CEO2CEO Summit: The Challenge of Sustaining Long-Term Growth At this time of economic uncertainty and political upheaval, the demands on top business leaders have never been greater. CEOs are called upon to generate earnings while pursuing innovation, to support new initiatives while protecting core businesses and to embrace new technology while trimming costs. These demands come during a time of both great economic uncertainty and tremendous change. Once impregnable-seeming business models and institutions are crumbling, while new giants are being born. In December, Chief Executive magazine gathered more than 100 CEOs at The New York Stock Exchange to explore these challenges. The pages to follow capture some of the insights, opportunities and concerns shared during the presentations and discussions.
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CEO2CEO summit > CEO roundtable
A Strategy Map: Competing Through Culture A strong culture can leverage hidden potential and differentiate one’s competitive edge in a lowgrowth environment.
That tone at the top can begin to unify even the largest companies, particularly when the CEO is able to transform a culture of management into a culture of leadership, noted Mike Ullman, chairman and CEO of JCPenney. By the time Ullman took the helm seven years ago, the 109-year-old retailer had become so decentralized, each of the 11,000 store managers made his or her own decisions regarding hiring, merchandise purchasing and even store design. The company was rapidly losing market share. “They got outfoxed by people that had large, centralized organizations that were much more efficient and productive,” he said.
by C.J. Prince
Roundtable session at the New York Stock Exchange
With the economy rebounding at a snail’s pace and companies already operating as lean and mean as they can, CEOs have to get creative about achieving growth. Those hoping to increase share of market in the current environment need to find ways to exploit their company’s hidden potential and find that unique edge to propel them ahead of competitors. A company’s culture and values can be that secret weapon, enabling it to delight customers and inspire loyalty, and ultimately differentiate itself in a competitive field. The trick is finding and then honing that unique culture and uniting the organization, with all its far-flung, siloed units, around a common set of values and principles. That magic act can only start with the company’s chief, said Tom Saporito, chairman and CEO of RHR International, speaking to participants gathered for a discussion on Competing Through Culture, held in partnership with global business services company, FedEx. “Culture is a byproduct of philosophy, it’s a byproduct of passion, and it really does start at the top. If you have someone at the top who is thoughtful and passionate and concerned about culture, that’s an essential ingredient.” Cary Pappas, president and COO of FedEx TechConnect, the company’s customer service organization, pointed to his chairman and CEO as a prime example. “Fred Smith is an employee zealot; he’s a customer zealot. He leads in a manner that our customers and our employees come first and he operates with the highest level of integrity, which I believe makes a huge difference and it just resonates throughout the company,” he said.
RHR’s Tom Saporito, FedEx’s Cary Pappas, New World Van Lines’ David Marx
Ullman launched a training program to help managers construct an inspiring vision for their teams as part of the larger entity, and to develop their own communication and leadership skills so that their teams would follow and deliver. “Engendering trust is all about character of a leader, competence of a leader, all the various components of leadership. People work for people, not for companies, and no one wants to work for somebody they don’t respect,” he said. Six years into Ullman’s tenure, employee survey numbers revealed people were starting to believe. In 2010, 93 percent of employees participated in the poll, compared with 60 percent the year Ullman started. “That means they know that whatever we learn in the survey, we’re going to do something about it.”
