Since she took the helm at Flex in 2019, Revathi Advaithi has overhauled its portfolio, exited volatile markets, and quietly positioned the global electronics manufacturing giant as a major player in AI infrastructure. How to pivot and lead a company that make everything from electric car circuits to cardiac catheters? We sit down with its chief executive.

Revathi Advaithi
Chief Executive Officer, Flex 

Ellie Austin
Editorial Director, Most Powerful Women, Fortune

How Flex Got its Groove Back

Conferences

Flex is the kind of company that most people don't see, but everyone depends on. Since taking over in 2019, CEO Revathi Adviti has recast Flex from being a sprawling manufacturing company into a major player in reinventing AI infrastructure. To discuss more about how she's led this transformation and what it means to run a company that builds the hardware behind the future of technology, please welcome Rayati. At BT and she'll be interviewed by our amazing Ellie Austin. OK Wow, what a welcome. Thanks, guys. OK, so I want to start with a very important note that Ravay is one of our 100 most powerful women in business globally. As per Fortunes List, which was published in May of this year. So it's such an honor to have you with us today, Ray. Um, so as we heard in Jason's introduction, you've executed a pretty impressive transformation at Flex. You joined the company as CEO in 2019. Give us a brief overview of what your strategy was in those early days when you went in. Yeah, so when I started in 2019, you know, Flex is one of the world's largest contract manufacturing companies, around $25 billion. I'd say when you hear about contract manufacturing companies, you hear about people like Foxconn. So The top three in the world and it was going through a transformation phase that didn't go well. So when I joined in 2019, the stock was, you know, around $7. The CEO had just left the company, so I was brought in, my background being mainly in industrial companies to remake the business itself. And I approach every job the same way, and this has been in every sector I've been in, which is oil and gas or aerospace or any electrical, any sector is really focused on the portfolio, kind of say, do you have the right products for what the customers want and will they pay for it, right? Pretty simple. So focused on the portfolio, did the stuff of exiting a pretty significant part of our portfolio, which is more consumer driven, and then refocused the business on really kind of high value goods that we could actually drive value for with customers and in the middle of that. As we were doing all of that, this is well before kind of people were talking about AI and Nvidia and all that. My background being with Power, you know, Flex was building compute racks for kind of the data centers, and I thought, well, someday compute's going to be power hungry. Why don't we Build a power infrastructure and so started buying a whole bunch of power companies and put together a power infrastructure so today Flex 20% of our portfolio that's growing at 35% builds power, cooling, and compute for data centers so really have become. A contract manufacturing company and then somewhat of an industrial AI infrastructure company and then in the 7 years this is my 7th year we've done really well. The stock's around 500+% we've spun off a certain part of our portfolio so really. Do a full blown transformation of the whole company end to end. So you mentioned that about exiting certain markets, and I know that you exited things like footwear, like smartwatches, like laptops. Tell us a bit about what your criteria was for making those decisions to leave certain markets. Yeah, so if you think about, you know, You know, you're a Western company that if you look at our capital markets and our cost of capital, you have to get the returns for it. So if you're in high volume consumer goods that have very cyclical ups and downs, you don't get the return in the time period you're looking for. So if it was a very cyclical. and the product portfolio moved really fast. I felt like the returns wasn't being made through the cycle, and maybe the Asian companies that had a different cost of capital and were funded in a different way were better suited for doing that. So we exited cell phones, you know, very famously things like Nike footwear, all those things we. Exited because I didn't feel like for our returns that we were looking for it would provide that through the cycle. So to use a very systematic way of thinking about what are the financial returns. Will customers pay for those financial returns over a long period of time? Can you drive value? And if you can do that, you stay, otherwise you exit. It's obviously been a huge year for manufacturing with the current administration prioritizing reshoring a lot of manufacturing. What will, in your opinion, never be made on US soil? Um, well, it'll be hard to imagine phones being made in the US soil. I know that's, uh, publicly not a great thing to say, but, um. You know things that take uh a significant amount of labor still will be difficult things to be made in the US soil. I would say not because we're not capable or we don't have the capacity to do it. I would say that the population doesn't support that kind of skill level so it's more to do with what is the best use of our resources in the United States, right? You want higher skill level jobs. Jobs and to do higher skill level jobs you want to do the more complicated things and cell phones are not the most complicated things to do, you know, so is in footwear, right? So I don't think those things are the things that you would make in the US and hopefully you can do final assembly or other things that would add value to it, but I don't see those things being reassured in. And I know you speak a lot about job creation, and so how do we go about upskilling the domestic workforce? I would say, you know. There's a lot of work involved in this, so some important things that are happening in the US today is, you know, a significant part of our employment is around warehouses, right, e-commerce, and you think about the future of warehouses and e-commerce with automation, with human robots, all of that that's being worked, you see those. Jobs migrating to a higher skilled workforce, so companies who are in that space have to undergo significant transformation and say what is our role in reskilling this workforce, right? And I talk about this even in our factories today. So my uh employees who come into the factory today and maybe operate a 5 axis CNC machine in the. Future they may be just programming that from their phone. This is my responsibility to train and reskill that workforce to be able