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fo rt u n e . c o m
Businessperson of the Year MARK ZUCKERBERG The Unexpected Management Genius of Facebook’s CEO
How the Microsoft Chief Is Reviving the Sleeping Giant
The DeathDefying Comeback of United’s CEO
AMAZON TRAVIS K AL ANICK UBER JACK MA ALIBABA MARY BARRA GENERAL MOTORS REED HASTINGS NETFLIX
FORTUNE CRYSTAL BALL The Events, People, and Ideas That Will Matter in 2017
PUTTING YOU AT THE CENTER OF OUR WORLD Welcome to our Business Class, where your comfort is our priority.
DECEMBER 1, 2016
F E AT U R E S
THE 2016 BUSINESSPERSON OF THE YEAR
2016’s Top People in Business
Facebook CEO Mark Zuckerberg
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By ADAM LASHINSKY
How to lead like Zuck: The Facebook founder has built his social network into a global phenomenon and a growth powerhouse. Here’s what you can learn from how he manages.
The rest of the best: The standout executives on this year’s list have wildly varying styles and approaches, but just one thing in common—they deliver, big-time.
Microsoft CEO Satya Nadella
United CEO Oscar Munoz By SHAWN TULLY
It Isn’t Easy Being Green By BETH KOWIT T
By ANDREW NUSCA
d ec e c e m b e r 1, 1 , 2 016 016
ffoo rrtt u n e . c o m
Businessperson of the Year MARK ZUCKERBERG The Unexpected Management Genius of Facebook’s CEO
How the Microsoft Chief Is Reviving the Sleeping Giant
The DeathDefying Comeback of United’s CEO
COURTESY OF FACEBOOK
Nadella’s traveling revival show: on the road with the man who is quietly transforming a fading legacy software operation into a hungry cloudcomputing comer.
A miracle comeback: Munoz returned to the helm of United Continental soon after a heart transplant. How he bounced back—and why the company is starting to soar again.
Seventh Generation— acquired by Unilever this fall—is cracking the code on how to make eco-friendly cleaning products. The challenge now? Selling them to the masses.
AMAZON TRAVIS K AL ANICK UBER JACK MA ALIBABA MARY BARRA GENERAL MOTORS REED HASTINGS NETFLIX
FORTUNE CRYSTAL BALL The Events, People, and Ideas That Will Matter in 2017
ON T H E C O V E R : P H O T O G R A P H B Y D AV I D P A U L MORRIS—BLOOMBERG VIA GET T Y IMAGES
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6 Editor’s Desk The moral imperative for today’s business leaders. By ALAN MURRAY f o r t u n e + T im e g l o b a l f o r u m
8 Forging a New Social Compact At our joint conference in Rome, more than 100 corporate bosses will address the challenges of creating a more inclusive and humane economy. By CLIFTON LEAF
22 Business in the Cloud Amazon eliminates wrapping paper ahead of the holidays in an attempt to accelerate fulﬁllment and advance its sustainability strategy. By LEENA RAO 26 Fortune Brainstorm Health 2016 Highlights from our inaugural conference on the tech-fueled revolution in health care. inves t
b r ie f in g 11 The 2017 Fortune Crystal Ball The future, in eight pages: our forecast for the year ahead in business, politics, and technology.
30 Play Your Cards Right Stronger consumer spending has generated big proﬁts for the credit card industry. But investors should tread carefully. By MATT HEIMER venture
34 How I Got Started Robert Herjavec’s path—from poor immigrant to entrepreneur to reality-TV star—was not an easy one. Interview by 11
38 American Voices Economist Peter Blair Henry is teaching an evolved version of ﬁnance at Wall Street’s favorite business school. By TOM HUDDLESTON JR.
40 Executive Read Problem solving with Tim Ferriss, tech’s hottest self-help guru. By MICHAL
passions 43 2016 Gift Guide Haven’t started shopping yet? No problem. Fortune has you covered with picks for everyone on your list. By KATE FLAIM and CHLOE LIESKE
forum 49 A Boom With a View A ﬂood of new money and a lack of good investment opportunities are making things awkward in Silicon Valley. By ERIN GRIFFITH
50 Disrupted How to master change: Chipmaker Nvidia can teach us a few things about corporate transformation. By DAN LYONS
LEV-RAM BACK PAGE
last byte 108 Cash Hoarders A graphic breakdown of this year’s mounting U.S. corporate cash stockpile. Text by BRIAN O’KEEFE; graphics by NICOLAS RAPP Fortune (ISSN 0015-8259) is published monthly, with extra issues in March, June, September, and December, by Time Inc. Principal oﬃce: 225 Liberty St., New York, N.Y., 10281-1008. U.S. Subscriptions: $22.00 for one year. Member, Alliance for Audited Media. POSTMASTER: Send all UAA to CFS (See DMM 507.1.5.2); Non-Postal and Military Facilities: Send address corrections to Fortune, P.O. Box 62120, Tampa, Fla. 336622120. Canada Post Publications Mail Agreement No. 40110178. Periodicals postage paid at New York, N.Y., and at additional mailing oﬃces. Return undeliverable Canada addresses to: Postal Stn A, P.O. Box 4321, Toronto, ON, M5W 3G8. GST #8883816 21RT0001. Customer Service and Subscriptions: For 24/7 service, please use our website: www.fortune.com/customerservice. You can also call 1-800-621-8000 or write to Fortune at P.O. Box 62120, Tampa, Fla. 33662-2120. © 2016 Time Inc. All rights reserved. Fortune is a registered mark of Time Inc. PRINTED IN THE U.S.A. Subscribers: If the postal services alert us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may provide updates to the card information we have on ﬁle. You may opt-out of this service at any time. Mailing List: We make a portion of our mailing list available to reputable ﬁrms.
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THE MORAL IMPERATIVE FOR LEADERS WE LIVE IN A TIME of moral outrage. If you listened to
editor’s desk partisans on either side of Election 2016, it was a contest between—or a protest of—a criminally corrupt politician and a serial sex offender, even though neither candidate had been formally charged with, much less convicted of, such crimes. Elizabeth Warren recently eviscerated Wells Fargo CEO John Stumpf—a man once known for his own and his company’s core values—as a “gutless” leader, squeezing “employees to the breaking point so they would cheat customers and you could drive up the value of your own stock and put hundreds of millions in your own pocket.” Twitter failed to ﬁnd a buyer in part because its streams overﬂow their banks with instant outrage, brutalizing users in the process. Wrongdoing is rampant, easily revealed, and more easily ampliﬁed than ever before, animating us all to stand in judgment. I recently shared a meal with Dov Seidman, the CEO of LRN, which advises companies on how to build ethical cultures. He reminded me that the philosopher David Hume said that “the moral imagination diminishes with distance.” Human beings have always been quick to form moral conclusions about events closest to them, but slower to judge those beyond their immediate grasp. Seidman added a corollary: “As distance decreases, the moral imagination increases” and “we now live in a ‘no distance’ world where we experience the dreams, frustrations, plights, and behavior of others directly and viscerally.” Today the whole world is at our ﬁngertips. Video of the young Syrian boy pulled from his home in Aleppo is shared millions of times, putting the tragedy only an arm’s length away. Moral imagination has exploded. For business leaders, the challenges and implications are profound. Being a “good” corporate leader once meant delivering superior results to shareholders. Today that’s still necessary, but not sufficient. Workers and customers as well as politicians and the public are holding those who lead to a new—and higher—moral standard, and leaders must learn how to respond. CEOs of large global companies “can no longer operate without a normative point of view on the geopolitical, economic, and social issues that profoundly affect the lives of our employees, our customers, our partners, and members of all communities in which we operate,” says Seidman. “They need a moral framework and North Star that can guide us in our thinking and in our choices.” That’s easier said than done. But it’s the reason we selected Rome and the Vatican as the site for the
2016 Fortune + Time Global Forum on Dec. 2 and 3. We don’t necessarily agree with all of Pope Francis’s views on business and capitalism. But we do think he is one of the leaders in the world with the moral authority to help us better understand the changing nature of authority itself. And in that he has something important to teach every business leader. You’ll ﬁnd more about the Global Forum on page 8 of this issue of our magazine. And you’ll also see some fascinating examples of leadership in our Businessperson of the Year list. The early decision of Google cofounder Larry Page to make “Don’t be evil” the motto of his company is a case in point. Others on the list—like Jack Ma, Mary Barra, Tim Cook, and Larry Fink—have wrestled with their version of the same. The world is changing, and the deﬁnition of business leadership must change with it.
