Royal DSM's Geraldine Matchett: Key mindsets for groundbreaking innovation

Linda Lacina, Meet The Leader: Welcome to Meet the Leader, a podcast where top leaders share how they're tackling the world's toughest problems. Today's leader Geraldine Matchett. She's the Co-CEO and CFO at Royal DSM, aworld leader in biotechnology. She'll talk to us about the leadership mindsets required for ground-breaking innovation.

Subscribe to Meet the Leader on Apple, Spotify, and wherever you get your favourite podcasts. And please take a moment to rate and review us. I'm Linda Lacina from the World Economic Forum. And this is Meet The Leader.

Geraldine Matchett, Royal DSM: You have to have a kind of generational approach to leadership. It's not the performance here and now only. Do you look back at yourself in the mirror and say, wow, we've done great if we've had a few years of great success, but we've set up nothing for the future? No, that doesn't work.

Linda Lacina, Meet The Leader: Royal DSM was founded in 1902, started by the Dutch government to mine coal reserves. It has changed a lot since. Those mines closed decades ago, and it's independent now, but it has built on its scientific heritage to become a leading-edge company for health and nutrition developing micronutrients and even personalized nutrition.

Success in biotech means taking big bets, often on projects that not everyone can understand at the time. For instance, a project started more than a decade ago to tackle climate change (when most private sector companies were not doing such things) recently led to a history-making inhibitor that slashes methane released by cows by 30%.

Solutions like these take more than harnessing science and technology, and even more than vision. It takes knowing how to manage innovation for the long term -- for generations.

Geraldine talked to me about Royal DSM's generational approach to innovation, about the block and tackle skills required to give critical projects air cover so they're not side-lined in a crisis, or the importance of ensuring teams know that a stopped project isn't a failed project. Critically, though generational leadership means ensuring that leaders are investing in the people who come after them, that they're considering big picture transformation and not just the next quarter.

Geraldine talked about these mindsets as well as the tactics that Royal DSM uses to make sure their work makes both a market and a social impact. She talks about all of this, but first she'll explain a little more about her dual role and how it gives her a special window into making change possible.

Here's Geraldine.

Geraldine Matchett, Royal DSM: Knowing the company and having a background of CFO is pretty helpful because a lot of things are linked to capital allocation. And what I mean by that is which innovations do we go for? Where do we not only apply financial capital, but human capital? What are the choices that we make?

And that gives me maybe a bit of a unique window of being able to combine both. But it's very much a partnership. We lead the company together, leveraging our respective strengths and, it's been a fantastic journey.

Linda Lacina, Meet The Leader: What can any leader factor in or should they be factoring in with the financial side? We know that we have limited resources and limited time in order to make so many of these things happen urgently. So what questions should they be asking themselves right from the financial side that they can learn from you?

Geraldine Matchett, Royal DSM: Well, I think here the financial resource allocation is something that every company has a slightly different profile.

And what I mean by that is between, it's really a timeframe question. How much of the resources are engaged in delivering the now or the near future, and how much can the company afford to invest in the future? That is probably the biggest dilemma of any organization, especially if you're a company like DSM that is science-based and innovation based.

So, you know, we have the potential, thanks to our science, to solve some pretty big challenges. At the same time, we're running a business today. So that proportion is, I think, what all leaders have to think about. And finding is it an 80/20, is it a half/half? Different industries can carry different types of approaches, but that's the, I think the, crux as a leadership, challenge the crux of the matter.

Linda Lacina, Meet The Leader: Do you have a particular framework when you are trying to prioritize how much of the future in the present you are factoring in for any decision? Do you have any kind of framework, like it needs to check this box, that box in this box in order to move forward?

Geraldine Matchett, Royal DSM: The framework that most companies have to think about is what is short term, how much resource to put to the short term versus the long term. And one of the frameworks we've used, for example, in Royal DSM is actually 'red box, blue box' on innovation. So we feel we could afford to carry about 25% of red box, which is a bit more risky, a bit more long term.