Arise Virtual’s Angela Seldin, The Bradbury Co.’s David Cox, The Lee Company’s Bill Lee, Covanta’s Tony Orlando
No culture change can take root without buy-in from employees, who need to feel like they’re a part of something bigger, says Angela Selden, co-chairman of Arise Virtual Solutions, a virtual business services firm. That wasn’t easy for Arise, which employs 18,000 telecommuters. To keep people feeling part of a team, the company has invested heavily in social networking, using virtual town halls to bring people together. “People are still people, and they need that connection,” says Selden. Six years ago, Selden and her leadership team began to build a common culture and direction by establishing a set of four values—competence, confidence, consideration and innovation—transparently
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CEO2CEO summit > CEO roundtable sharing both the goals and the results of the company, and rewarding innovation with a monthly award. “If you can actually set the vision and then establish the corporate values, and you live them every day and your whole strategy is oriented around those, it can really mobilize and rally your team around where you want to take the company,” she said. “And if you can get them energized about where you’re taking the company, they’ll follow along.” Ken Howard recalled facing the challenge of bringing employees along when his photography company, Splendid Portraits, embarked on the major transition from film to digital. In order to keep folks on track during a tumultuous time, Howard spelled out the company’s top five priorities for the next 90 days and then each employee had a copy of those goals along with three specific tasks he or she would complete in order to help meet them. “I started to actually codify what my expectations were, because sometimes they literally don’t know what you’re expecting. You think they know, but they don’t,” he said. Clear, simple language and compensation that’s aligned with goals can speed up culture adoption, noted Tony Orlando, president and CEO of Covanta Energy, which converts ordinary household trash into electricity at 50 facilities around the world. “We know that safe and superior performance at our facilities translates into more efficiency,” he said. “If we can squeeze an extra one percent out of our facilities, that drives top line growth for us.” So the company laid out its goals for dramatic improvement in safety and environmental performance. “And then oh, by the way, half of your bonus is tied to safety and environmental [goals]. It’s not just about financial results,” he noted. The company’s leadership must be ready to walk that talk, noted Ron Alvestetter, president of Service Express, who recalled a recent situation in which a top-performing sales rep was sabotaging the performance of another rep. The saboteur was fired. “The message that sends to the company is that culture is non-negotiable,” he said.
FedEx’s Cary Pappas
Having a hard line on culture also can help acclimate newcomers to the organization, who may not have seen good behavior values at previous employers, said Pappas. “It’s like adopting a kid from a family that’s been abusive. You try to show them love and they’re not used to it and they resist at first,” he said. “You’ve got to sit down and have lots of conversation, understand where they’re coming from and what baggage they’re bringing. But if they’re the right person and they have the right beliefs underneath, you can bring that out.”
The Leadership Agenda What do CEOs need to know to succeed today? by Jennifer Pellet Turmoil in the CEO world has been on the rise in recent years. In 2008, three Fortune 500 CEOs were replaced by members of their respective company boards. Each year since then has seen a threefold increase in that figure. Why are so many CEOs being shown the door? The market’s upheaval is a big piece of the equation—rattling boards and directors and coloring their expectations and perceptions around CEO performance. But while turbulence surely contributed to the bump in CEO oustings, the underlying cause is more likely a longer-standing issue, agreed participants gathered for a Chief Executive roundtable discussion on leadership held in partnership with Heidrick & Struggles. “The No. 1 reason we get called for replacement of a CEO is a lack of strategic alignment with the board,” asserted John Wood, vice chairman of the executive search firm Heidrick & Struggles, who notes that the choice of a board member as a successor is only fitting in such cases. “If you’ve been sitting in a room with someone for the last few years, discussing the state of the business and where it’s evolving, you probably have a pretty good idea where their head is on strategy. When you reach out to one of your own and put him in the CEO seat you’re automatically getting someone who aligns with you strategically.” But the idea of boards making a practice of replacing CEOs who don’t embrace their strategic directions with one of their own—as evidenced by recent successions at HP, The Gap and Denny’s—begs the question: Who is charged with forging a corporate strategy, the company’s board or its CEO? Are CEOs merely hired guns charged with executing to the collective vision of the board? Joe Herring, CEO of the pharmaceutical development company Covance, expressed doubt about that concept. “Let’s say you’re brilliant leader with a lot of energy,” he said. “Would you rather the board paint its strategy and say, ‘This is the playbook. Go do it’? Or would you rather be part of developing and then implementing the strategy? In my experience, the more I engage the team in developing the strategy, the more fired up they are about executing on it; and when things don’t go well they take ownership to fix it.” Even a collegial environment might be something of a stretch for some CEOs, many of whom are accustomed to a higher degree of control over strategic direction “It’s the CEO’s job to do the vision and the execution,” noted Gayle Estabrooks, CEO of the Canadian optical store chain Greiche and Scaff. “You are immersed in the business, not your board. The board is not there all the time. They’re there for feedback, conversation and support.” Complication Demands Collaboration Generally, however, board involvement is on the rise—and rightly so. “Today, every operating blueprint is so complicated; and without an execution strategy it doesn’t mean anything,” asserted Faisal Hoque, founder and CEO of the management solutions provider BTM Corporation. “So unless you have a collaborative way
