S3E5 Javed Iqbal: Big Tobacco Meets Big Tech

I think it looks like something which is very close to my heart personally as an employee and a lot of 50,000 plus of us around the world because we have a legacy of 100 plus years and we have been doing a standard product business for more than 100 years. This is the first time we have the science and research behind us to offer our consumers something which is much less riskier versus a standard combustible product. This is the reason we have embarked on this journey. We have already made some good progress in the last 7 to 10 years. For example, in Europe now, close to 30% of our revenue is coming from smokeless products. The way we see that digital can play a much bigger role in this is that now, as we all know, we are much more connected as individuals and as consumers, so we want to connect with our consumers to explain to them the profile of risk which will reduce for them once they move from smoke product to the smokeless products. But that's only one part of the equation. The other one is we all hear a lot of debate about the challenges of vapes, how you stop access to youth, how do you regulate. There also we see technology playing a pivotal role. For example, in the UK, we want it to be regulated. We actually said that if you can license and control liquor sale and consumption, why don't we do the same for nicotine? Luckily, I think we are moving in that direction. But where the tech comes in, we are already using the technology in Siberia and some other European markets where we scan the face and help the retailer to see if the person and consumer is adult or not. You see the scan, you get the scan deleted because you don't want to keep the data, and then you get the results. In case the tech flags red, then they should ask for an ID. Similarly, for vaping products, we have now technology where you will not be able to use the product until you prove to the device you are an adult. So those type of tech solutions can also help the governments around the world to regulate this because we want regulations. We genuinely believe that regulations can help this transformation faster.

We are actually using it in two markets. We'll roll it out in more markets this year. What we do with every tech solution, including the age verification, is we do a proof of concept, create a commercial use case, and then rapidly scale it. So we have proved the concept and now we are in the role of scaling it out, first in Europe and then in other markets.

This is where we want to work with the regulators because we believe that ban doesn't work. Prohibition didn't work in the past, but a good regulation with effective enforcement can actually work.

Before we go into that, what you saw is actually we've recently launched a website, an app, a portal called Omni. It is not only for us as employees, it's for society at large, for our consumers, people who have concerns about health, for health advocates. What we want is a conversation about nicotine with facts and figures. So Omni brings not just BAT science but global research science in one platform which helps us to distinguish the risk profile of a traditional cigarette versus the new products we are offering. This data is now available in one place. You don't need to go to BAT's website, you can go to NHS website to see what is the difference between risk of vaping versus smoking, you can go to FDA website, but what we have done is we have brought all those information together and also some cases where we have been successful. You see a good example where in New Zealand effectively curbing smoking rates very effectively transitioning, and you see a failed case of Australia where actually illicit cigarettes are spanning 50% of the market, illegal vaping is banned but vape stores are there everywhere. So you also see a failed example and a successful example. What we are trying to do with this data is two folds. One is we are feeding this information to our product developers, to our scientists to make sure they create more better and less riskier products for our consumers, and also for our marketing team to get a better understanding on what our consumer needs and how they are changing once they transition from smoke to smokeless world.

Yes, data in Omni is available for any individual around the globe to go and check and read and download.

Our journey in AI started actually a bit earlier, at the end of 2023 when the whole thing was exciting and when generative AI came in and everybody got very excited. But what we did, what some of my friends say is the boring part but what I say is the right part first, we focused our work on creating the legal framework on ethical AI for BAT. So we worked with our cyber security team, our legal team, our compliance team to make sure we create the right framework for this new technology that before it lands in the business, we are protecting our consumers, ourselves, and regulation. We made sure to look into the guidelines issued by the UK government, by the OECD, and also US and other regulators given our global business we have to keep that account. So yes, first five, six months was not about exciting creating new solutions, it was more about creating the right regulations and guidelines. But after that, we embarked on the journey. We started with some initial test cases for co-pilot. We also started working on some AI enabled agents in some of the areas. What we are going to do in 2025 is we are scaling up our co-pilot usage to a few thousand employees. We are also rolling out some of our solutions which we have done for our marketing insights and research team, for our R&D team in terms of patent. We will scale those solutions up and across. So we are working on some use cases which once tested, I can scale out globally.

