Deloitte's COO explains his view of the economy, fintech, and why we shouldn't be afraid of robots
Deloitte Touche Tohmatsu Limited is one of the most powerful financial companies in the world.
The 172-year-old UK firm, which is commonly referred to as Deloitte, is known for its audit and consulting services. In 2016, the company's workforce stood at more than 240,000 employees and its revenues totaled about $36 billion, according to the firm's 2016 Global Report.
Heading the operations of the multi-national and multi-billion dollar operation is Frank Friedman, the firm's global chief operating officer. Freidman's oversees the network's operational leaders, helping them execute the firm's vision and strategy throughout its various divisions worldwide.
In a wide-ranging interview with Markets Insider, Friedman explained his view of the US economy, financial technology, and why he thinks people should be excited about the eminent robot revolution.
This interview has been edited for clarity and length.
Markets Insider: In your outlook note, you said the global economy is actually much stronger than experts are giving it credit for. What leads you to this conclusion? What effect will it have on asset prices if the consensus view incorporates this?
Take the US for example. We currently see strong employment growth alongside surprising growth in Europe, particularly in Germany and Spain. Economic growth overall is accelerating from last year, and asset pricing continues to increase.
To give you an example, despite percentage decrease for April, the Institute for Supply Management (ISM) manufacturing index has been on the rise. The index rose to 57.2 percent in March from 56 percent in January, with February's 57.5 percent showing the highest reading since August 2014.
Chapparo: With so many fintech companies emerging these days, what does Deloitte look for when they partner with fintechs. What makes those firms stand out from others?
Friedman: In today's climate, no company, no matter its size can go it alone. It's really all about strategic alliances. At Deloitte, we look to align with organizations that differentiate themselves in response to changing market and industry dynamics. No criteria is set in stone, but we also look at how these organizations can complement what we're already doing. For fintech companies in particular, what's really going to grab our attention are factors like their ability to lower costs, improve compliance, and focus on markets where they have a real competitive advantage.
Markets Insider: Where are you dedicating resources and where do you see as major growth areas for a global professional services firm like Deloitte? What direction would you like to see the company heading in?
Friedman: Right now, we are continuing to invest in increasing the strategic value of our client service offerings. Much of this is driven by our focus on digital innovation, cybersecurity services, transfer pricing and M&A support. Expanding all areas of our core business by advancing our capabilities with technology and risk mitigation is an on-going priority for us. We believe all services we perform, including audit, should include digital and security components.
Markets Insider: What do young fintech startups offer that legacies like Deloitte do not, and how do they benefit Deloitte?
Friedman: First of all, disruption in any industry is a good thing. It forces people and organizations to think differently and challenge their routine. And, the same is true for Deloitte. We often take a step back and ask ourselves how we can continue driving our professional services industry forward. In some ways, the abundance of fintech startups has reminded us that the lessons we learned a long time ago are just as relevant today. To remain competitive, we have to continue hiring a lot of really bright people from a variety of backgrounds, all with innovative mindsets. People who can bring disruptive ideas to the table, and who can create solutions to deliver better insights for our clients. So in many ways, these emerging players have pushed us to continue doing what we were already doing in the first place, but doing it faster and more effectively.
Friedman: Today's conversations tend to focus heavily on the degree to which robots may take the place of humans, which can be a scary thought for a lot of people. But, with that said, it is important to recognize that robots will also create new types of jobs. According to our recent Deloitte Global Human Capital Trends Report, the entire workplace is being reinvented as the use of robotics and AI increases. But even with this transformation, only 20 percent of survey respondents felt that future of work scenarios will reduce the number of jobs. More than three quarters of the companies surveyed said they either will retrain people to use technology or will redesign jobs to take better advantage of human skills.
With the increasing use of technology, we will of course need STEM skills, but we will also need people skilled in softer areas like critical thinking, creativity, selling and relationship building. The ability to lead, strategize and inspire people to follow you and bring your vision to life will also become more important.
I see younger generations in the workforce increasingly place a premium on these softer skills as they work together in teams, allowing them to build relationships with those around them through social activities. Ultimately, they're devoting themselves to a purpose sometimes greater than just their paychecks.
Markets Insider: Since the financial crisis, recovery in the world's most developed economies has been lackluster. What do you think has been the reason for this?
Friedman: Two key factors need to work in tandem with one another to stimulate long-term growth. First, economies need to get more people working and second, the productivity of those workforces needs to increase. Globally, we are not adding more people to the workforce. In fact, in most developed economies, we are observing a slowdown in the working age population, and even a decline in China and Japan. In the US, we are still seeing some growth in the working age population, but it is slower than it used to be.
Productivity increases are primarily the result of technological innovation and implementation. Unfortunately, not only are the world's most developed economies not investing in new technologies, but innovation has slowed noticeably, too. Broader implementation of innovation tends to come in cycles, like the late 1990s and early 2000s with the implementation of information technology. This boosted business productivity in ways we could have never imagined. I hope that today's innovations will be drive similar momentum in a big way sometime over the next decade, boosting productivity once again.
Friedman: As a global leader, I am hopeful about positive steps forward on a range of issues impacting today's society. But, in my role, I also know that affecting large scale change is not easy. I realize that policy changes such as fiscal stimulus, tax reform, deregulation and investments in infrastructure can help boost our economy, but these things don't happen overnight. Regardless of the outcomes, Deloitte needs to remain nimble and ready to serve our clients, because that's what they expect of us.
Markets Insider: What's top of mind for a business leader of a global company like Deloitte? What do you see as the biggest risks, the biggest opportunities?
Friedman: Disruption, without question, is both a risk and an opportunity for businesses large and small. Organizations need leaders who are constantly thinking about disruption or their business is going to lose. It is important to have people who ask the challenging questions in all areas of business. How do we expand our footprint globally? What can we do differently that we are doing today? How can we disrupt our own business? What are the investments that we need to make today and over the next 5-10 years?
Markets Insider: What advice would you give for employees who want to make it to the C-suite?
Friedman: You really need to put your head down, and work as hard as you can to learn as much as you can. The first thing I would tell someone is that it starts with competency. Second, is persistence and hard work. Third, is the ability to really lead and to emerge as a natural leader. Fourth, is the ability to create a vision that is big, perhaps bigger than you, that challenges the status quo and inspires others.
Tina Wadhwa contributed to this interview.