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of coming up with a strategy and also the operational executions, the company will fail. You have to create a collaborative management structure and way to execute the operational plan.” The issue of strategy-setting aside, the days of board members simply showing up quarterly to rubber stamp a CEO’s direction are long gone. At a minimum, both companies and CEOs expect counsel and input from their directors, noted Joe Herring, who overhauled Covance’s board when he took the CEO spot in 2005. “I had a troubled board,” he said. “I had one [director] who was sleeping, one who wanted my job and one who didn’t read the board book. So I said, ‘For this company to go forward we need a board that acts as a business partner—that will actively engage and ask hard questions—but in a respectful, constructive way.’ We changed out 75 percent of the board and the impact to our company was huge.” At BTM, board members are expected to contribute directly to the company’s growth, said Hoque. “We want our board to be a working board,” he noted. “So we give assignments to our board members to make sure that they can actually help the company to get to the next level and to know who can help if something were to happen to the CEO.” At the same time, over-involvement of a board can lead to disaster. Sandy Climan, president of media investment firm Entertainment Media Ventures, points to Panavision as an example of a board that brought in a new CEO who controlling investor Ron Perelman hailed as “a visionary,” only to undermine him at every turn. “That vision clashed with what the owners—it was an inside board—wanted and creditors ended up owning the company,” said Climan. Achieving Alignment Communication around roles can stave off that sort of implosion, noted Bob Darbee, CEO of the venture capital company Omni Capital. “The relative roles of the CEO and the board have to be defined,” he said. “Nominally, the schoolbook rule is that the board members represent shareholders and are largely overseers, while management is [charged with] execution for the benefit of the shareholders. If the board gets involved with management, you can’t have mixed messages.” In fact, ultimately, successful strategic leadership may depend more on CEO, board and management team alignment around strategy than exactly who sets strategy. “Whatever the system is, there needs to be alignment,” said Ken Makovsky, CEO of the public relations firm Makovsky & Company. “Whether the board sets strategy or the CEO decides it, there has to be consensus among that entire group in order for it to work.” However, turbulent times can knock alignment off-track. When CEOs and board members are under pressure to address a disruption and to do so swiftly, a disagreement about the best course of action can all too easily erupt into a crisis of leadership. But CEOs can generally avoid that unhappy fate by changing their approach to conducting board meetings. The management guru and best-selling business author Ram Charan urges business leaders to focus on building board engagement by using meetings as an opportunity to educate board members on the competitive landscape in their respective industries. “Unless you have somebody who has industry knowledge—and even then that knowledge may be obsolete—your board does not really know the external side of the business,” he points out. “You need to educate them by succinctly presenting the external movement taking place—not what the competition has done, but what you see your competition likely to do. That’s how you’ll get partnership with your board.”
1. Roundtable participants; 2. Yale School of Management’s Jeff Sonnenfeld, Huntington Bancshares’ Sumeet Kapoor, Excelsior College’s John Ebersole; 3. Hibbert Group’s Timothy Moonan, Entertainment Media Ventures’ Sandy Climan, Hay Group’s Michael Ippolito, Chief Executive Group’s Marshall Cooper, Omni Capital’s Bob Darbee, Heidrick & Struggles’ Anne Lim O’Brien; 4. Service Express’s Ron Alvesteffer, Stuart Dean Co.’s Mark Parrish
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New Growth Drivers Hunkering down is the natural reaction to mitigate risk in recessionary times. Yet sidelining the pursuit of growth can be even more risky. “Companies really render themselves irrelevant when they don’t continue to improve,” panelist Lynn Tilton, CEO of Patriarch Partners, told CEOs gathered for Chief Executive’s CEO2CEO Leadership Summit. “When you start cutting R&D—the lifeblood of future product innovations—you’re really damaging the business,” agreed Bob Nardelli, CEO of Cerberus Operations & Advisory Company. “From an integrity standpoint, you’re not doing what the shareholders and the board of directors have asked you to do.” At the same time, spurring growth in a troubled economic environment is no easy feat. Chief Executive’s J.P. Donlon asked investment company panelists to recount how they overcame that challenge at one of their own portfolio companies. Here are brief recaps of the stories they shared.