ALAN MURRAY Chief Content Oﬃcer, Time Inc. Editor-in-Chief, Fortune @alansmurray
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FORGING A NEW SOCIAL COMPACT
Fortune and Time will gather more than 100 CEOs and thought leaders at the Vatican this month. The aim? To strengthen the partnership between Big Business and the rest of the world. BY CLIFTON LEAF
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WE OFTEN TALK , in these pages, about how
to become a great leader—and who we think the best leaders are (see our cover package of stories in this issue, beginning on page 65). But we don’t focus enough on the where: Where, that is, should today’s chief executives and other managers lead their companies? The question is an important one—and perhaps never more so than now, at the end of a bitter election season in which at least two major candidates for President (and tens of millions of voters) have asserted that Big Business has lost its way. We think the question is so fundamental that, this month, Fortune and our sister publication Time are convening an unprecedented summit at the Vatican to answer it. There, more than 100 corporate chieftains, thought leaders, scholars, and experts in labor, health, education, economics, and the environment will meet intensively with one another—and with Pope Francis—in the hopes of forging a new “social compact” between Big Business and the global community it serves. That we have chosen the Holy See in Rome for the 2016 Fortune + Time Global Forum should not suggest that corporations should align their values with those of any one religion or ethic. But this venue, in our view, does convey the signiﬁcance and
Pope Francis waves as he arrives at the Kangemi slums on the outskirts of Nairobi in November 2015.
urgency of the challenge before us. How do we deﬁne the moral imperative of modern leadership to begin with? The question has no simple answer (see the Editor’s Desk on page 6 for more). Still, we’ll begin our two-day conclave by tackling it. We’ll probe how and where the global economy can be more inclusive and fair, how to ensure technology creates jobs even as it inevitably destroys some, how to bring the rural poor into the 21st-century economy, and how to bridge the digital divide between the haves and have-nots. The mission of business is not, and cannot be, isolated from the goals of humanity. And so we’ll address how to provide better health care for billions in the world who have little of it, to do a better job of safeguarding the land and water entrusted to us, and to offer better futures for those who have been displaced from their homes by the ravages of conﬂict and poverty. We understand that two days of talking in Rome— and that good intentions and even earnest commitments—will not remotely solve problems that humanity has taken decades and centuries to create. And, yes, we recognize that setting larger-than-life goals (especially when the rich and mighty do it) can often look like arrogance or worse—marketing. But not talking to one another, and shying away from such goals, hasn’t been the answer either. We know: The business community has tried that for too long.
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1 THE FUTURE IN
DECEMBER 1, 2016
Fortune Crystal Ball
THE ELECTION OF DONALD TRUMP to the presidency represents a seismic shift in American politics, an
event with implications nearly impossible to predict. One casualty of the election, indeed, may be the science of prediction itself: For all their algorithmic gymnastics, pollsters and betting markets were utterly confounded by Trump’s win. Which is why it’s essential to have a prediction tool that relies as much on art (and whimsy) as it does on science. And this year, for some extra insight, we’ve even teamed up with artiﬁcial-intelligence powerhouse IBM Watson, which mined tens of millions of sources to help us spot hidden trends. Here, we offer our well-informed, intuitive take on the stories that will shape business—and much else—in the coming year.
11 ILLUSTRATIONS BY WREN MCDONALD
fortune.com // dec.01.16
Fortune Crystal Ball
We’ll Add More Solar Capacity Than Any Other Type of Power. As coal continues its decline, and wind and natural-gas growth slows, solar power just keeps getting cheaper. In 2017 more power companies looking to expand will turn skyward. Expect big new solar farms in remote areas.
600 trillion BTU 400
U.S. SOLAR ENERGY SUPPLY
200 0 2006
2,073 WHERE THE S&P 500 WILL FINISH IN 2017 It’s no coincidence that markets stumbled the day after Trump’s win. Uncertainty about his impact on growth and trade will unnerve investors who are already anxious about interest rates and overvalued U.S. stocks. Expect the S&P 500 to ﬁnish 2017 about 3% below where it closed on Election Day.
WAT S O N S AYS
UBER AND AIRBNBWILL CONQUER THE SUNBELT The new economy’s ride-sharing and home-sharing giants are most popular today in dense coastal cities—think New York, Boston, or San Francisco. But IBM Watson research suggests Uber and Airbnb will make more inroads in the Southwest next year: It found signiﬁcant spikes in news and social media mentions of the phrase “sharing economy” in cities including Phoenix, Denver, and Dallas.
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chat will ﬁle IPO paperwork any day now. For many VCs awaiting a payday, the tech IPO revival of 2017 should come just in time.
Next year, on-demand delivery, better virtual reality, and Internet-connected everything will keep making life easier—and riskier.
THE IPO MARKET IS COMING BACK THIS YEAR, the market for technology company initial public oﬀerings has been weak at best. Just four small deals were completed in the ﬁrst half of 2016. But since August, 10 companies hit
the market, raising almost $2 billion. And it could be just the beginning. Many of the top names in startups—from big-data analyzer Palantir to ride-sharing titan Uber— have been hinting that they’ll soon be ready to go public. Plus, rumor has it that Snap-
THE INTERNET WILL GET SHUT DOWN MANY MORE TIMES IT IS A GREAT irony that a system designed to withstand nuclear war falls so easily victim to a stampede of beeping baby monitors and webcams. We’re talking about the Internet, of course. In October a number of top websites— Twitter, Amazon, Spotify, and more—were knocked oﬀ-line when a sprawling botnet
Disney Will Name Its Next CEO.The departure of Disney’s y’s COO and heir apparent in April left CEO Bob Iger without a clear successor. Iger’s contract ends in 2018, and if it’s not renewed, Disney may have to nab an outsider as there’s not much time to groom an internal candidate. (Paging Sheryl Sandberg?)
Super Bowl Viewership Will Slip.NFL ratings are lagging this season. That’s partly because of the election, but also because of concussion concerns and domestic violence scandals. Our bet: This game gets 110 million viewers, down a bit from last year. Our other bet? It’s Cowboys vs. Patriots.
