO of the company, how do you think about blending the type of domain
expertise that you've had in Deere for so many years, with new competencies and
capabilities?
People who come with digital backgrounds, and the digital natives?
>> It has been something in some ways we've had to deal with this for
a number of years.
In other ways digital, especially artificial intelligence,
pieces brought up a different opportunity here.
If you think for example,
we've had an engineering center in India now for almost 20 years.
So you manage that culturally, differently than you do an engineering center that
we have let's say Moline, Illinois and we have another one in Kaizersladen Germany
and again, there's some cultural pieces there that you end up picking up.
When we were first going down the path, and
I think the best example I can give is embedded software engineers.
Embedded software engineers verses regular software, very,
very different and you do things quite a bit differently.
Regular software with agile development you iterate quickly if
you got an embedded software computer that's on that tractor,
it's one of seven computers on there.
The day you launch it, it better be 100% right.
>> Right.
>> So you have to create literally inside of our system,
you had to create a software group that it's gotta be very
process-oriented to do it right the first time and a little slower.
Then you have another group that's gotta be very,
very fast to market with solutions and then iterate, fix them quickly.
And now, we've added this additional piece is
as we go down the artificial intelligence piece is the center of that is out here.
And so it's not, you just know you're not going to get the brain power to
come immediately to Des Moines, Iowa for example, you have to come here.
So we have had some experience with this, because 20 years ago
when we first did our first GPS systems, we did those out of Torrence, California.
And we still have that down there in the L.A.
area because that's where all the government contractors are.
And we've let that group run, it's been connected, but it's been loosely connected
at the start and very slowly became more and more integrated within Deere.
And that's given us really the roadmap, if you will, what we have to do here.
We knew when we acquired Blue River,
that it's gotta stay almost like a startup and the culture of a startup.
But you'd have the security of a Fortune 500 company and so
the key is to understand that.
And then we've developed a couple areas where we say, now,
guess what, you're part of a Fortune 500 public company, you have to do this.
One of those is governance, compliance, and
the other one is our accounting processes.
But other than that, we really want to create, if you will,
definitely a different culture here, let it be maintained and
over time just continue to instill Deere values into that culture.
It will always be different, but it will still have more and
more bleeding green as time goes on.
>> Now, as the leader of the business,
I heard you say that you want to enable those organizations to take all
the attributes that make them great independently but slowly bring them in.
How do you think about when's the right time to be infusing green into them and
how do you know what's that magical sauce and
magical time that allows you to do that?
>> Well, certainly on the digital side somebody like Blue River,
it's going to be a different answer than this company we acquired, Vertkin.
They're a $3.5 billion themselves.
They have five brands.
That one will be much more defined by which time we have
integrated more Deere technology into the products.
And we can see at a point in time, and it may never be, but at a point in time when
we say okay it's time to change the brand and Deere brand now adds something to it.
When you're out here, you don't have those, and
in my belief what you're going to trust heavily on,
this person that's leading the organization out here.
You're going to continue, in this case, Jorge,
you're going to continue to expose him to all the management activities.
So all our, well, in September we'll have our every other year top 300 meeting.
He will be an integral part in that meeting.
We have a leadership session every spring.
He's been in those.
He's been meeting with our management team.
He presents to the senior officers.
He will get the exposure.
>> Mm-hm.
>> He will start saying, okay, here based on what we have as a culture, here's
something I think that Deere does that we will really be interested in picking up.
But you're going to rely heavily that the boots on the ground pulls it.
You don't want to force feed it.
>> All right, so let's transition talking from internal issues to external issues.
As you blend increasingly physical and digital products and services,
how do you see your business model changing over the next decade?
>> Well, number one, we know it is going to change, that's part of it.
Number two, one thing that we don't think, and we don't think we're naive about it,
that isn't going to change is in
most of our businesses, we go through independent dealers and to the customer.
And because the type of work activity they're doing, planting for
example, this time of year when they're planting, they have a two week window.
They're working 12, 14 hours a day.
The machine has gotta be up all the time.
You've gotta have a dealer right there that can turn it around, get it back up,
diagnose it, and turn it up.
So dealers are still going to be a part of it.
The role of the technician will be different.
Instead of Chasing oil leaks, there'll be also much more on the digital side.
Much more looking at okay that telematic control or
what do I need to do here might be a part of a software update.
They may have to do that type of thing.
We also have are going more and more away from selling a piece of equipment,
a tractor, a planter, a combine, to saying that we want to provide a total solution.
Say a corn solution.
And the solution will be connected.
All the pieces will be connected,
which will allow us to do more optimization of the equipment.
But will also allow us to aggregate data from there that will
provide the customer insights, why am I'm I getting 220
bushel an acre on this field and over here I'm getting 180.
Or the 15 other people that had their data aggregated in our system,
the average of those is 280.
And what can I do differently to end up improving my yield and
or reduce my cost of inputs.
And those bundling of services will become more of a service component that we sell,
not just the initial equipment itself.
And how quickly that gets monetized, that's something that we wrestle with, and
challenge with.
And the best example I can give you of that, we have for
over 18 years had a auto-steer system.
Which you can show the customer that they have a payback on that
system in nine months.
The adoption curve from zero to getting to almost all of our equipment
in North America coming with that optional auto-steer system,
took about 17, 18 years.
Farmers are just very, very conservative, tradition-bound.
So as we try to think about how do we monetize some of these solutions,
one of the things that we will wrestle with, compared to some,
is that we have a customer base that is somewhat reluctant to move that direction.
And you've gotta go with the leading edge individuals,
get them to adopt it, and then hopefully spiral it out to others.
But we do believe, certainly, that we're going to change from selling just iron
to selling solutions, and selling information that provides insights.
>> All right, so as you get that information and solutions, and
you really focus on customer outcomes, increased productivity,
lower costs, how do you work with your channel?
We see this with the auto industry, where they're trying to figure out
how do they work with their existing partners, and yet
you're trying to get data from the end users so that you can deliver products.
How do you manage that dynamic?
>> Actually,
I think this is one where I think we've gotten on top of it pretty well.
If you would go back to just 2015,
we bring our dealers together annually for about two and a half days.
We told them in 2015, you're either
going to get on this precision ag bus with us or you're off the bus.
And we put together a robust program with here's how you get to
precision ag 1.0, here's how you get to precision ag 2.0,
and here's the timeline you have to get there.
First you have to know how to service telematics solutions, etc.
Later on, you have to know how to do machine diagnostics.
Then you ought to get to the point you have an agronomist.
And the dealers have rapidly transformed,
today, we've gone from less than three, four years ago,
I would argue less than 10% of our dealers were really prepared to support that.
Where now, we're at 80%, working on the last 20%.
We hope that we'll get there by the end of this year.
So they're there now and
the good news is once they get there, they really see the value of it.
>> Now, today's session,
today with the students is going to be managing at intersections.
I don't know if we have any other company that comes in that's doing this
as acutely as John Deere.
Farming, which has been with us for thousands of years,
now going from a very physical world to a physical and digital world.
We're very appreciative of your taking the time to come to Stanford and
speak with us.
Sam, thank you for coming to Stanford.
>> Thanks a lot. >> Thank you so much.
>> Appreciate it.
[MUSIC]