>> L ynn Tilton CEO, Patriarch Partners The Company: Rand McNally, a $500 million Skokie, Ill.based publisher of maps, atlases and textbooks. The Challenge: “In 2009, Rand McNally was a manufacturer of paper maps that had been left behind as paper maps became irrelevant. It let Garmin take the navigation device market, MapQuest take the directional market; and Google go into the digital/ satellite arena. People almost didn’t care if they had Rand McNally on their shelves anymore. So we faced this challenge of how do we get back into the game of innovation when everybody else has moved forward?” The Philosophy: “In these situations, you need short-term, mid-term and long-term plans for innovation. You need ‘quick hits’ so people see that you’re back, that you’re innovating and there’s a reason to keep you where you are. Then you need that middle plan where you’re really starting the research and development, getting into new markets. And then [you need] that long-term plan of who you will be in the future that you’re pushing forward. You might change that as you run into obstacles and changes in the global environment, but you at least have to be moving in a trajectory between two points.” The Solution: “The first thing we did was get into the electronic market. Rand McNally already did a lot of atlases and work for the trucking industry so we created a truck navigation device, Rand McNally’s TND, something that really wasn’t out there. We brought that to market, and it has been No. 1 in the market, and it was a very big hit. We also created an RV navigation device for people who travel by RV. And we brought out a [new line] of Best of the Road paper maps, which Walmart featured at their checkout stands.” The Outcome: “All of a sudden, all those people who didn’t care about having our paper maps and atlases anymore wanted them, because Rand McNally was relevant again. It wasn’t any huge innovation that changed the world, but it wasn’t going away. Because if you’re innovating, you’re not going away. That is the perception. And frankly, it’s the truth.” The Future: Our long-term goal is to become a virtual-travel company, to take people who can no longer spend the money to go to Europe to shop the streets of Bellagio through sort of virtual travel. We brought the COO from our videogame company into this business as the CEO because we’re moving in the direction of virtual-reality travel.
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>> Fred Hassan Chairman, Bausch & Lomb Senior Partner, Warburg Pincus The Company: Bausch & Lomb. An innovator of contact lenses in 1971, the $2.5 billion Rochester, N.Y.-based company had grown stale and stagnant by the time Hassan came aboard in 2009. The Philosophy: “Engagement with the customer is very, very important. One of the most important things is to measure the trust index by asking customers and employees, would you recommend this company or not? If you get those two numbers right, going in the right direction, that company is headed for stronger health.” The Challenge: “The company was in the doldrums; it had gotten into some flat patterns and something had to be done to bring this older company back to a more vibrant culture.” The Solution: “We worked on changing in several ways. First, customer engagement, getting customers to view Bausch & Lomb more as a partner. Second, innovation, because that improves customer engagement. Third, extending the business to overseas markets. Those were the three strategies, but the three priorities on the inside were a triangle of people, products and processes, with people at the base. Because if you can get the people part right, the products and the processes will fall into place. The best way to approach that strategy is on the two ends of the spectrum: the team at the top and the frontline managers. If you can get them to understand the approach in simple sentences, and internalize it and really focus on execution, it’s amazing how much power can be unleashed.” The Outcome: “Our internal calculations indicate that our value has gone up 60 percent in less than two years. The top line is growing very nicely with all the businesses. Overall, it’s a case of a company that was too old and getting too stale that’s suddenly now become the new Bausch & Lomb.” The Future: “We have been able to put very strong people on the ground in all the countries to serve as role models for the country operations. That’s creating a virtuous cycle, because as the company’s credibility increases, one can then attract better products from other partners and also better support from the key doctors who are very important in that business. And we’ve extended the business to overseas markets, which is now a big opportunity. In fact, Bausch & Lomb’s largest growth rates are overseas.”