WAT S O N S AYS
VIRTUAL REALITY GLITCHES GAMING AND entertainment ﬁrms are pouring serious money into virtual reality, betting that it’s destined to be the next big thing. There’s just one problem: Early adopters aside, consumers don’t agree. As of November, shoppers can buy any of the big three “ﬁrst-generation” headsets: Oculus VR’s Rift, HTC’s Vive, and Sony’s PlayStation VR. But there’s no sign of a mass frenzy to scoop them up: Most are ﬁnding that mere novelty can’t justify the high price tag. To be sure, there are signs of growth in VR. Research by Deloitte expects 2016 to be the industry’s ﬁrst billiondollar year. But it’s looking likely that the rocket ship will stall in 2017, unless software makers can come up with a true raison d’être—and soon.
attacked a New Hampshire ﬁrm that serves as an Internet switchboard. An army of hijacked “Internet of things” devices swarmed this choke point with overwhelming trafﬁc. Now, far from being ﬁxed, the problem compounds as more unsecured devices—including surveillance cameras, toasters, and other home appliances—roll oﬀ the production line with weak default passwords. Fortune tends to agree with Jeremiah Grossman of security ﬁrm SentinelOne, who said after the recent strike that it “could easily be just a canary in the coal mine.”
AOL WILL GET COOL AGAIN DON’T LOOK NOW, but the
“You’ve Got Mail” progenitor is getting its groove back. With the help of a series of ad-tech acquisitions—like Millennial Media, Vidible, and Convertro— the Verizon unit is building out a powerful new advertising platform, called ONE by AOL. It may never make it into another romantic comedy, but among tech-savvy marketers, AOL iss looking hip. lloo ooki king ng downright dow d ownr nrig ight ht h hip ip..
THE IPHONE WILL GET A RADICAL UPGRADE THE RUMOR MILL is already cranking with leaks about the iPhone 8, due in 2017. Marking the 10th anniversary of Steve Jobs’ original iPhone, the new model is expected to include radical changes like a super-high-resolution OLED screen that stretches from edge to edge of the device, and a home button transformed into a virtual onscreen button. Other rumored features include wireless charging capability. After the mildly disappointing iPhone 7, the next update should be a more radical hit.
DRONES WILL DELIVER PIZZA (BUT NOT TOILET PAPER) IN THE PAST YEAR, we’ve seen drones deliver pizza, burritos, fried chicken sandwiches, and Slurpees. Expect to see more one-oﬀ junkfood ﬂights as companies like Chipotle and Domino’s use them as marketing stunts. But anyone thinking drones will usurp delivery drivers or postal workers in 2017 will be disappointed. New FAA rules have made it a bit easier, but companies still can’t legally ﬂy drones at night or outside the line of sight of their operators without a special exemption. A NASA national e air-traﬃc management a system is in early stages— s don’t expect regular drone d shipments of toilet paper or s toothbrushes until it’s done. t
THE NEXT BIG DRUG BREAKTHROUGH: BEATING DRUG RESISTANCE A bit of sobering newsonthethreatof growing antibioticresistance: An IBM Watson study of news sources and medical journals found a surge in mentions of late-stage trials related to CABP, a pneumonia associated with drug-resistant infections. Luckily U.S. drugmaker Cempra and Austria’s Nabriva each have drugs that are close to formal approval.
1.25% THE FEDERAL FUNDS RATE AT THE END OF 2017 The Federal Reserve spent much of 2016 hinting that it wanted to raise rates. Now, Janet Yellen and Co. have a president-elect whose economic agenda may prove to be inﬂationary. The economy won’t justify huge rate hikes, but we can expect three quarter-point increases between now and next Thanksgiving.
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Fortune Crystal Ball
Barack Obama Will Get a $20 Million Book Deal.The postpresidential book deal is a time-honored moneymaker for past Presidents. But Obama, already the author of a writerly bestseller and a historic ﬁgure as the ﬁrst African-American president, will command a higher premium than most.
4 BOOK DEALS (IN 2016 DOLLARS) B. CLINTON
G. W. BUSH
PREDICTED: $20 M.
WAT S O N S AYS
POLITICS A Trump White House may defy predictability, but with Congress under GOP control, expect these early moves.
highway bill, which President Obama signed into law, but legislators will vote for more because Democrats view it as a jobs measure and Republicans crave the corporate tax reform that’s likely to accompany it (see right).
CLIMATE CHANGE RULES ARE ROLLED BACK THE U.S. GETS A GIANT NEW INFRASTRUCTURE BILL PRESIDENT-ELECT Trump will make this a high priority because it will give him a speedy bipartisan win. Members of both parties love spending money on roads, bridges, airports and other infrastructure. As a former Capitol Hill staﬀer memorably put it, “The smell of hot tar is an aphrodisiac to legislators.” Last year, Congress passed a ﬁve-year, $305 billion
TRUMP WILL launch his ﬁrst attack on Obama’s climate-change legacy by moving to dismantle the Clean Power Plan, the current administration’s ambitious attempt to dramatically cut carbon emissions via pollution regulations. It would probably take Trump’s team a year to unwind the rule, which was ﬁnalized in 2015 and for now remains tied up in a court challenge. But shots are likely to be ﬁred early.
THERE WILL FINALLY BE (PARTIAL) TAX REFORM CONGRESS WILL change the corporate tax code to encourage (or compel) companies to repatriate trillions in overseas cash at a low tax rate. The revenue generated by that deal will give Congress cover to pass some of the deﬁcit-swelling income tax cuts that Trump and the GOP have backed.
THE PENDULUM SWINGS AGAINST IMMIGRANTS TRUMP WON’T be able to assemble his promised “deportation force” to boot undocumented immigrants from the country. But he will rescind Obama’s executive order allowing about 800,000 immigrants who came here as children to stay on twoyear work permits.
EVENYOUR GRANDMA WILL USE GRUBHUB Amazon and Facebook have jumped into online food ordering and delivery, making a crowded ﬁeld even more so. But GrubHub should remain an industry leader. Its active user total rose 19% over the past 12months, to 7.7 million, and an unusually high volume of social media mentions (revealed by an IBM Watson analysis) suggests it’s poised for more rapid growth. Bonus: It’s already proﬁtable.
U.S. GDP GROWTH WILL BREAK
2% International agencies are signaling an upbeat message for U.S. GDP growth in 2017, with the OECD, the IMF, and the Economist Intelligence Unit all forecasting 2.2% growth or more—up from a projected 1.6% in 2016. Some banks have taken a more dour tone about the forecast, but with wages rising and unemployment low, there’s reason for a little optimism.
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Fortune Crystal Ball
OIL WILL COST
$50 A BARREL NEXT YEAR The Energy Information Administration says the price of oil will tick upward in 2017, to $50 a barrel from the current $45. Others expect a bigger jump—Merrill Lynch, for example, projects the price will hit $69 by summer. We think OPEC will opt to keep production high, and thus prices lower. But either way, gas will get a little more dear.
WAT S O N S AYS
IT’S THE PHILIPPINES’ YEAR President Rodrigo Duterte’s penchant for vigilantism and anti-Americanism is worrying. But he has taken over an economy that’s hitting its stride: Economists expect Philippine GDP to grow 6.2% next year. One clue to a looming boom: An analysis by IBM Watson of some 700,000 global news sources found a high concentration of mentions of infrastructure investment linked to the country.
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E Ecuador Kicks Out Julian Assange:With its oile exporting economy in recession and in need of i investment, Ecuador may boot the WikiLeaks mastermind from its U.K. embassy as an olive m branch to Europe and the U.S. b
There Will Be a Climate-Change-Driven Refugee Crisis: Hotter days, rising oceans, and extreme weather—already contributors to migration—will displace more people in 2017, particularly in low-sea-level areas.
THE WORLD Nationalism, political uncertainty, and stunted trade will create new headaches in 2017. But global prosperity will keep increasing.