I think we are working on a couple of areas. For example, I'll give you an example of our marketing insights and foresight team. We have marketing research data which is insurmountable in terms of size because it's a global consumer data and it was so difficult for teams at times to bring and use all data in one go. But by enabling an AI developed agent which we have created with the help of our tech partners and our subject matter experts, we are able to look at that information in a much more comprehensive way and get far greater insights than we were able to use before. Similarly, if you look at the new world we are in, we are in a world of consumer electronics as well because our vaping device is electronic, our heating devices are electronics. So then the patent world becomes very difficult. It's not easy. There are a lot of innovations happening around the world, there are a lot of patents getting registered. So how to navigate that space? There also we worked with our partner Microsoft and they gave us a big team of AI black belt engineers from Microsoft, some key talent from my team, and some from R&D and legal team to develop a first 1.0 agent, which we call 1.0 because it's still early days, to help the teams to navigate the patent world in a much faster and accurate way than it was before. One other thing which is also working which is very close to my heart given our ESG agenda is that we are also working in our AI lab, which we can talk about more, which we just inaugurated in Dubai, to look at the solutions how we can develop a solution to tackle the challenges of for example child labor in farms. That is something which becomes a big challenge for a global company and we use agriculture product of tobacco. So now we are looking at how do you use technology to scan the global maps, look at those areas hotspots, so we can help and manage that challenge. So there are different areas we are working on them. Some are in slightly advanced stage, some are in the proof of concepts.

I think as I said, patent is a very complex space. In the game of electronics, in the field of electronics which we are entering as a new entrant, the biggest battle is on patents. So if you're trying to innovate, you have to see that. We are in that stage which, if I may say, the electronics industry was in a bit earlier. So you have seen patent wars between Apples and Samsungs of this world, Google and Microsofts of this world. We are going through that space now. But what we were able to do now is using that technology of AI and capacity and capability to scan the environment and make sure that if you're going to innovate something, is it already available? If it's available, is it viable? Is it breaching some right of competition if they've already innovated in that space? So it helps you to focus and direct your energies for R&D in the right space and also to scan the market if you're looking for technologies that are already available. It was so difficult to build even 1.0 because even large language models have their own capacity constraints and here we are talking about millions of documents, billions of pages around the world with different regulators. So hence, this is where we needed help to navigate that. You could see that if that amount of data is there, the use case of AI becomes much stronger.

I think the mantra we have been following for the last few years at BAT is transformation has to be business led but technology enabled. So my request to all the leaders or peers around the world is that focus on what your business is trying to achieve and then give them digital solution to enable and deliver those visions or those missions. For us, the deliverable business was how do you transform the business, so we gave them technological solutions. How do you communicate to society? That's where we start with connected devices. So we have to make sure that what our business objectives are and how we can enable them with digital solutions. The thing which we have to not get excited at times is for us, because we are not a tech company, people who work in the consumer goods business comes first and technology is enabling it. But if you put a technology and try to fit business into it, that's where the friction and the challenges start, especially in large commercial organizations.

I think if I take a context why we decided to go in that space, we have invested a lot to make BAT ready for the future technological solutions to be used or, if I may use the word, exploited. We are far ahead of cloud adoption versus most companies in the world. I'm not saying CPG, most peer groups are in the range of 30 to 40%, 50% cloud adoption. We closed last year at 72% cloud adoption for BAT. We are in a state of moving our SAP estate to RISE, so by end of this year we are targeting at 90% cloud adoption, which is far ahead and I'm very proud of the work the team has done. But what it does is it makes my data cyber secure, it makes me much more climate friendly because either it's carbon neutral in some case, it's carbon positive, and more importantly it enables my information to be ready to be used by the latest tools available, whether it's data analytics or AI. Also, one thing which we did is that we upgraded the whole enterprise data platform by adopting Microsoft Fabric around the world. So once we have done those two things, then we thought we were ready and we wanted to be part of the AI thing. But as I said, we want to go cautiously and commercially consciously. So there was a lot of work happening in the IFC. We already have our commercial presence and they were expanding into an innovation AI hub which is quite exciting facility. I was there last week with our CEO and we decided to join that place where they are bringing not only the big tech but the young AI entrepreneurs who want to change the world using this technology along with the business. So now we have just inaugurated our own lab which will be running in a few weeks time where we can bring our key talent with the key business challenges and work in that very innovative and AI enabled environment to develop solutions which we can be a test case and then bring them back into BAT world and scale them at speed.

We have also been given the work we did on ethical AI. We have also been a member of the AI Regulation Forum in the UAE. There are other few bodies which have taken our work as a benchmark and we are helping the world, especially corporate side, to work on the ethical AI guidelines. Fbii is a huge topic, so perhaps that's one that we dig into for the next podcast.

Thank you.