>> Robert Nardelli CEO, Cerberus Operations & Advisory Company The Company: Talecris Biotherapeutics, a Research Triangle Park, N.C.-based company with $1.6 billion in revenues. Formed through a carve-out from Bayer, Talecris processes blood into plasma for specialized applications. The Challenge: “One of the biggest issues we had was ensuring the quantity and quality of input material—blood.” The Philosophy: “I tend to believe there’s an infinite capacity to improve upon everything that you do, so you enhance the core and then you extend the business and expand the markets.” The Solution: “The company undertook reverse integration, taking control of the input material with the establishment of Talecris Plasma Resource, [a network of] 65 collection centers. We took control over the quality and the price of the input material.” The Outcome: “It had a huge impact on our ability to control the quality and the volume of the product coming out and, ultimately, to meet demand. After we ran the business for a few years, we were able to sell it for 24 times the investment.”
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Growth Strategies recognize what is required and figure not what they know they like to do, but what needs to be done.” Work from the Outside In In retrenching into the mainstream marketplace, Hoffman realized that Lord & Taylor would once again be going head to head with department stores like Macy’s. So he trolled the competition. “I realized that a traditional department store is overwhelming,” he said. “It’s big, it’s loud and it’s tough to get service.” With its more intimate feel and higher level of service, Lord & Taylor was well positioned to capture a customer whose needs were changing. “There were a lot of people in the world who either could no longer afford to shop Neiman Marcus or maybe should never have been there in the first place,” Hoffman recounted. “I thought this customer segment could find a soft landing at Lord & Taylor.” Focusing on the external environment—consumer needs— enabled Hoffman to identify an opportunity, noted Charan. “The rearview mirror is a major problem in companies,” he noted. “Instead of [looking back], start from the need and work backwards.”
Author Ram Charan with Bon-Ton Stores CEO Brendan Hoffman, former CEO of Lord & Taylor
With steadily eroding sales, department store operator BonTon Stores last month named Brendan Hoffman CEO and president. Hoffman had served as CEO of Lord & Taylor since 2008, having taken the helm there when the company and its markets were in flux. “It had undergone a lot of management changes, and for the previous few years, sought to be more of a luxury player,” said Hoffman, recounting his experience at Chief Executive’s CEO2CEO Summit. “I was hired to accelerate that.” But when the market went into freefall, Hoffman, who had been steeped in the luxury marketplace during a 10-year tenure at Neiman Marcus, had to rethink that strategy. “We recognized very quickly that we would have to reposition the brand—the luxury path wasn’t really working, and it certainly wasn’t going to work in this new world,” he said. Back to the Basics Instead, Hoffman opted to return to Lord & Taylor’s foundation by bringing back mainstream department store brands it had jettisoned in its pursuit of the luxury market—brands like Jockey underwear, Liz Claiborne apparel and Nine West shoes. It was the right call, noted fellow panelist Ram Charan, a business author and strategy consultant, who pointed out that Hoffman’s ability to recognize external changes that demand a shift in strategy is essential in achieving growth. “People like Brendan
Driving Differentiation For Hoffman, the shift in department store customers’ circumstances crystallized into a strategy for differentiation. “The answer became clear,” he said. “We were going to create an environment that was a little bit more upscale than where you traditionally find the same brands and offer a level of service that would cater to a customer that expected a little bit more. From there we really took off because nobody else was doing exactly that.” Hoffman had found a way to stand out from the competition, pointed out Charan. “You need the acuity to see the point of differentiation that is sustainable—how you can connect to the ground floor of the customers.” The effort paid off. Lord & Taylor, which retail industry experts had predicted might disappear, began to show growth in late 2009, and has seen sales climb by an average of 10 percent a year over the last two years. The lesson? Even in troubled times, perhaps especially in troubled times, opportunity exists. “You hear a lot about how the U.S. economy will only grow by 1.6 percent annually,” said Charan. “But aggregates are not a good indicator. There are segments that will grow and those segments are large.” Charan urged CEOs to actively engage their teams to focus on finding those opportunities. “Stop commiserating that the U.S. is going to have no growth and Europe is going to hell and say, ‘Let’s find the growth,’” he said. “We have a $15 trillion economy and some of the segments are changing. Find out where the opportunity is and go after it.”
