Lars Martensson believes partnership is the new leadership

Ben McAlary:

Hello and welcome to Business Agenda at Ashurst and another episode in our Outpacing Change mini-series where we meet visionaries who have challenged and changed the world around them. I'm Ben McAlary, and in today's episode, I speak to Lars Martensson, the director of Environment and Innovation at Volvo Trucks, a global company at the forefront of developing electric, autonomous, and connected trucks, aiming to reduce the carbon footprint of the logistics sector, improve road safety, and ensure circularity in all processes.

Lars been with the Volvo Group for almost three decades, and in his current position at Volvo Trucks, he's responsible for environment and innovation strategies. During Lars's time with Volvo Trucks, he's been instrumental in building the first CO₂ neutral automotive production plant in the world. He's also helped adapt seven different renewable fuel alternatives and engineered both unique LNG trucks alongside a full range of electric trucks. Welcome, Lars to the Outpacing Change mini-series.

Lars Martensson:

Thank you for having me.

Ben McAlary:

So, Lars, let me set this scene for you. It's early summer. You're in Gothenburg at a small outdoor function overlooking the [inaudible 00:01:36]. I'm probably pronouncing that really, really badly. You're approached by a group of business leaders from diverse industries and sectors whom you've never met before. How do you go about introducing yourself and more importantly, describe what you do at Volvo Trucks?

Lars Martensson:

Yes, I think I would start by introducing myself since it's a nice summer day here that I work with what is fun and what is important. Fun is obviously innovation. What is great, what is new, what's exciting. Environment is obviously what is really important here now. And I primarily think about climate and circularity. At the same time, obviously, I need to connect this a little bit to what I do in my daily work, and that is really to work with today's trucks and future trucks because it's not enough to focus on today because we also need to look at what we need for the future. We need to be successful as a company and as a society. We will need transport and even more transports to come in 10, 20 years.

Ben McAlary:

So you've touched on a few themes there that we're going to come to and they're intrinsic to the Volvo brand around the environmental safety, quality, things like that. I want to first of all just clear up something. So Volvo has a very unique history. Could you just share the connection between... Well, maybe it's the disconnection between Volvo and Volvo Trucks.

Lars Martensson:

Yes. So today there are two companies. They're called Volvo Group and Volvo Cars, and we share a history together since 1927. But today, we have different owners, but we own the brand together. And by owning the brand together, it also means that we share several values like a core values, environment, safety and quality.

Ben McAlary:

So, Lars, Volvo Trucks as a global company is at the forefront of developing electric or autonomous connected trucks that are aiming to reduce the carbon footprint of the logistics sector, improve road safety and ensure circularity in all processes. Can you define what that means?

Lars Martensson:

Yes, in a way, circularity has been something that we have always worked with as company, but circularity now is much more, it is using, let's say, recycled material into new trucks, designing the truck for a long life, and also making sure that certain components like engines, gearboxes can be remanufactured, meaning that can be made as good as new and be used again, and in the end that we can recycle the truck and use the material once again.

Ben McAlary:

Lars, I also believe the history of Volvo trucks has really influenced your career.

Lars Martensson:

The first Volvo truck was manufactured back in 1928. It was to a very large extent produced with renewable material, but it was using wood for the cab and also not that many types of material. It was very much designed for making it easy to repair, reuse, and in then also then to dismantle and recycle. So from that perspective, I would say that the trucks back in 1928 were to very large extent, very circular and could serve as inspiration also for the trucks for the future where we want to improve the recyclability, where we want to increase the usage of material from renewable sources like biomaterials.

Ben McAlary:

All right. So I want to now touch on your history with the Volvo brand because I know that you've been there almost three decades. Could you just take us through what that looks like for you, what that history and working within the Volvo ecosystem has looked like?

Lars Martensson:

From a historical perspective, I would say that the car side of Volvo has really been the forefront, especially when it comes to safety, but also when it comes to environment. So from that perspective, it was a little bit sad for me personally when we took different paths and became two different companies. But at the same time, we have had a lot of synergies in the past. But going forward, I see that as a business-to-business company where we both have trucks, buses, and machines.

We have plenty of synergies within our own company that are extremely beneficial, but I'm happy that we have this history because it's obviously so that when we look at many of the safety systems, for example, that we have in today's trucks, we can find them as well in modern cars. Then obviously for trucks, we need unique safety system because we have unique safety challenges there as well. But we have a good history together that I think has served us well and I think going forward we will, let's say, take advantage of the synergies that we have within our new company.