CHINA KEEPS BOOMING MAKE NO MISTAKE, when President Xi Jinping last year called for GDP growth of at least 6.5% for the coming ﬁve years, China was signaling it would prop up growth in any way necessary. The domestic debt-to-GDP ratio rose by an astonishing 28% in the 12 months through June, according to Emerging Advisors Group. The result: Real estate prices are up, consumers are spending, and GDP growth is hitting targets (though actual growth will be at least a full percentage point below the government’s oﬃcial releases).
PUTINPICKSNEWTARGETS THE BALTIC STATES are fairly well defended, but Russia may see a target in the Balkans. Moscow will continue to bulk up its cyber oﬀensive too. Bad
news for establishment politicians throughout the West.
Angela Merkel wins reelection, despite rising fringe groups.
U.K. PRIME MINISTER Theresa May will trigger Article 50, formally starting the thorny process known as Brexit and further fueling concerns about the economy (scaring oﬀ capital). Meanwhile, inﬂation will curb ECB quantitative easing, driving the euro higher.
Alain Juppé will be elected President of France in May, beating Nicolas Sarkozy to the center-right UMP party’s nomination and seeing oﬀ the Front National’s Marine Le Pen in the runoﬀ. Bonus prediction: German Chancellor
We’ll Get Some Good Geopolitical News in 2017: There will be much media attention on China’s disputes with its neighbors in the East and South China Seas. But words are unlikely to force truly destabilizing deeds because China’s reform process demands that China avoid trouble and because the neighbors know they can’t count on Washington to rescue them if they stumble into conﬂict. In addition, Colombia’s peace deal took a tumble a few weeks ago, but it will still happen because both sides want it. Finally, despite political dysfunction in both Greece and Turkey, we can expect a deal to reunify divided Cyprus. In all three cases, pragmatism prevails. —IAN BREMMER, PRESIDENT, EURASIA GROUP
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Fortune C s Balll Crystal
Gourmet Burgers Get Hot (Cow Optional): Pricey grass-fed beef sales grew 25% in the past year, while plant-based protein surged 35%. That combo onlyseems odd: Credit both rising trends to health and climate concerns.
A Streaming Service Finally Wins an Oscar: Netﬂix’s13th, bySelma director Ava DuVernay, is a strong contender in the doc genre, and Amazon’s devastating drama Manchester by the Sea is getting buzz.
WAT S O N S AYS
follow in her newly cushioned footsteps. Increasingly health-conscious consumers now see high heels—once the epitome of elegance—as an unnecessary bodily risk.
OLD HAVANA BEATS OUT OLD SAN JUAN (FOR NOW)
Next year’s crazes will include Star Wars (expect the new one to win at the box oﬃce), athleisure (comfort is king), and novelty fast food (sorry, calorie counters).
A FORTUNE 100 COMPANY WILL GO OFFICE-FREE THE FIRST TO GO was the personal oﬃce. Then the cubicle bit the dust. Now even the open oﬃce is at risk, with the rise of “hot desks” that belong to everyone and no one. In 2017 the slow dissolution of the workplace will reach its natural conclusion: The ﬁrst Fortune 100 company will jettison the oﬃce altogether. After all, why foot a hefty real estate bill when telecommuting is an option? A backlash may be
18 fortune.com // dec.01.16
brewing, though, as mentoring drops oﬀ, laptop-bound workers report ergonomic issues, and employees burn out when they ﬁnd themselves literally living at the oﬃce.
HIGH HEELS GO OUT OF STYLE IF WE’RE TO TAKE Victoria Beckham’s word as gospel (as we should), women will pitch their sky-high stilettos once and for all. The style legend famously ditched her Christian Louboutins this year for comfy sneakers, and women will
CUBA’S TOURISM ministry expects a record number of visitors this year: 3.8 million, up 19% from the previous year’s high. If the momentum holds in 2017, the number of foreign visitors to Cuba will surpass those to Puerto Rico and the U.S. Virgin Islands combined. But the surge may be shortlived: Once American visitors realize that those 50-year-old classic cars belch noxious fumes, tourism will drop oﬀ.
ROSSWILL GO ON A RETAIL RAMPAGE Ross Stores is on a roll: Analysts expect the discount retailer’s sales to rise 7% next year, to $13.6 billion— surpassing department-store giant J.C. Penney. Revenue has soared under CEO Barbara Rentler, who is reclusive but well liked. In an IBM Watson analysis of mentions of CEOs in news articles and social media, Rentler scored some of the highest positive “sentiment scores.”
THESE ARE THE NEXT FOOD MASHUP STUNTS THIS YEAR Burger King tried to take a bite of Chipotle’s lunch with its Whopperrito, and McDonald’s took a pass at Starbucks’ seasonal magic with pumpkin-spiced fries. Here, the weird ways food giants will (or, okay,might) try to knock each other oﬀ in 2017. DQtakes a page from Taco Bell with the Black Bean Blizzard Supreme. KFC 12-piece Bucket of Cheeseburgers. Applebee’s Tuña Colada: rich in omega3s and rum. Look out, Long John Silver’s.
HOMEBUILDERS WILL RISE FROM THE DEAD Home prices have risen relentlessly of late—the S&P/Case-Shiller index is up 37% since 2012—but homebuilders have not kept pace with demand, as inventory for sale has fallen 9% over that time. With wages rising and unemployment low, 2017 will be the year builders ﬁnally start building in earnest again.
MORE COMPANIES TIETHEKNOT
formed a joint venture with Sears last year to hive oﬀ some of its best locations and charge other retailers a premium. It follows that Simon could go one step further and buy the chain outright, then sell oﬀ or carve up the remaining space for other stores.
Helped along by low interest rates, the merger boom of 2016’s last quarter will keep rolling.
COMCAST WILL BUY T-MOBILE T-MOBILE has been by far the fastest-growing U.S. wireless carrier since John Legere took over as CEO in late 2012, and has more than doubled its subscriber base, to 69 million. Sprint made a run at the company in 2014, but antitrust regulators waved it oﬀ. That likely wouldn’t be an
AMAZON WILL MAKE A PLAY FOR BARNES & NOBLE issue for a buyer like Comcast, which has said it plans to oﬀer a wireless service in 2017.
PRIVATE EQUITY WILL NAB HEWLETT PACKARD ENTERPRISE NOW THAT it has sold oﬀ most of its software and enterprise services units to focus on high-end servers, storage,
and data-center tech, the trimmer version of the oncemighty company will tempt buyers. Rumors are already circulating that private equity ﬁrms like what they see.
SIMON PROPERTY WILL ACQUIRE SEARS SIMON PROPERTY GROUP,
the largest U.S. mall developer,
AFTER YEARS of competing with physical bookstores, Amazon is building them. The tech titan has opened or announced four locations so far but is rumored to be planning more. Conveniently, Barnes & Noble has 638 stores and a market cap of $760 million—a pittance for its deep-pocketed rival. The risk? Antitrust regulators will close the book on it.
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SLACKWILLSELLOUT SLACK, the business-
oriented chat product, has tons of traction if not proﬁt. It would make a nice pickup for a company that wants to acquire potential customers and perhaps bask in Slack’s reﬂected glow. Any Slack acquisition—by IBM? by Cisco? by Oracle? by Salesforce?— would follow in the footsteps of Microsoft’s 2012 buyout of chat platform Yammer.
UNDER ARMOUR WILL MERGE WITH LULULEMON STRETCHY PANTS, meet basketball shoes. Under Armour’s success outﬁtting the male gym-goer is matched only by Lululemon’s strength with yoga-loving women. A partnership could look good on both.