to do that. So I'd say organizations have a pretty significant role. You have to kind of say there's the world going in the next 5 years and we have to have a systematic way of really reskilling the American workforce, and I'm a huge fan of that. I feel like. Organizations own it. I feel government owns it, and a good cross partnership between industry and government is really important to be doing that. Now. Flex is very clearly booming. At the same time, your revenue has dipped slightly over the past couple of years. I think it was $27 billion in 2023. It's now $25.8 billion still huge. But what do you attribute that slight dip to? I would say because we're continuing to remake the portfolio, right, so, um, you know, we used to be less than 3% manufacturing margin type of business, right? Today we're like a 6% operating margin business, so we continue to exit parts of the portfolio that we think long term are not financially viable for where we need to be. So I don't really focus on kind of. Revenue per se at the top level. I focus on revenue and the high value areas that we're growing so our data center AI infrastructure business is is around $6.5 billion growing at 35%. That is more important to me than trying to figure out, are there other parts of the business that aren't long term for us that will continue to kind of re-scope. So that's how I think about overall. Revenue. Flex operates in 30+ countries, I think, um, and you and I caught up yesterday and you were saying that a few days ago, well last month, one of your facilities in Ukraine was hit by a missile, which I'm sure is an incredibly kind of complex and upsetting time. Take us inside kind of your response in those hours afterwards, and then second part, what are your operations going to look like in Ukraine going forward? I would say, you know, this is the role of every CEO, right? I mean, you never know what's going to come in the next minute and the next day, and you have to kind of go with the flow as these things happen. It's like the pandemic. Nobody realized you'd wake up one day and half your workforce couldn't show up. The next day, I think it's similar to that, right? It was around 10 p.m. I got a text from my team saying that our site in Ukraine was hit. I first thought it was a joke because we're in the western part of Ukraine, really far away from where any of the shoes have been. So I picked up the phone and called and then I'd say our team was on the phone the entire night, right, trying to figure out what happened and why it happened. But the incredible part of this is how good our teams are, right? 600 people evacuated in 7 minutes, no loss of lives. We had bomb shelters in place, unbelievable. So once we understood our employment. were good. Everything else fell in place, right? That's the most important thing as far as I'm concerned. We're in the process of evaluating and rebuilding, right? We still don't have a good view of kind of how the site looks. There are parts of the site that are destroyed, so I'd say the team will reevaluate, very committed to making sure that awesome team in Ukraine gets a chance. So I would say that, you know, it's one of our best teams. One of our best manufacturing sites and we'll continue to be supportive. And so when you say rebuilding, rebuilding the site or going elsewhere, or is that not a decision that's been made yet? I would say we definitely rebuild the site. OK. And and this is connected is kind of the resilience of supply chains, particularly in this time of really kind of unending geopolitical. Volatility. I know that you've integrated AI into your supply chains. Talk to us a bit about that and the efficiencies that you're seeing as a result. Yeah. See, I think the whole AI story is interesting. It's funny. It depends on the news of the day. Some days, AI is the most coolest thing, and then suddenly, oh, everything's coming to a, you know, grinding halt. Is it really happening? Um, so. I want to talk about it practically speaking, how I think it works in industries and you know factories like ours. First is, most companies like ours, most industrial companies, most manufacturing companies, anybody who's making anything probably has 50 plus software systems that are sitting in your factories. Like 50 is probably the low end, right? And so putting all those together and getting information that can then harness the power of AI, forget it even generative AI, it's happening but happening slowly. There's a lot of work that needs to happen for that, but I feel the future of this is very significant for for companies like ours and for everybody in this space because. Manufacturing productivity, despite everything that's been said, really hasn't moved in the last decade. Labor arbitrage maybe has been added a little bit, but other than that it really hasn't moved. Why? Because things are super fragmented in factories. Most factories you run into other than a few maybe in China are not fully automated end to end. So to be able to do that we need to take all these fragmented systems, be able to harness the power of information that comes in from that, and be able to run our factories like your car navigation system. Think about the future of that. So much to be had. I'm very bullish about this. I feel like the productivity journey through AI has just started. For most organizations like ours, and so I'd say don't pay any attention to the to the news cycle. It's not about who's using Chad GPT today. That's just barely the starting of of everything. When big industrial companies can harness the full power of AI, it's going to be a game changer. And what's the timeline for that, do you think? I think the time, I think in the next. My view is in the next 3 to 5 years, this whole data issue will get figured out, right? Because it's going to be controversial when I say this, but enterprise software companies, I'm sorry, a lot of you are here in the audience and listening, have sold as many softwares, fragmented systems that have been hodgepodge and, you know, jerry rigged together. So the first thing we have to do is fix that. And so that's going to take a little bit of time, but there is such innovative startups that are coming up that are going to skip all these systems and processes and really put overlaying, I'd say, systems in place that doesn't do all this data integration work. So I would say in the next 3 years we should be seeing full blown productivity coming out of these AI. at least for us, that's what we're pushing our teams to do, right? And I think most companies, most organizations, if they're thinking about it the right way, we'll be driving for that. I'm gonna ask you one more question and then open it up to see if