Ben McAlary:

Absolutely. So thinking about those synergies and over the time that you've been with Volvo, what does that look like in a practical sense? Can you take us through maybe a practical example of how that synergy and innovation has cut across the different companies?

Lars Martensson:

One, I would say very obvious example is what's happening in electromobility where the journey with electromobility to very large extent has happened within Volvo buses. So Volvo buses have really been the company within Volvo that has been in forefront implementing initially hybrids and then also fully electric buses. Where we have learned quite a lot from them in terms of both the technology, how does this technology work in daily operations? How does it work in hot and cold climate, but also how do we need to service and repair these type of vehicles?

Now, when we for several years now have developed and produced and sold electric trucks, we are of course using that long, long history now from the bus side and using that for trucks. At the same way, we are also using this experience now with the electrical machines that we are also starting to sell on the market with Volvo construction equipment.

Ben McAlary:

Yeah. That's a great example. Now, if I could get you to step back now, and let's go back a couple of decades. So we are in the early 2000s or late 1990s. Freight transport is seen to have a large negative impact on the environment due to excessive energy uses, emissions, as well as those other more social impacts like traffic accidents and noise disturbance and noise pollution and all those sorts of things. How has your role as the environmental director for the vehicle manufacturer, a freight vehicle manufacturer changed over that time and what have you seen over that period of time?

Lars Martensson:

In a way, you just described it in a good way that historically when I came into the company, the focus for trucks were very much on air quality and noise. It was obviously so that authorities and legislators, they also saw this as a major problem and they were about to come up with some really, really tough legislation. And as a company we said that it will be almost impossible for us to reach these very, very low levels. And then when we look at where we are today, we have taken several steps since then. And today a truck compared with back then is about a hundred times cleaner if we look at nitrogen oxides and particulates.

So it has been a tremendous journey during the last decades here. And also when it comes to noise, I would say noise has very much been connected to, let's say trucks in city environment and let's say to diesel engine. And now with electrical engines coming into distribution, refuse trucks, these type of vehicles will become much, much quieter, which also will improve the city environment quite a lot.

So from that perspective, we're going from I would say a very problematic situation in more or less all cities all over the world with air quality noise. And looking forward, I think those issues will improve significantly. There will still be some cities in the world where there will be significant problems, but in many cities we will see great improvements.

Ben McAlary:

You touched on there sort of the push-pull about regulation and influencing the innovation and the need to innovate. I know that trucking and freight has had a lot of innovation, particularly I think since supply chain issues around COVID and big data and AI coming to the forefront. This is an industry that has just undergone such significant change. How do you communicate that change to customers and the purchases of your trucks?

Lars Martensson:

It's a very, very good question. I would say it's really the key in order to drive innovation because innovation is not only about developing new technology, it's really bringing it to the market and convincing the customers to buy it. Obviously, we need to agree upon what is the problem we are trying to solve. We need to agree upon what are the true benefits of this solution. And then we also need to understand what are the costs and the benefits of this. But I would say in a conservative industry like our industry, the truck and transport industry, it's just as important really to show that the new technology is reliable.

Therefore, it's very important for us to, let's say, do early field tests together with customers to do public demonstration projects together with customers. So our customers can tell other colleagues in the industry that the technology is working and their experience with the technology. So that can in a way get the ripple effects to others. And that will help us quite a lot because you also to do marketing, that will not really be the way when it comes to new technology. We need to have customers supporting us, bringing our message towards others,

Ben McAlary:

And you can really see the three core themes that are intrinsic to the Volvo brand. Let's dig a little deeper here into these values and how they play out in a practical sense. Firstly, in terms of quality, and you've spoken about it a little bit, but how do you balance the sometimes conflicting notions or goals of innovation in terms of production, manufacturing, choice of materials and overall environmental stewardship? Where's that balance?

Lars Martensson:

To start with, it is not an easy balance. So there's no easy answer to that question. Obviously, that they are, if we take one great example is some new materials, they could have excellent properties. When we look back and we see materials like asbestos, from a technical perspective, from a qualitative perspective, asbestos was a great material. But from an environmental perspective, it was to say not good at all.

So one way of addressing this of course is really to try to know as much as possible, and also from our perspective, we always, when it comes to environment, need to adapt a precautionary principle, meaning that if we understand that there could be a problem, then we try to avoid creating that problem going forward. But there is really no easy answer to this question because this is a struggle that our engineers have every day where they need to balance different properties. It could be safety towards quality, quality towards environment, and many, many other things. And I think the best way of doing it is to secure the best available knowledge and also support them in their daily work in a good way.