“Aggregates are not a good indicator. There are segments [of the U.S. economy] that will grow and those segments are large.”
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Aligning People with Business Strategy Dick Finnegan
CEO, C-Suite Analytics Founder and President, The Retention Institute
CEO, Qlik Tech
“How important is retaining and engaging your teams? On a one-to-ten scale most of you would probably say ten. But while managers are held really accountable for [sales or revenue] metrics, they’re not held so accountable for retention and engagement. Yet 70 percent of how engaged your people are and whether or not they stay is about their boss— not about HR or employee programs. If you want to change your company to make retention and engagement metrics important, to drive them down to the first-line supervisor level, enforce them with reports that have names and tie outcomes to bonuses. Convert turnover percentages and engagement scores to the language we all know—dollars— so that now they’re really meaningful in your company.”
Emmet Keeffe CEO and Co-Founder, iRise
“The single biggest challenge for CEOs around alignment is how do you get business and technology people aligned and communicating and marching in this direction of automating business process and generating new things that will affect the top line? That’s huge because you have a fundamental communication problem between business and IT stakeholders; and as a CEO, if you’re going to really automate the business, drive it forward, make it more profitable, make the top line better, somehow you have to get the IT and business folks aligned.”
“What it all comes down to is you’ve got to motivate people. Why do they come to work? How can you assure yourself that they will come back to work the next day? Payment is not the No. 1 driver for young people today. It is feeling motivated, being engaged, making sure that they can contribute to the overall cause of the company, doing something that’s meaningful to them—which could well be financial success, but I don’t think that’s the sole driver.”
M. Christine Jacobs CEO, Theragenics
“If I’d say anything based on my experience [maintaining alignment though a massive strategic shift that involved reorganizing and downsizing], it would be don’t you dare delegate this. Don’t let the HR people say, ‘I can do it for you, Chris.’ No, they can’t. You have to sit with the folks. You have to not delegate away your messaging to your people, because they are going to need you at that moment. I followed Maslow’s hierarchy of needs, and I said, I’m going to change the company; this is how I’m going to change it; and here’s how it affects you. I spent the majority of my time on the employees, because I felt these folks were the most important to the long-term success in transforming the company into a diversified medical device company.”
Dick Flanagan, Emmet Keefe, Lars Bjork, Christine Jacobs
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1. Bausch & Lomb’s Fred Hassan, Covance’s Joe Herring; 2. Hassan, Patriarch Partners’ Lynn Tilton, Cerberus Capital’s Bob Nardelli; 3. Yale’s School of Management’s Jeff Sonnenfeld, Nardelli and Bumble Bee Foods’ Prasa Rangappa; 4. Tilton holds court with Stuart Dean Co.’s Mark Parrish, Enviro-Guard’s Roy Serpa, Receivable Exchange’s Justin Brownhill and Great Numbers’ Drew Morris; 5. Freudenberg-NOK Sealing Technologies’ Brad Norton; 6. Mate1.com’s Elizabeth Wasserman, Minyanville’s Todd Harrison and Arbor Energy’s Luke Williams; 7. Author strategy advisor Ram Charan and Entertainment Media Ventures’ Sandy Climan; 8. Participants brainstorming in the idea exchange roundtable session
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Five Execution Strategies That Work Panelists offered up strategies that work—and how to execute them effectively.
Ingersoll Rand’s Larry Wash
2. Broaden Your Base “As a market leader in HVAC Systems, we were concerned about what would happen if the product commercialized or the market slowed,” recounted Larry Wash, who serves as president of Trane Global Services, a part of Ingersoll Rand’s Climate Solutions business. “So we looked at how to leverage our capability into doing something broader for our customers. In mature markets, we adopted a deliberate strategy of moving from equipment sales to system sales to solutions and then to services. We found that the journey of having a broader dialogue with your customers around systems and solutions inherently involves asking them about their broader business problems. As our understanding of those real problems accelerated, it allowed us to introduce many innovative service offerings so that now, when you fast-forward seven years, 40 percent of our revenue comes from services and solutions as opposed to equipment in mature markets.”