any of you have a question for her. What's one thing that Flex isn't doing well at the moment that you're excited to see progress over the next year or so I'd say this is, I mean, the AI question is a big one, right? You know, we just, I was just talking to my teams last week about this. I want to see all this happen in the next year. I don't want to wait for 3 years. Like, who doesn't want to get this done? Like if I can go into like, you know, loud or chap TPT and it's solving these complex problems. For me, I don't want my supervisors to walk into a factory and then having to do spreadsheet and resources and MES systems and all that. I want them to be able to do it from their bed in their home, and I want them to do it tomorrow. So I would say that is where we need to progress and really go fast and um as far as I'm concerned, 3 years is too slow, OK. I love the impatience. Um, question over here. Nazar, is that you? Tell us your full name, Naz, um, where you're from. Uh, thanks. So thank you so much. You're such an inspiration. Um, it's been a pleasure listening to you during the MPW as well as this session. Um, so I'm Nas. I'm, um, co-founder and CEO of Vernie KI. We are all about making it so that operationally heavy enterprises can actually be silo, which is exactly the point that you were making. They make it so that in an AI native way we give you guys basically this operating platform that ends up helping both your employees as well as, you know, basically consumers. You have one across the board in a very unified and transformative way so that you don't have an AI that answers questions of your employees in a completely different way than the AI that answers the questions of say your um customers. So on that point what we've seen as the biggest uh challenge is that of course enterprises are very complicated with so many owners, so many hands. Uh, we've seen this, uh, 3 in a box model where the CEOs in the are in the driver's seat with the CTOs on a CXO next to them, 3 people helping drive the agenda, but the question back to you is, as the CEO, uh, how do you think such a transformation can happen if you are in the driver's seat to help. Silo and kick out all these again legacy software providers that have bloated your organization and become very expensive gold plated silos. How do you think you can work with your C level executives to actually go about these transformations which naturally take time and a lot of resistance? I would say that the CEOs have to be at the forefront of rethinking organizational design to drive this kind of change. It has to come from that office, and you know the MIT study that everybody was surprised about that 95% of AI projects are failing is not a surprise because. Because most of these are kind of someone is just, you know, kind of finding a project and resourcing it and doing it. So I just had this conversation with my team yesterday is that, you know, everyone is doing projects across the organization, but it has to come from my office to think about design. organizational structure. How do we break the silos? How do we pick the top 5 things that will drive the most change in the quickest way and get that done? And I would say, and most CEOs I'm talking to are thinking the same thing. So I think it's a common conversation across almost every CEO that I hear and talk to today. Thank you, Nas, um. Yes, one final question from the audience. If you could keep it brief, please, because we are running short on time. Thank you and tell us your name. Hi, I'm Emily Sherberth with APO. We do advisory and communications work. Um, I, I know several people that work at Flax, they talk about how incredible the culture. There and I just maybe wanted to ask you um what's what how have you really instilled something special in the culture at Flex and what are some of the the things that you think are most important in this time of uncertainty and um chaos. Well thank you for that and um I love the fact that our flex people talk about our culture. It's based on very simple principles, right? Treat everyone with respect whether you're in a shop floor in Poland or, you know, China or in the C-suite. We like to say just treat everyone the same way. That's the cornerstone of everything we do. And so in a time like this when geopolitics and. Having people across the globe can be quite traumatic for our employees. We just keep reminding everybody of that. It doesn't matter where you are, how you work together. It's really important that you respect each other. And how do you do that? Is that communications? What does that look like? Lots of communications. When I first came, we published kind of very simple 3 to 5 rules on how you treat people, and we've kind of stuck with that, and we remind everyone of that all the time. And you see that in meetings with our teams and my team, and, and so you have to live it. You have to show it by example, and then you hope it spreads to 140,000 employees across the world, right? And I love the fact that it does. I will say, and don't confuse that with the fact that we aren't competitive. We're competitive. We want to win, you know, we're very aggressive about everything we do. That's why we've delivered the performance we've done. and I think those two things can exist side by side. So, and I like to think that we'd like to show up and be competitive, but at the same time do it in a way that we have fun with each other and like being around each other. So a culture that's really important to me. Great question. One very final quick question for me that I would be remiss not to ask as someone who works for the most powerful women. Only 30 to 35% of the global manufacturing workforce. Is women. It's made up of women. I know it's something you're very passionate about, big question, 30 seconds to answer, how do we change that? I would say by doing what we continue to do, which is every woman around the world should push the story of why aren't you hiring more women? It has to come from women, men across every single platform. You have to ask the question of what makes them different? is it skills? Is it competencies, and really change the thinking around it. This will not come by just some C-suite initiative. It has to come up and down the organization. It has to come horizontally across and it's going to take a lot of work. I feel like in my lifetime we'll get to the 50%, which is where we need to be, and I want to see that in my lifetime, but it has to come from conversations like this. It has to come in everyone asking the question in their organization and forcing it to happen. OK, well, I count on you to keep asking that question. Ravay, thank you so much for joining us today. Thank