Ben McAlary:

And that quality and testing that you were mentioning before, it's being transparent, which obviously then is very well received by the market. Now, full disclosure, and I probably should have mentioned this at the top of the episode, I bought a Volvo based on the fact that it's one of the safest vehicles in where I live in Australia, and they have been rated as the safest vehicles for decades. How does this theme carry across over to the trucking side of the business?

Lars Martensson:

To start with, if we look at cars and trucks, we share quite a lot of technology. That could be in some areas actually where the cars are one small step ahead of the truck side. In many areas, some technologies that are unique for trucks. So you can be sure that if you drive a Volvo car or a Volvo truck, you probably have the latest and the best safety technology in those vehicles.

And an interesting thing is that there are also some new opportunities there with connectivity, meaning that we had a cooperation with a Volvo car side where we shared data between the vehicles. So when, for example, a car drove on the road and notes that it was slippery, it could be ice, it could be something else, that information was shared with other vehicles like a truck driving in the same direction. So when the truck came to the same place, the driver was already aware that that part of the road could be slippery.

So there could be a lot of synergies here between also when it comes to data. So it's not only about hardware, it's also very much about sharing data and knowledge between the different types of vehicles.

Ben McAlary:

Yeah, knowledge sharing and only possible due to the rich data that you're able to secure. Volvo truck has been a leader in pursuing sustainability. And you've mentioned it a few times, circularity within the trucking industry for quite some time, probably as long as you've been there. Can you share some of the key initiatives you are looking at to pursue and reduce your environmental footprint further and maybe some of the challenges you're facing?

Lars Martensson:

If we look at the environmental footprint of a Volvo diesel truck, about 90% of the environmental impacts come from the usage. But if we then compare with an electric truck, it will be quite obvious that a major part of the footprint from an electric truck comes from the production. It means that today we are trying to address, let's say, different challenges with the different type of vehicles here. When it comes to the electrical trucks, we need to address the availability of green energy because that will really reduce the impact from usage.

Also we need to focus quite a lot on the production of the electric truck, especially when it comes to the batteries because the batteries is a major part of the climate impact of that electric truck. But something that both the electric truck, diesel trucks, gas trucks, all have in common is that they are very much dependent on what type of energy that they're using because the type of energy is really the key issue when it comes to how big the climate impact is.

So here we obviously need to work quite close with our customers and the energy companies to help our customers to have access to the best available energy. It could be energy from renewable sources, or it could be nuclear energy with a very low climate impact.

Ben McAlary:

That's so interesting, Lars. And you've mentioned how closely Volvo cars and Volvo trucks are sharing innovation and data through collaboration and partnership. Apart from Volvo cars itself, are there any other important collaborations and partnerships you have and are involved in? Because the whole theme of outpacing change and what we're seeing throughout all these episodes is how people and organizations are collaborating and working together to a common goal.

Lars Martensson:

Absolutely. Our mantra in a way is partnership is the new leadership. That's something that our CEO and President Martin Lundstedt is repeating all the time. And I would say to me, there are three key areas. One is partnership in this supply chain where we are one of the founding members of something that's called the First Movers Coalition where we with many of our suppliers and other companies are working together to develop and implement, I would say the key here is implement new technologies. And one excellent example here is the fossil-free steel from Swedish Company SSAB, where we were then the first company to implement this fossil-free steel both in construction machine and also in our trucks.

Because always with new technology, it's not enough to have the technology, you also need to have the customer. So in that case, we were the customer. If I look at it from another perspective, obviously when it comes to electric trucks, the key here is to work in partnership with our customers. But what's becoming more important is also a partnership with our customers' customers with the transport buyers, with companies like Amazon and IKEA who are big, big transport buyers, who really set the conditions for our customers.

So here, we can do quite a lot together because we in most cases share the same goals in terms of climate and we can collaborate in order to make this happen in reality. And the third area, which I have touched upon several times already, is in order to be successful here, we also need to work in partnership with the energy companies because they will help us to provide the green energy that we need, but also the infrastructure needed, the power grids, the charging stations, the gas stations and so forth.

So the energy companies are very important. The tricky part with everything that I just mentioned is that it's not so that there is one company globally when it comes to energy companies. There are thousands of energy companies, many of them very much local. Partnership here is also very much that our local organizations need to step up and find these energy companies and work very close together with them.

Ben McAlary:

So in the introduction to the episode, Lars, I mentioned that you've overseen the first CO2 neutral automotive production plant in the world, developed seven trucks that have been adapted with seven different renewable fuel alternatives. And you've also overseen an engine in unique LNG trucks along with the rollout of a full suite of electric trucks, which you've mentioned. What's your biggest achievement?