HOWWE DID IN 2016 On target: We predicted correctly that slow growth and caution about the political climate would mean the Fed would raise rates only once in the past 12 months. We called an ongoing real estate boom (some would say bubble) in China. We predicted that new endorsement deals would put Serena Williams atop the female athlete earnings list. And we read
the political tea leaves to predict that Sen. Tim Kaine would become Hillary Clinton’s running mate. In the ballpark: We warned that an email hack linked to foreign intelligence agencies would make news. (Hello, John Podesta.) And we predicted that hoverboards would be a hot item—roughly 3million have been sold in the U.S.—but we missed that many would be
so hot they’d catch ﬁre. Oﬀ the mark: Ask us about the “Rubio/Haley 2016” T-shirts gathering dust in our garage. Like most of the media, we didn’t see Trumpism coming. We were also overoptimistic about tech, predicting a 22% surge for Apple shares (instead they fell) and a breakthrough in nuclear fusion. (Still a Star Wars– only technology, alas.)
Fortune Crystal Ball CONTRIBUTORS: Christina Austin, Kristen Bellstrom, Scott Cendrowski, Geoﬀ Colvin, Barb Darrow, Katie Fehrenbacher, Alex Fitzpatrick, Erika Fry, Robert Hackett, Matt Heimer, Tom Huddleston Jr. , Mathew Ingram, John Kell, Linda Kinstler, Beth Kowitt, Michal Lev-Ram, Polina Marinova, Chris Matthews, Tory Newmyer, Roger Parloﬀ, Aaron Pressman, Jeﬀ John Roberts, Geoﬀrey Smith, Anne VanderMey, Jonathan Vanian, Phil Wahba, Valentina Zarya, and Claire Zillman
I think your 8 fell over.
Amazon will be employing its “box on demand” machine, which creates formﬁtting boxes for oddly shaped items such as boogie boards, golf clubs, and tennis rackets.
22 fortune.com // dec.01.16
PHOTOGRAPH BY MICHAEL CLINARD
OUT OFTHE BOX
Amazon eliminates wrapping paper ahead of the holidays in an attempt to accelerate fulﬁllment and advance its sustainability strategy. BY LEENA RAO
WHEN AMAZON SHIPS millions of gifts
BUSINESS IN THE CLOUD
to customer doorsteps this holiday season, one thing will be noticeably missing from the majority of the brown cardboard boxes emblazoned with its logo: wrapping paper. For the ﬁrst time, the e-commerce juggernaut—which saw last year’s holiday-quarter sales increase 22%, to $35.7 billion—is ditching its customary blue-and-gold wrapping paper in the U.S., Mexico, and Canada. Instead, Amazon will offer velvet gift bags in ﬁve sizes and three colors (red, silver, and blue) to ﬁt presents of different shapes and sizes, ranging from a palm-size BB-8 droid replica from Star Wars to a DJI Phantom Drone. Pricing for the
velvet bags will range from $3.49 to $5.99—the same as what gift wrap cost previously. “Our guiding North Star is the minimization of packaging,” says Kara Hurst, Amazon’s director of worldwide sustainability and social responsibility. “Wrapping paper has no value.” Hurst joined Amazon two years ago in her current role, which was new for the 22-year-old company. Her mission: to help Amazon become more environmentally conscious as it looks to scale a multibillion-dollar e-commerce business as Walmart and Target try to threaten its lead. A big part of her job, Hurst explains, is determining how to streamline the packaging of millions of goods shipped each year. In a small laboratory in Seattle, Hurst has a team tasked solely with brainstorming strategies to improve Amazon’s packaging. She is more acutely focused on Amazon’s 123 fulﬁllment centers worldwide—massive warehouses in which a mix of robots, industrial machines, and humans package and sort orders. This holiday season robots will be working full-time as Amazon doubles down on deploying “frustration-free packaging,” explains Hurst. This type of packaging debuted in 2008, using recyclable cardboard while excluding excess materials, such as extra internal boxes and the plastic casings found around batteries. All box forms can be opened by hand without a box cutter. This year, Amazon says, more than 1 million items will be shipped with frustration-free packaging, instead of hundreds of thousands in years past. But Amazon isn’t turning to environmentally friendlier practices purely out of altruism. “They can save money by reducing packaging costs and increase room on trucks for more sales by making packages smaller,” says Colin Sebastian, a senior equity research analyst with Robert W. Baird. While Hurst declined to place a number on the beneﬁts of eliminating wrapping paper and superﬂuous boxes, she conﬁrms that there is a “deﬁnite cost savings for the company.” Sebastian concurs: “This is classic Amazon.”
23 fortune.com // dec.01.16
THE REVOLUTION STARTS HERE
Big things are happening in your medicine cabinet. Perhaps you haven’t noticed it yet, but technology is changing virtually every aspect of the health care continuum—from how we detect and diagnose disease to how and where we deliver care to the notion of what it means to be well in the ﬁrst place. You can thank advances across an enormous spectrum of new tech—deep learning, big-data analytics, wearable sensors, hyperconnectivity, 3D printing, gene editing, and much more—for that shake-up and the rapidly changing state of America’s $3 trillion health care sector. To track this extraordinary transformation, Fortune launched Brainstorm Health Daily, a newsletter, and a conference that kicked oﬀ in San Diego, Nov. 1–2. Here’s a look at a few of our favorite moments from the event.
GlaxoSmithKline’s chairman of vaccines, MONCEF SLAOUI,
compared developing a new vaccine to ﬁght pathogens like Ebola and Zika in the face of an already occurring outbreak to buying car insurance in the midst of an accident: It’s just too late. —KATIE FEHRENBACHER
“Mentally,ask thequestion: ‘WhoamI?’”
26 fortune.com // dec.01.16
ENTREPRENEUR ARIANNA HUFFINGTON took a trip inside virtual reality and learned how the immersive tech can help ease physical pain. HOWARD ROSE, CEO of DeepStream VR, had Huﬃngton place her left hand into an ice bucket; the minute-long bath proved a painful experience. But when she dipped her hand again in the chilly water, this time donning a VR headset and playing a game, she barely felt any discomfort. “That was amazing,” Huﬃngton said. —JONATHAN VANIAN
S T U A R T I S E T T— F O R T U N E B R A I N S T O R M H E A LT H
Arianna Huﬃngton, founder and CEO of Thrive Global, has fun with Howard Rose’s pain-ﬁghting VR game.
— DEEPAK CHOPRA, cofounder of the Chopra Center, guiding conference attendees through a 20-minute meditation. Such periods of mindfulness have been found to change gene expression and oﬀer many health beneﬁts, he said.
SHORT ON TIME MORE FACE TIME
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Fortune’s Leena Rao gets a baby checkup onstage, thanks to a portable ultrasound.
Nobel Prize–winning scientist and Salk Institute president ELIZABETH BLACKBURN schooled the crowd on her life’s work: telomeres and what those chromosomecapping structures tell us about aging. Episodes of long-term stress are not good for them—or us.
The king of disruption, Sean Parker, heralds the power of venture philanthropy.