Things like reducing methane burped by cattle. Something we worked on for 15 years, that looked a bit esoteric at the start, but actually is highly relevant to climate change today. And then 75% much more current and medium term.

That is the kind of framework that I think any leader needs to have in the context of their own business.

And some industries and sectors maybe it's 50/50. And what is really key is that short term efficiencies can fund your future growth and your future innovation. So those are the kind of frameworks one can use.

Linda Lacina, Meet The Leader: Tell us about that. It's called Bovaer, correct? Tell us about that and why it's important and what anybody can learn about it.

Geraldine Matchett, Royal DSM: At DSM, we're the world leader in micronutrients. So that means what makes actually food for human and animals actually healthy. And in that context about 15 years ago we did some ideation for our innovations because we are a science-based company. We said, what can we do linked to climate?

And after some reflection we realized that actually one of the biggest contributors to climate change is methane. Now, to give you an idea, methane is a hundred times more potent than CO2 on a 10-year timeframe. So it's a little bit the weapon of mass destruction when it comes to climate. Now realizing that and realizing that a big source of methane is actually livestock, it's the digestion of ruminants, cows being the main one.

And we actually feed animals. And we thought, well, is there something you can tweak in the gut that then reduces methane? And yes, there is. But it took some fundamental research and with a quarter of a teaspoon of this ingredient in the feed of a cow, you can reduce the methane by more than 30%, which if you think of the methane pledge of countries, for example, of reducing methane reductions by 30% by 2030, it's actually extremely relevant.

Now, why is this story relevant? Well, I think it's about foresight. It's really about thinking very deeply about the purpose of the company and at these different time horizons thinking, what can we do to have an impact. But even if that means it's not my leadership, that it's the next leadership that will probably take it commercial.

Now this has gone commercial. It's now approved by many regulators around the world. We are building a big production plant. It's really going live, if you want. But we would not be in this position if it hadn't been an investment decision of our predecessors, 15 years ago. And I think that's the wisdom that we like to put is, particularly for science and technology companies, how to invest for the next generation.

Linda Lacina, Meet The Leader: So there was probably a lot of people saying, what, why are we doing that? And, and it's hard, it's hard to push forth with change when not everybody's on board or understanding or is asking you questions. What's important? What's important to keep pushing forward when maybe the path isn't clear? What would you recommend people be thinking about?

Geraldine Matchett, Royal DSM: Well, it's very helpful to have a clear definition and sense of one's purpose. I think that is fundamental because then it makes the understanding clearer.

So, in our case we are a science-based company, we are in life science. We are about living people and animals, and we really want to make our science have a positive impact, whether it be on climate or on the health of humans.

And now we are going into wellbeing and stress management and there's a lot of things. If you already have a clear view and all of your employees have that dream of having positive impact, even if it can seem a little esoteric at first, it creates a good frame.

Then the other thing is to protect some of these projects. You know, this is not something, it used to be called Project Clean Cow which made a lot of people smile and it could have been, you know, undermined by short term pressures. But as an organization you have to make a few longer-term bets in order to maintain a healthy organization that can sustain itself over decades.

And that is probably the other part, is you really have to provide a bit of air cover for these more far-reaching investments.

Linda Lacina, Meet The Leader: Has there ever been something that you have worked on for the climate, for sustainability, that you were hitting a wall and you weren't quite sure how you were going to kind of get kind of a consensus or get it moved forward? It worked out eventually. But you weren't sure it was going to go for, but it did., Is there a project, an example of that where you had to kind of find a way to push it forward?

Geraldine Matchett, Royal DSM: I think it's good to also celebrate the things which you had to stop, right? Because one of the dangers is that if stopping means a major failure, then you're never going to try.

So, for instance, we are, you know, very knowledgeable in biotech and bioscience, and we were looking at second generation biofuels. So basically, fuel from agricultural residue in this case, corn residue.

Now we put a lot of research in there. And we did struggle. At some point, we realized that we were not going to be able to scale it within a timeframe that can support itself. And effectively we thought the problem was going to be the biotechnology. In fact, it was the mechanical part.

