Pressure on the global economy is weighing on the business decisions of Canada’s top executives.
Control and discipline are the watchwords of Institutional Investor’s debut All-Canada Executive Team, determined by buy-side analysts, money managers, and sell-side researchers at securities firms and financial institutions in the region. One top-rated CEO, Canadian Pacific Railway’s Keith Creel, described his firm as taking “a disciplined approach to taking on new business” as part of a desire to “control the things we’re able to control.”
His words are echoed by Donald Lindsay, who placed first in the basic material sector as president and chief executive of Teck Resources. “The ongoing global economic uncertainty is the greatest challenge for the commodities sector,” he said. “Since this is out of our control, we are focused on what I call controlling the controllable.” Meanwhile, Allied Properties REIT chief Michael Emory, the highest scoring CEO among Canadian financial institutions, argued that the “greatest challenge in 2020 will be allocating large amounts of capital with strategic coherence and discipline, especially in the context of a heated acquisition and development environment.”
In an age of restraint, automation and data are helping leading chief executives meet their targets more effectively. Both Canadian Pacific Railway and Teck are gathering data that allows them to make leaps in hardware maintenance by predicting issues before they arise. On the consumer side, data is helping Canadian Pacific Railway to communicate better with customers and reduce waiting times at terminals, while Air Canada is harnessing data to improve its customer loyalty platform.
Not all of II’s top-scoring executives see a difficult business environment as a threat. According to Calin Rovinescu — the top-ranked chief of Air Canada — the airline has succeeded not despite but because of adverse conditions. Rovinescu, who joined Air Canada in 2009, took the company through a cost-transformation program when it was teetering on the verge of bankruptcy in 2012. He fostered a “just do it” mentality at the company that was put to the test last year, as executives dealt with the fallout from the grounding of the Boeing 737 Max. “The people of Air Canada performed best when our backs were against the wall on a burning platform,” he said. “We found the innovation, creativity, and will to not only survive but to thrive and transform our business irrevocably.”
Keith Creel, Canadian Pacific Railway
Capital Goods/Industrials
1. What’s the greatest challenge facing your sector in 2020?
The geopolitical and macroeconomic challenges of 2019 created some uncertainty for the North American economy and ultimately rail volumes. While we see some of those challenges resolving themselves, we will succeed in 2020 by controlling the things we’re able to control. That means a disciplined approach to taking on new business and a commitment to control costs.
2. How is your company being innovative?
By investing in technology and championing innovation, CP is solidifying our position as a leader in moving the economy safely and efficiently. In our industry, we are at the forefront of predictive analytics. Using our patented technology, we accumulate big data on wheels, rails, cars, locomotives, and trains in real-time, enabling us to do maintenance before issues arise. Our award-winning technology has enabled us to reduce online bearing failures by 95 percent. We’re also rolling out robotic process automation and mobile devices and apps to drive efficiencies, reduce wait times at terminals, and create more customer satisfaction.
3. What’s the best piece of business advice you have received?
I have been blessed to have a number of exceptional mentors throughout my career. One piece of advice that sticks with me comes from the late Hunter Harrison, who was a railroading legend as well as my mentor. He told me the true measure of leadership and success is determined by how well the company runs when you are no longer there. I continue to take that advice to heart and as CEO I dedicate a lot of my time to developing people and building a strong corporate culture.
4. What is the most important thing you learned about your work in 2019?
The tenacity of our people and the dedication and pride they have for this company. CP experienced a tragic derailment that claimed the lives of three of our employees in February of 2019. It was an incident that neither the company nor I will ever forget. In spite of the loss and grief, our employees banded together during an extremely difficult time and worked tirelessly to restore our network so that we could safely provide a needed service for our customers and the economy. I’m extremely proud to be railroading with each member of the CP family.
5. What is the biggest risk to the global economy in 2020?
Uncertainty around global trade will continue to be a risk in 2020. CP is fortunate to have a strong pipeline of new growth opportunities that will enable us to overcome these challenges. We have been the fastest-growing railroad for the last two years, and we plan to continue to leverage that momentum into 2020.
Michael Emory, Allied Properties Real Estate Investment Trust
Financial Institutions
1. What’s the greatest challenge facing your sector in 2020?
The environment for Canadian public real estate entities was generally favorable in 2019 and is expected to remain so in 2020. The greatest challenge in 2020 will be allocating large amounts of capital with strategic coherence and discipline, especially in the context of a heated acquisition and development environment. That said, the potential rewards, short-term and long-term, for doing so successfully in Canada’s major cities remain high.
2. How is your company being innovative?
Since taking a leading role in the emergence of brick-and-beam workspace in Toronto in the late 1990s, Allied has continued to pursue design innovation (humanistic, technical, and aesthetic) in providing knowledge-based organizations with distinctive urban workspace in Canada’s major cities. Everything Allied has done in recent years (and proposes to do in the coming years) demonstrates that design innovation pays, both economically and socially.
3. What’s the best piece of business advice you have received?
Thinking is almost everything. Good execution is essentially sound thought in action.