The cost of a new drug per year of added life has surged ﬁvefold in the past two decades, noted Memorial Sloan Kettering’s PETER BACH. Government regulation might do more to rein in prices than free-market forces have, but it could mean reduced patient choice and other negative side eﬀects. —JEN WIECZNER
28 fortune.com // dec.01.16
AT EIGHT MONTHS PREGNANT with my second child, I’m used to sitting for ultrasounds at a hospital, where a technician uses a $250,000 machine to check the health of my baby. Most people in the world aren’t that lucky. New medtech is changing that, however. At Brainstorm Health, I got a belly-eye view of a device that could bring such peace of mind to women in the poorest and most remote regions: a mobile ultrasound machine, created by Qualcomm and Trice Imaging, that can send scans to an iPad-like unit that ﬁts into the palm of a technician’s hand. What’s more, it can reduce the cost of an ultrasound from $80 to $2 per patient. —LEENA RAO
EARLIER THIS YEAR, with his own $250 mil-
lion, Napster cofounder and ﬁrst Facebook president SEAN PARKER launched the Parker Institute for Cancer Immunotherapy. His goal is to hack cancer—but even before he had opened his center’s doors he had, in signature fashion, disrupted the competitive ﬁeld, enlisting six of the nation’s leading cancer hospitals in his eﬀort. Parker represents a new breed of philanthropists. Tech billionaires often approach problems with a “hacker phenotype,” he said; they don’t just want to throw money at a cause—they want to “intellectually engage.” So far, it seems the model is working. —ERIKA FRY
“Theideais,YoucouldprescribesixweeksofiPadplayand beabletomonitorthatremotely.” —ADAM GAZZALEY, professor of neurology at the University of California at San Francisco and founding director of Neuroscape Lab, which is developing videogames to treat ADHD, depression, and traumatic brain injuries
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PLAY YOUR CARDS RIGHT Stronger consumer spending has generated big proﬁts for the credit card industry. But given the challenges facing brands like American Express and MasterCard, investors should tread carefully. BY MATT HEIMER
BEFORE THE END OF 2016, perhaps while loading their minivans and Malibus with
Christmas presents, Americans are expected to blow past a major milestone. For the ﬁrst time since the ﬁnancial crisis, they’ll be carrying more than $1 trillion in credit card debt. That high-water mark is actually an encouraging sign of economic recovery. (The consumer is back, baby!) But it also hints at the enduring success of the credit card industry, especially its four best-known brands—the ones whose names adorn those “Accepted Here” decals at the cash register. Since the Great Recession, Visa, MasterCard, American Express, and Discover have become increasingly efficient proﬁt machines. In 2016 they’re on track to post $20 billion in earnings on $70 billion in revenue, according to S&P Global, up from $9.6 billion and $48 billion, respectively, in 2010. The companies can credit their success to a combination of smart adaptation and good
30 fortune.com // dec.01.16
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downturn dampens consumers’ exuberance—so investors should be selective. MasterCard and Visa have less to fear from tough economic times. They derive most of their revenue from processing payments among merchants, banks, and spenders, which means they don’t get stuck holding bad debts if consumers struggle to pay their bills. MasterCard has expanded aggressively overseas, where credit card adoption is growing much faster than in the U.S. In July it bought VocaLink, a competitor to PayPal’s Venmo in person-to-person payments. And Sinegal says MasterCard has been “the most aggressive of the credit card ﬁrms” in monetizing data about spending patterns—big data indeed, given the 1.6 billion MasterCard-branded cards in circulation. Still, at 24 times expected 2017 earnings, MasterCard’s stock looks pricey. Visa isn’t a bargain either, at 21 times next year’s earnings, but its advantages in scale (it processes between 50% and 60% of global electronic payments) and technology justify its valuation. Its Visa Checkout mobile app has more than 15 million customer accounts, and Bob Napoli, analyst at investment bank William Blair, notes that its exclusive Costco card is among the ﬁrst widely adopted “contactless” cards in the U.S. Analysts expect earnings to grow 17% and the stock to rise more than 15% next year. American Express and Discover can seem downright stodgy by comparison. They concentrate primarily on issuing cards, which ties their proﬁtability more closely to consumer spending habits. American Express took a big revenue hit when it lost the Costco franchise to Visa—one reason its stock is down about 30% from its 2014 highs. That said, AmEx’s unusually affluent customers and its near lock on the corporate expenseaccount business should stop its recent slide. Its customers spend two to three times as much per account as the average card user, which makes them desirable to merchants—enabling AmEx to charge higher-than-average transaction fees. AmEx has ramped up its rewards programs Tech innovations and timely acquisitions have helped Visa and to keep such gold-mine customers from defectMasterCard gain more traction with investors in recent years. ing. It’s no longer a stock to avoid, but analysts VISA don’t expect robust growth anytime soon. 24.5% 20% The biggest bargain among the Big Four may be the one with the most traditional business 10 24.9% model. Discover Financial Services focuses almost 0 exclusively on credit cards and lending. It has MASTERCARD rigorously avoided risky borrowers: “They DISCOVER –13.8% –10 stayed in the ‘superprime’ space even before the ﬁnancial crisis,” says Sanjay Sakhrani, manag–20 ing director at investment bank Keefe Bruyette –28.6% & Woods. Its stock trades at 9.5 times 2017 –30 earnings, inexpensive relative to its credit card AMERICAN EXPRESS –40 rivals and to banks in general. And because lending is its main business, Discover’s proﬁt JAN. 2015 JAN. 2016 NOV. 2016 margins should improve if interest rates rise. SOURCE: S&P GLOBAL MARKET INTELLIGENCE Sakhrani thinks the stock could climb from the mid-50s to around $65 next year—the kind of gain that could fund a future shopping spree for today’s investors.
timing. After the ﬁnancial crisis, regulators crimped the card giants’ revenue by capping or cutting their fees. But regulators also helped the industry by curbing big banks’ other business lines, like proprietary trading and riskier lending— leaving the issuance of new credit cards as one of the ﬁnancial sector’s few reliable sources of growth. Technological change also gave card companies a tailwind, as e-commerce and faster processing systems enticed consumers to choose plastic over cash and checks. Credit, debit, and prepaid cards now account for two-thirds of noncash transactions, up from one-third in 2000, according to the Federal Reserve. And while many tech seers thought mobile-payment platforms like PayPal and Apple Pay would threaten the card oligopoly, the old guard has largely co-opted the upstarts, making their own services compatible with the new generation of apps. Fintech “used to be seen as the great threat,” says Jim Sinegal, equity analyst at Morningstar, but for now digital innovators are “just incorporating the existing ecosystem.” Of course, there’s no guarantee the stars will continue to align for the Big Four, especially if a
WHAT’S IN THEIR WALLET?
32 fortune.com // dec.01.16
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Â©2016 Time Inc. TIME is a registered trademark of Time Inc. Photograph by Harry Benson
H O W I G O T S TA R T E D
BEFORE HE WAS A SHARK
Robert Herjavec’s path— from poor immigrant to entrepreneur to reality-TV star—was not an easy one. INTERVIEW BY DINAH ENG
BEING AN IMMIGRANT led Robert
Herjavec, 54, to grow up fast. His family moved from Croatia to Canada, and by the time he was 10, they relied on him to read their apartment lease. Later, he talked his way into a tech company before starting his own ventures. His cybersecurity ﬁrm, the Herjavec Group, has $130 million in 2015 revenue, and Herjavec has become a TV personage, on Shark Tank and Dancing With the Stars, where he was a recent contestant. His story:
I CAME FROM CROATIA, where my
dad would tell me he was a political prisoner. He’d drink a little too much, say bad things about Communism, and got thrown into jail 22 times for being an anti-Communist. In 1970 he escaped from jail, grabbed my mom and me, and we hightailed it out of there. I was 8 years old. We planned to emigrate to the U.S., but our pa-
34 fortune.com // dec.01.16
pers weren’t accepted. However, Canada opened its arms to us, perhaps because we had family there, so we arrived with one suitcase and $20. We then found a friend of my mom’s and lived in the basement of their house in Toronto for 18 months before moving to a three-room apartment. My parents and I didn’t speak any English. Those years were painful and difficult. My
R YA N P F L U G E R — A U G U S T
Shark Tank’s Robert Herjavec.