Agricultural waste is extremely messy. It's got stones and things in it. And it was actually the mechanical processing of this residue from cornfields that was destroying the, the plant. So, at some point you have to stop.

And I like to share these examples because I think in a culture where you want innovation and a bit of risk taking, it cannot be that you don't want to talk about the things that didn't work because otherwise the, the fear of failing is too high.

Linda Lacina, Meet The Leader: How important is it for people to understand that there needs to be this nimble nimble approach to, especially for sustainability, where some of these things also need to be designed for a transition where maybe the solution is only there for 15, 20 years until we can get to the big dream?

How important is that to sort of, prepare people to be like, no, like it's okay for us to be nimble with these things, to abandon a project or to plan for something that will just get us to the big, the big thing. How important is that thought process for long-term success?

Geraldine Matchett, Royal DSM: Very important. But particularly if you have an organization that has a lot of innovation and science in it. There are ways of course, doing that. You have a lot of milestones.

So importantly, success is going reaching a milestone. And at that milestone, whether you decide to continue or not, and the answer is not, it's not a failure. You reach the milestone. That's where discovery comes from. You have a hypothesis to take your point, and then you say hmm.

For instance, we have been working on personalized nutrition for a long time. Now, when we did our first attempt at personalized nutrition, we were too far ahead of the curve. The world was not ready for it.

Fast forward, probably about 15, 20 years, the world is ready for personalized nutrition. Why? Because DNA sequencing is very affordable, because people wear portable devices that measure everything about your body. Because there is an understanding everybody's gut is different, everybody's lifestyle is different, everybody's exposure to stress.

So now everyone wants their own custom-made running shoe. Well, the mindset is people would like their customized approach to being healthy, and that is personalized nutrition in our case.

So, what was actually not going to fly 15, 20 years ago because the world was not there is actually fully relevant today.

So sometimes you have to just pause and shelve things and maybe they will be actually very useful in the future, but not persist and keep pushing because you've started.

Linda Lacina, Meet The Leader: Is there something you tell yourself in those moments where it's like, you know what, it's okay. It's okay. This is for 10 years from now. Future me is going to be able to pick this up. What do you tell yourself?

Geraldine Matchett, Royal DSM: You know what I tell myself? I think same with, you know, with Dimitri as Co-CEO, we're very fortunate to run the company where our predecessors did so many things right? Whether it's in setting up the culture, the purpose of the mindset and setting a very good pipeline of innovations. And we are in a position to take those commercial.

So, when in our, it is under our era, if you want, that we are making those choices. And when we stop things, I will think of least we are learning resources to build something else that will be the basis of the success of the future.

So, you have to have a kind of a generational approach to leadership. It's not the performance here and now only.

Don't get me wrong. I'm still the CFO. Performance, of course, matters. But do you look back at yourself in the mirror and say how you've done. Great. If we've had a few years of great success, but we've set up nothing for the future. Sure. Okay. That doesn't work.

So that's what I tell myself sometimes when you have to say stop or pause, it's having a philosophical view of people did that before for our benefit, we are doing the benefit of the next generation.

Linda Lacina, Meet The Leader: So many companies are not optimized for that. They are optimized for a solution being carried through that particular leader. And sometimes those ideas expire when those leaders move to other opportunities. What is a block and tackle away that companies can make sure that the DNA of these solutions, of this thinking, carries on after they leave organizations, after they go out on other roles. What should they be doing? Is there a block and tackle practical thing that should be put in place or what do you suggest?

Geraldine Matchett, Royal DSM: Well, the more mechanisms you have in a company that can bring your purpose into the daily lives of people, the better.

Let me give you something that may sound very cold but is actually a good example. And that is putting a price on CO2.

Now we are one of the first companies to put an internal cost on carbon and to embed it in our decisions on investments, being capital investments being innovation investments.