Lars Martensson:

I think that the tricky part in my role is to describe, or let's say, to know exactly my contribution. In a way, I believe that all the things that you have just mentioned, I have been one small part or sometimes a bit, a larger part in making those things happening. I remember, let's say the story with the first climate neutral factory in Belgium, in Europe, which was really starting up with a kind of a competition that I initiated between different production plants where the Belgian plant was really competitive and they also had opportunity with a great collaboration with a local energy company to make this happen.

So I think that the key here in all the different examples, and the key for me is that be involved in a way to find right people who really believe in the same things and then we can make great things happen just like the examples you just gave.

Ben McAlary:

Great answer. They're the achievements. Let's go to challenges now. Could you share what you see as the single biggest challenge, not only facing Volvo trucks, but the actual whole trucking industry today and how you are going about addressing it?

Lars Martensson:

I would say the biggest challenge is really that the trucking industry is quite a conservative industry. Little bit due to that, but also due to other reasons, the change is going too slow. And the change I'm referring to is primarily, let's say the change that we need to do in order to reduce our impact on climate and do it rapidly enough to be within the Paris Agreement. And of course, one way of addressing this slow change when it comes to climate is to work close with our customers to make them more aware about, let's say what options they have and also let's say the benefits.

But I think that key here, coming back to also the transport buyers, is that the trucking industry is really a low margin industry, and the margins in a way are very much influenced by the transport buyers. And then it's also influenced in how good we are in transferring the cost to the consumer in there. And if we look at the consumer and what we are paying then for, let's say, a TV or a bottle of Coca-Cola or something like that, the transport cost is extremely small for that consumer product.

So if we transfer more of the cost of the new technology to the final consumer, then I think we can do this in a much more rapid way. But the other part is obviously also that we need support from the authorities, from the politicians in order to have incentives in place that help to drive this change much, much quicker

Ben McAlary:

Incentives and education laws too, I suspect. Just educating the public about that.

Lars Martensson:

Absolutely, absolutely. It's very much about awareness and knowledge and understanding, what can be done. And also that a lot of these things can be done without sacrificing anything. There could be benefits in terms of more efficiency and also lower cost, but at the same time as we get a lot of environmental benefits.

Ben McAlary:

All right. Thanks, Lars. We've now reached the quickfire question part of this episode where I will ask you a series of questions which you'll need to answer in the shortest amount of time possible. Are you ready?

Lars Martensson:

Yes, I'm ready.

Ben McAlary:

How would your colleagues describe you in three words?

Lars Martensson:

Mr. Environment and very committed.

Ben McAlary:

If you could have a coffee meeting with any leader alive or dead, who would it be?

Lars Martensson:

The famous Swede Jan Eliasson who was a diplomat mediator who said that the environment should not be a political dividing task. It should be the absolute common task.

Ben McAlary:

I love that. What is the biggest myth or misconception about your industry?

Lars Martensson:

The trucks are just in the way on the roads. Trucks are really the bloodstream of the society. Without trucks, the society will come to a standstill just within a couple of days.

Ben McAlary:

Now as we are recording this at 7:30 AM Gothenburg time, I think I already know the answer to this question, but I'm going to ask it anyway. When it comes to generating new ideas, are you a morning person or an evening person?

Lars Martensson:

I'm absolutely a morning person.

Ben McAlary:

That's what I thought. And name one book or podcast that you'd recommend for business leaders?

Lars Martensson:

I would recommend the book, Volt Rush by Henry Sanderson, which is really about understanding the importance of the supply chain for a company and also understand what is critical for growth. And that book is very much focusing on electromobility and what is needed to make that happen.

Ben McAlary:

Great. Thank you very much for those quickfire answers. Now, for the last question, Lars, and another question we ask a lot of our guests is thinking about business leaders who are listening to this podcast, they always want one golden nugget of advice to take away with them in order to action some of this outpacing change and radical change that you're talking about in their organization, what would it be?

Lars Martensson:

I would say find the change agents. It could be people, managers, different functions internally, but it could also be people outside the company, in the authorities, among customers who really are people who can drive change. Find those people and support them because together you can then make the change happen.

Ben McAlary:

Fantastic. Lars, thank you so much for joining me.

Lars Martensson:

Thank you.

Ben McAlary:

Thank you for listening to Ashurst's Business Agenda. This episode has been part of our special Outpacing Change mini-series where we speak with innovators and disruptors who've changed the world around them. To make sure you don't miss any future episodes, subscribe to Business Agenda on Apple Podcasts, Spotify, or wherever you get your podcasts. And while you're there, feel free to leave us a rating and a review. Until next time, thanks again for listening, and goodbye for now.