4. What is the most important thing you learned about your work in 2019?
That the bases for success in a given year are established in large part through thoughtful programmatic execution in prior years. Commercial real estate is a marathon, not a sprint.
5. What is the biggest risk to the global economy in 2020?
Global trade disruption and systemic governance failure at the national and international level.
Donald Lindsay, Teck Resources
Basic Materials
1. What’s the greatest challenge facing your sector in 2020?
The ongoing global economic uncertainty is the greatest challenge for the commodities sector. Since this is out of our control, we are focused on what I call controlling the controllable. That means running our operations as safely, efficiently, and sustainably as possible, controlling our costs, and successfully executing on our priority projects.
2. How is your company being innovative?
There is no question that technology is changing the mining industry, and at Teck we are embracing that change to improve safety, efficiency, and sustainability across our operations. RACE21 is our key technology and innovation program, which leverages existing, proven technologies to improve productivity and lower costs with a focus on delivering significant value by 2021. By implementing initiatives like machine learning to predict maintenance issues before they happen in our haul truck fleets and data analytics to improve efficiency in our processing plants, we will generate an initial CAD$150 million in annualized EBITDA improvements for 2019, which is just the start of the significant value we expect to create through innovation.
3. What’s the best piece of business advice you have received?
It is essential for both individual leaders and organizations to learn to embrace change and to find the opportunities that come with our constantly evolving world. For example, the decarbonization of the global economy is a huge change that is underway which will change consumption patterns for key commodities. For instance, the huge growth in electrification and electric vehicles will drive an increase in demand for copper. At Teck, we are embracing that shift and working to rebalance our portfolio toward copper, starting with our Quebrada Blanca Phase 2 project, which will significantly increase Teck’s copper production.
4. What is the most important thing you learned about your work in 2019?
A change that we have been tracking for a number of years and which accelerated throughout 2019 is the increased emphasis among investors on ESG, or environmental, social, and governance factors, in their investment decision making. I think this is a very positive trend. This focus will drive improvements across all industries, while also creating a competitive advantage for those that have worked hard over the years to embed sustainability in their business. At Teck, environmentally and socially responsible mining has been our focus as a company for many years — both because it’s good for business and because it’s the right thing to do. As a result, we were the top-ranked mining company on the Dow Jones Sustainability World Index in 2019.
5. What is the biggest risk to the global economy in 2020?
Continuing trade tensions and geo-political uncertainty are contributing to a challenging economic environment. I think the biggest risk is that those conditions persist, or grow worse, and continue to put negative pressure on investment and overall economic growth.
Calin Rovinescu, Air Canada
Consumer
1. What’s the greatest challenge facing your sector in 2020?
The airline industry’s greatest challenges relate to the global impact of macro-economic and socio-political events, such as the impact of the recent conflict with Iran, and how the industry will respond to climate change pressures. The International Air Transport Association has projected our industry will continue to grow in 2020 with revenue reaching nearly USD$900 billion. Managing this growth profitably will, however, require contending with a wide range of variables including fuel costs, the global economy, geopolitics, and other macro factors that will impact travel demand. For our part, we have emphasized staying nimble as a company so we can quickly adjust to changing conditions and keep operating our business profitably.
2. How is your company being innovative?
Having in recent years undertaken a CAD$12 billion program to modernize our aircraft fleet, a new area of focus for Air Canada is on emerging technologies to enhance the customer experience and improve our overall performance. We are embarking on programs to develop and deploy new technologies, including AI, machine learning, new mobile capabilities, and even drones through a partnership at Air Canada Cargo. One area where new technologies hold great promise is with respect to data mining, and we will be applying these to our new loyalty program launching later this year to deliver better service that is more tailored to individual customer needs and desires.
3. What’s the best piece of business advice you have received?
Two things: Never waste a good crisis, and out of adversity you can find great strength. The people of Air Canada performed best when our backs were against the wall on a burning platform. We found the innovation, creativity, and will to not only survive but to thrive and transform our business irrevocably.
4. What is the most important thing you learned about your work in 2019?
Like several global carriers, we operate the Boeing 737 Max. We had 24 in our fleet when the aircraft was grounded in early 2019 and were on our way to acquiring 12 more by the summer. In total they represent about 25 percent of our narrow body fleet. This had an incredible impact on our operations, worse than the events of 9/11. While I had great faith in our ability to adapt, that we were able to do so and deliver record financial results during the first nine months of the year was an object lesson in the value of teamwork, flexibility, and the importance of giving strong decision-makers leeway. I have, for a decade, stressed a “just do it” mindset throughout our company where decisions can get made and executed quickly. 2019 was a welcome validation in that respect.
5. What is the biggest risk to the global economy in 2020?
The performance of the global airline industry is intimately tied to that of the world economy, which is interdependent on trade and geopolitical stability. We have not had a recession in over a decade and do not expect one in 2020. However, we do see pockets of instability and weakness in some geographies, largely based on trade disputes, such as [the dispute between] China and the U.S. So, while we are generally optimistic based on continued global growth in aviation, we remain nonetheless cautious in terms of our capacity planning to assure sustainable profitability over the long term.