Now, it wasn't just to help our decision making in the leadership positions, it was to embed the conversation further down in the organization. Then we included it in our budgets, and we said, yeah, if you can manage your footprint, your greenhouse gas footprint, you can be successful. It's part of our incentives.

So, the more the features of your purpose are embedded in the living daily processes and ways of running the company that touch as many people as possible. The less you are dependent on whoever is at the top leading the company, because when they move on to do something else, then it's still there.

And I can tell you at DSM everyone breathes our purpose. And no matter who is in the leadership team, I think there will be an organ rejection if those leaders did not live and breathe that purpose, which is really of using our science in health, nutrition, and bioscience to have a positive impact on the world - in multiple different ways, bBut that's what we are about.

So that's for me the thing is embedded. If it stays too much in a leadership layer then you're at risk.

Linda Lacina, Meet The Leader: You guys have a solution you've got it's called the Brighter Living Solutions Matrix, right? And it helps standardize methodologies and metrics. Can you tell us why that's very important? And also, what it is -- more about the solution?

Geraldine Matchett, Royal DSM: Yes, absolutely. So, what we found, and that goes back again more than 10 years, is that we were already, of course measuring our footprint, whether it's greenhouse gases, water, land use, biodiversity, et cetera.

But the question was more and more what about what we sell? What is the footprint of, and the positive impact, of the products that we develop and that we sell to our customers? And in order to actually manage that, we put it in, in place a framework. It used to be Eco Plus and People Plus.

So, if you look at each and every product we sell, Is it market leader from an environmental footprint point of view, and is it market leader in terms of a social impact? And this is based on lifecycle analysis. So very much, scientifically assessed and it's reviewed by our auditors.

Now what we've done, we've got about, currently our targeted 65% of our sales need to be Brighter Living solutions, which is a combination of Eco Plus and People Plus.

And we want to take that higher. It has enabled us. Two things. Firstly, it's helping the decision making inside the company, always prioritizing the innovations and the product cells that actually have a positive impact. But it has also given us an ability to measure what does that contribute to the company.

So, for instance, we know that we are doing better with these products than with other products.

And lastly, of course, it's a way of. Also meeting the needs of the capital markets. We are a fully listed company, and we have a lot of investors who are either ESG investors or green funds, but increasingly they have a thematic that's based on the UN SDGs - sustainable development goals.

And if you are able to be very clear as to how does your activity as a company contribute to a zero-hunger world, to health, to whichever SDG you want to pick, you actually then start to have this transparency that everyone is trying to get to. Whereas today, I have to say, we've probably added up, there's a more than 600 different frameworks that investors are using to try and do this.

So it was, it was an internal exercise that has been able to help us shape basically our impact. And it's a lot of hard work, if I'm honest. At first it was quite unwieldy. And in a perfect world, you would hope that a methodology can be developed that applies to multiple companies, that it's not bespoke, but sometimes you have to learn by doing. And that's what we've introduced.

Linda Lacina, Meet The Leader: There are so many things that people are trying to push forwar, circularity, for instance, but there aren't clear metrics on. Are we doing better? Are we doing worse? What's going on? What surprised you about creating these methodologies and trying to make something a little bit more tamed, that was a little bit more standardized. What surprised you about that very unruly process?

Geraldine Matchett, Royal DSM: Yes. I think what surprised me is the complexity of a lifecycle analysis, for example.

It's not a methodology that you have to have the right people to do it. So, at first you start working with externals who help you do it, but then you have to embed that capability in the organization and. What I'm seeing today is there's an increasing wave of non-financial disclosure requirements coming, whether it be from the, the EU, for example, with CSRD [Corporate Sustainability Reporting Directive], whether it's coming in the US where companies are increasingly. getting familiar with non-financial disclosures.

But the thing that I have in common and why I'm bridging is having the internal skills and people that are able to do that is probably the biggest barrier going forward in the next three years. To cope with the next level of transparency and trust and disclosure.

And it's not because companies have done wrong, it's just that it is an evolving space and whether you talk to corporations like us, whether you talk to the Big Four accounting firms, there is a massive need for people who know how to do this, and it's still very, very fresh.