Covance’s Joe Herring
1. Operational and Service Excellence “It’s the corniest, easiest to articulate strategy, but I think a very difficult strategy to actually execute against,” said Joe Herring, CEO of Covance, who explained that it’s been the execution model for the drug-testing and safety company for 10 years. “If you think about running a four-year clinical trial or drug safety testing for what could be a billion dollar drug for a sophisticated client, the data better be accurate and on time, and you better build a trust-based relationship. To put that strategy in a way that we could execute on it every day, we broke it down into people process and clients. And I can tell you, the effort we put into targeted selection, behavior-based interviewing, how we on-board, train, motivate, career path and terminate employees is fundamental to our strategy, absolutely fundamental. And since 1997, we’ve grown from about roughly $300 million in revenue to about $2.2 billion in revenue and from about 2,500 employees to 11,600 employees in 60 countries.”
General Atlantic Partners’ Frank Brown
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CEO2CEO summit 3. Blue Ocean Strategy “‘Blue Ocean strategy’ is simply changing the rules of the game, eliminating competition through a completely different construct of the way a business or market is attacked,” explained Frank Brown, a former dean of the leading business school INSEAD, who pointed to Cirque du Soleil as an example. “They did away with the competition of traditional circuses like Ringling Brothers by eliminating animals and turning it into performance art, a phenomenal success.”
Wolters Kluwer Health Medical Research’s Karen Abramson
5. Leverage Your Core Assets
Mike Ullman, former executive chairman of JCPenney
4. Deliver on Customer Experience “To dramatically transform JCPenney, we had to build a differentiated experience that people would remember,” noted Mike Ullman, former executive chairman of the $17.8 billion retail chain. “We looked at the best of the best—companies like Wegmans, Southwest Airlines, Starbucks and The Container Store—that deliver the best customer experience in their respective industries. Then we identified our best 25 store managers and our best 25 sales people and looked at the characteristics that make them stand out. We found out there were some pretty simple principles. So we did several things at the same time. We used a modeling program that actually maps when the customers are in the store by hour and the hours of customer service against that. Using that model we picked up a 16 percent savings in salaries by actually putting people there when the customer is there—a novel concept. Then we essentially taught people that it was their responsibility to be themselves with a program called GREAT—Greet, Respect, Engage, Assist and Thank—and most of all, be yourself. We also adopted Southwest Airlines’ employee empowerment policy, which is that you only have to ask for permission to say no to a customer. Our customer service scores have soared. They’ve gone from 47 percent to around 66 percent. That’s key because in retail, highly satisfied customers come to your store 20 percent more often and spend 16 percent more.”
“Our job for 200 years has been to print articles about medical research, bind them in a magazine, and send it out once a month on behalf of societies like the American Heart Association,” explained Karen Abramson of Lippincott Williams & Wilkins, the division of Wolters Kluwer she runs. “I came on board during a time of contraction in the pharmaceutical market and falling print subscriptions, when the entire industry is under enormous pressure. But at the same time 92 percent of physicians said their medical journal is the No. 1 resource they go to when treating a patient, so the content—the information— was very, very valuable. “Right around that time the iPad came into the market and we realized we had a disruptive technology that was going to be a real solution for us. This year we turned eight of our largest medical journals into iPad applications. By doing this, we’ve been able to deliver a much more interactive experience for our physicians. There’s video. There are interactive conversations. You can have social media discussions with other physicians. If something changes, we can send out an alert. “These were all wonderful things, but when we were scenario planning we had to question our revenue model, because our biggest revenue model was print advertising. Once we delivered this wonderful electronic system that everybody loved and wanted to convert to, what happens to the print revenue model? We decided that we would need to take the risk of telling our advertisers, ‘You’re buying an audience, you’re not buying circulation. So effective now, if we have an iPad ad out, we will not break the price between the digital pricing and the print pricing, we will make you buy that audience.’ I’m happy to report that in January, which was our first bundled sale for advertising, we have not had a single advertiser refuse to pay for this new bundle, which in some cases comes at a 30 percent to 50 percent premium.”
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