HOW TOIMPROVE YOUR COMPANY’S CYBERSECURITY
parents depended on me a lot. When we got the apartment, I was 10 and had to read the lease for them. When I was 13, I had to help them get a mortgage to buy a small house. As an immigrant, where you live is a big deal. Only people who come from nothing really appreciate this. My dad worked in a factory, and I was the poorest kid in my class. I looked different, and people made fun of me. It forced me to mature really fast and gave me an insatiable desire for betterment. The chip on my shoulder never went away. I went to the University of Toronto and, after graduating, I went to work for a TV station in 1984. They needed someone who spoke [Serbo-Croatian], which I do, to cover the XIV Winter Olympics in Sarajevo, so I became a ﬁeld producer. I had no idea what I was doing, but I got the job done. My head got really big, and when I came back, I thought I’d be the next great ﬁlm director. I ended up getting the third assistant director position for a movie called The Return of Billy Jack and discovered that entertainment is a crazy industry. One day, my best friend at the time complained that he didn’t get this job with a tech company that was going to pay $30,000 a year. In 1985, that was a lot of money, so I decided to interview for it. The job was selling IBM mainframe emulation boards for a startup called Logiquest. I didn’t know anything about business or computers, but I [persuaded the founder to hire me]. I became fascinated. I like playing with devices, I like change, and I’m a little hyper, so I did well. I learned complicated concepts and how to sell to people who didn’t have a technical background. I worked my way up to being president of Logiquest in my twenties. I love to run things, and I found the minutiae of running the business fascinating. I ended up leaving to go into business with a guy, but it didn’t work out, so I started BRAK Systems in 1990. We were integrators, taking other people’s technology and integrating it into companies. We were competing against large companies like Sun and IBM, so the biggest challenge was ﬁguring out how not to be a small business. I had to convince engineers from big companies to come work for me. I understood that people don’t want to work somewhere. They want to be part of something. They don’t want to be managed. They want to be led. So I made work fun, and they came. As we grew, I had to get a second mortgage and use credit cards to expand. People say you should pay yourself ﬁrst, but a business is a living entity, so I paid the employees ﬁrst, and we became proﬁtable.
Back then, Internet companies had massive valuations, and we became a hot commodity. In 2000, KNOW THE STATE OF AT&T Canada made me an incredYOUR NETWORK. ible offer of $30.2 million, so I sold Most breaches occur over time. Hackers BRAK Systems to them. want to get in and My wife at the time wanted to go poke around for a back to work, so I stayed home with while to learn the the kids. It was the best experience. ﬂow of your network. But I missed running my own comBy the time you ﬁnd out, they’ve already pany, so in 2003, I put up $20,000 extracted data. and started the Herjavec Group with a couple of guys I’d worked with. We LOGS, LOGS, LOGS tried different things; many of them Every time you hit a keystroke, it credidn’t work. We tried to sell tech to ates an electronic customers who were already buying ﬁngerprint. With the a product from someone else. We Internet of things, the learned that nobody ever leaves amount of data gener“good enough” for “potentially ated is incredible. We monitor far more than better.” So we started selling newer 100 billion logs daily. tech and were one of the ﬁrst to get So make sure you have into antispam products. a way to correlate your In 2007 we decided that manlogs in one place. aged security, as opposed to just DO AN EXTERNAL selling the products, would become AUDIT EVERY YEAR. big. We started getting bigger, but Have a process to all our sales were in Canada. So 2½ analyze your data, years ago we increased our presapply analytics, and have humans involved ence in the U.S., bought a company in it. Don’t just rely on in the U.K., and moved into Ausan internal team. Hire tralia. Today, 35% of our business an outside ﬁrm for is outside Canada. objective ﬁndings. Data is the modern weapon. Protecting anyone is impossible. The game has changed to response time. We want to know the minute a breach occurs. Our company has worked on things like the data breach of a U.S. company by a foreign government and bringing a hospital back up that had been shut down by ransomware. My leadership style is inspiring, empowering— and dictatorial when I need to be. I’m a great guy to work with 98% of the time. The other 2%, you’re going to do it my way. In tech, you don’t have time for indecision or to make decisions by committee. It’s always clear where the buck stops. I have almost 300 employees now, and our culture is about always doing better. That competitive drive is an extension of me as the founder. The passion to better one’s life is not just an American dream. It’s a commonality among all people. I have a tremendous amount of pride in seeing my name on the office door.
36 fortune.com // dec.01.16
ROBERT HERJAVEC Herjavec Group
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Economist Peter Blair Henry is teaching an evolved version of ﬁnance at Wall Street’s favorite business school. BY TOM HUDDLESTON JR.
PETERBLAIRHENRY DEAN, LEONARD N. STERN SCHOOL OF BUSINESS, NEW YORK UNIVERSITY WUNDERKIND
Henry was the Stern School’s youngest dean, accepting the job a few days before his 40th birthday.
He is on the boards of Citigroup and General Electric and served as an economic adviser to Barack Obama’s 2008 presidential campaign.
A varsity football player at the University of North Carolina, Henry was also a ﬁnalist in a campus-wide dunk contest.
38 fortune.com // dec.01.16
when Peter Blair Henry came to New York University’s Stern School of Business, a top institution famous for its close Wall Street ties, the Street itself was in a shambles. Henry’s goal: expand Stern’s focus beyond New York banking and toward the larger world of business. “The world needs ﬁnance more than ever, but it needs the 21st-century version of ﬁnance,” Henry says. Speciﬁcally, a more globalized and tech-savvy version. The good news for NYU: Henry seems well-suited for the job. Born in Jamaica, where he later served as a consultant to the island nation’s central bank, the former Rhodes Scholar is a respected global economist with a focus on emerging markets. At Stern he has pushed the school to tackle broader macroeconomic issues like global infrastructure development, while also embracing entrepreneurship and the ﬁntech revolution. Under Henry, Stern has also increasingly come to see diversity in the business world as an imperative in the modern era, with its diverse global consumer base. The school has boosted the number of scholarships it offers, including the number of full rides for undergrads, from zero to 35; many go to ﬁrst-generation minority students. It’s not charity. “If we want to have a productive, prosperous economy,” he says, “doing this is not a nice thing to do—it’s something we have to do.”
A DEAN FOR ALL SEASONS
As usual, you saw that coming. There are a lot of things that are easy to see coming, like man buns and homemade kombucha going out of style, but some things are a little harder to detect. Like that pedestrian unexpectedly jaywalking. That’s why Toyota Safety Sense™ P,1 including a Pre-Collision System2 with Pedestrian Detection,3 comes standard on the new 2017 Corolla.
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PROBLEM SOLVING WITH TECH’S HOTTEST SELF-HELP GURU We asked author Tim Ferriss for his best advice on handling some of life’s and work’s worst situations. BY MICHAL LEV-RAM ALMOST A DECADE AFTER HIS BOOK The 4-Hour Workweek became a bestseller with a fanatical following, Tim Ferriss, the Valley’s favorite self-help guru (and angel investor and Chinese kickboxing champion) has a new vade mecum for the masters of the universe. Culled partially from interviews with the business elite on Ferriss’s popular podcast (80 million downloads and counting), Tools of Titans chronicles the best practices of the world’s highest performers. We caught up with him to get his top tips for some of life’s messier conundrums. Here, the condensed interview.