Linda Lacina, Meet The Leader: Is there a particular capability or skill that people should be either upskilling on or that people could be, should be learning. What should they do to make sure that we can build up this capability?

This is going to be an ecosystem requirement because that goes back to effectively academic organizations is the big four account firms, for example, will be looking for graduates who have, not only finance, but non-financial disclosure backgrounds. And when you say non-financial, spending on the sector, it's very different knowledge that you're looking at. Is it a tech industry? Is it life science industry? Is it phama, transportation infrastructure?

So you know, if anything I would say to any graduate or youngster going into university, if you want to be sure to have a great career go int, training around helping companies manage and measure and reports on everything, financial and non-financial. It's a huge gap.

Linda Lacina, Meet The Leader: Is there a piece of advice that you've always been grateful for?

Geraldine Matchett, Royal DSM: Yes, actually. And it actually links to the World Economic Forum. Every, every year there is women's leaders dinner. And one of these dinners was hosted by Sheryl Sandberg and Christine Lagarde and Queen Maxima, if I'm not mistaken.

And they were lamenting the fact that there were so few women in CEO positions. In fact, the number was decreasing. We had tables. And there was a big discussion as to why is that. And at that discussion at some point I said, "Well, let's be clear. I think for a lot of women, the motivation of being in the top job is not very high because often in that role, you probably can do less than if you're a couple of layers underneath and you just get on with things."

And there was someone -- and my biggest regret is I didn't catch her name -- she said, "Geraldine, you've got it wrong. This is not the question." I said, "Oh, okay, help me." She says, "Okay. We've done a piece of work on villages and why are the heads of villages generally men? And when you ask the women, they said, 'Ah, we don't have time for that. You know, we're too busy making sure that there's food and there's water and all these things.' But if you ask the question, 'Okay, so. If the way for the village to have freshwater, good quality water, a school, all the things that you want, if that takes you being the chief of the village, do you change your view?'"

And the answer was, "Oh, I hadn't thought about it that way." The reason why this story really hit me is that it was a fundamentally different way of looking at ambition, which is not ambition linked to title, not ambition linked to hierarchy, but ambition linked to impact. And it's a piece of advice that actually got me to step forward when the opportunity came to be Co-CEO and CFO of Royal DSM.

And I'm very grateful because I had big doubts otherwise that I had the personal motivation. But when you really anchor yourself on why is it that you're doing it, it's to achieve that. And it resonated with me hugely and it resonated with a lot of women leaders that I've spoken with since.

Ad it's something that I like to share, because I think the world defines ambition sometimes in a very narrow, I have to say masculine, way.

Linda Lacina, Meet The Leader: How have you changed as a leader in your career?

Geraldine Matchett, Royal DSM: I probably changed the most, and this is also counterintuitive, when looking at the possibility to become a CEO, you go through all kinds of hoops of selection, et cetera, and people always tell you, just be yourself.

And you think, "yeah, yeah, yeah." But in fact, it's exactly the right advice. And probably the more senior the role, the more you just have to be you. Because if you want people to trust, if you want people to see a genuine leader, then, and also you don't have time anymore to not be genuine to some extent.

So, I think where I've evolved the most is in being extremely comfortable with who I am and what I think. Which doesn't mean that I think I have the answers, but maybe in the past I was too worried about what other's thoughts as opposed to really just going for it based on I what I think. So that's my biggest evolution, I think is being myself

Linda Lacina, Meet The Leader: That was Geraldine Matchett. Thanks so much to her and thanks so much to you for listening.

A transcript of this episode and my colleagues’ episodes, Radio Davos and the Book Club Podcast is available at we.ch/podcasts.

This episode of Meet the Leader was presented and produced by me with Juan Toran, is Studio engineer Taz Kelleher as editor, and Gareth Nolan driving studio production. That's it for now.

I'm Linda Lacina with the World Economic Forum. Have a great day.