40 fortune.com // dec.01.16
PROBLEM: It’s that time of year again—performance review season—and you hate it. Is there any viable alternative?
I think peer reviews are generally more valuable than top-down manager reviews. So you can offload a lot by having peers contribute. And the process shouldn’t be onerous if you do what I do with employees: set clear objectives on a clear timeline. That way, there’s a report card already.
Based on watching several of my high-achieving friends do this, I would say a night nurse is by far and away the consensus winner—including among parents who were initially very averse to this. Getting sleep allowed them to be more present parents the rest of the time. PROBLEM: Say you’re an entrepreneur with a lot of hobbies that you love. How do you prioritize?
If it’s not a “hell, yes,” it’s a “no.” It’s very binary. If you’re choosing to play in the winner-takes-all, venture-backed startup business and you have seven different side gigs, you’re going to get your face ripped off.
THE UNDOING PROJECT
The alwaysengaging Michael Lewis’s latest book is about two Israeli psychologists whose partnership and friendship changed their ﬁeld.
POGUE’S BASICS: MONEY
PROBLEM: You’ve learned to say no to everyone but your mother. Seriously, she’s the one person who can guilt you. Any tips?
Your success can be measured by the number of uncomfortable conversations you’re willing to have. I hate to be a hard-ass, but if you can’t have a hard conversation with your mom, you’re f__ked.
Columnist and tech whiz David Pogue has a new compendium of tips for being ﬁnancially responsible in the modern era.
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PROBLEM: You have a newborn baby that’s keeping you up at night, and both you and your partner work. What do you do?
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TIME WELL SPENT
Haven’t started shopping yet? No problem. We have you covered with our picks for everyone on your list, from techie to style maven. BY KATE FLAIM & CHLOE LIESKE (MARKET EDITOR)
1. Leica Sofort Instant Camera. The joy of real prints, combined with control over everything from exposure to focusing distance, makes Leica’s ﬁrst instant camera a winner for snap-happy social butterﬂies. $299; us.leica-camera.com
gadget lover THE LATEST AND GREATEST GIZMOS FOR THE TECH FAN ON YOUR LIST.
2. Trunkster Suitcase. A sturdy and truly smart rolltop, it comes equipped with a removable USB charging unit, a built-in digital scale, and a GSM tracking device. $345; trunkster.co 3. Bang & Olufsen Beoplay H5 Earphones. Who needs a headphone jack anyway? Give them top-notch sound quality (plus great style) in earphones designed to withstand a workout, not just a commute. $249; beoplay.com
ST YLING BY CHANEL KENNEBRE W
4. Sony Portable Ultra Short Throw Projector. Imagine movies by the pool, vacation photos in the living room, and YouTube videos pretty much anywhere. This portable projector casts images from 22 to 80 inches onto any ﬂat surface. $999; store.moma.org
5. Razer Deathadder Elite Gaming Mouse. Gamers will love this ultra-accurate, extra-fast mouse, with 450-inch-per-second tracking and what is billed as the fastest sensor in the world. $70; razerzone.com
43 PHOTOGRAPHS BY BRIAN HENN
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homebody FROM HANDY HOSTESS GIFTS TO OVER-THETOP INDULGENCES, THESE PICKS MAKE STAYING IN A PLEASURE.
1. Areaware Totem Candles. Formed in molds made by turning beeswax on a lathe (like a table leg), these intriguing geometric candles will warm up a ﬁreplace mantel or tabletop. $12 to $20 each; areaware.com 2. Collar Espresso Set. A Scandinavian take on the classic Italian Moka pot, this stove-top espresso maker and its matching accessories
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double as decorative accents when you’re not fueling up. $45 to $85; stelton.com 3. Mrs. John L. Strong Home Directory and Journals. Nearly 90 years of tradition stand behind these elegant journals. The ultimate gift for serious entertainers, the volumes will let them track their favorite wines, party details, recipes, and more. $125 each; mrsstrong.com
4. Compartés Chocolates. Unusual ﬂavors— like blackberry sage and cinnamon toast— swathed in fun wrappers and sleek boxes make for a gift-giving gimme. Bars from $10, truﬄe gift boxes from $16; compartes.com 5. Cire Trudon La Promeneuse Scent Diﬀuser. Fill the house with fragrances from Cire Trudon, France’s premier candlemaker
since 1643. A wax cameo infused with Trudon’s legendary scents melts above a tea light within the glass and ceramic holder. $275; trudon.com 6. Wary Meyers Striped Soaps. These too-cool-for-school soaps smell as good as they look. You can keep them on hand for last-minute gifts all year long. $14 each; burkedecor.com
trendsetter KEEP THEM COZY AND STYLISH IN THE LATEST WINTER GEAR AND HEADTURNING ACCESSORIES.
1. Block Shop Textiles Scarf. It was designed by sisters in Los Angeles and crafted by a family of dyers and block printers in Bagru, India. The result? A strikingly modern, handmade scarf she will want to wear every day. $120; blockshoptextiles.com
2. Delvaux Simplissime City PM Bag. Graphic black and white and a classic shape combine in a purse she will treasure for a lifetime, from the legendary purveyor to the royal family of Belgium. $3,200; barneys.com
3. Burberry Cotton Sateen Parka. He’s guaranteed to stay toasty all winter in this luxe take on a British military jacket, trimmed in leather and featuring a removable furlined warmer and hood trim. $4,095; us.burberry.com
PARK A : COURTESY OF BURBERRY
4. Jet Set Candy Travel Charms. Start a collection or give a complete bracelet or necklace featuring luggage tags and passport stamps from all her favorite destinations. Sterling charms from $68, gold from $148; jetsetcandy.com 5. Nike Lunar Force 1 Duckboot. The sneaker addict in your life needn’t compromise between warm feet and impeccable style this year: These boots nod to Nike’s classic Air Force 1 but sport water-repellent leather and high-traction soles. $165; store.nike.com
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the adventurer WHETHER ON A PATIO OR DEEP IN THE WOODS, THESE ITEMS KEEP PEOPLE READY FOR OUTDOOR FUN.
1. Woolrich Fireside Poncho. Sure, it looks like a throw blanket, but the key here is a leather buckle that turns it into a poncho, perfect for staying snug by a campﬁre. $145; woolrich.com 2. Normann Copenhagen Nutcracker. Comfortable to use and cool enough to display back at home, this modern nutcracker (tie it to a big bag of
fresh walnuts) provides the perfect activity for chatting away the hours in the great outdoors. $53; normanncopenhagen.com 3. M. Crow Marshmallow & Weenie Sticks. Upgrade the ﬁre pit with stainless-steel roasting sticks, each with a different wood handle and a leather hanging loop. $55 for a set of four; mcrowcompany.com
4. Uma Sound Lantern. Its 360-degree sound and eight hours of battery life pair with a softly glowing lantern to provide the ideal accessory for outdoor entertaining. $479; dwr.com 5. Mon Oncle Portable Grill. Closed, it’s disguised as a briefcase. Open it, and this carefully designed tabletop grill makes picnics at the park or beach
easy, and the smallest balcony barbecue-ready. $375; wayfair.com 6. Best Made Company Long Ebony Higo Pocketknife. A single Japanese knifemaker crafts each of these extra-light pocketknives: No bells and whistles necessary, just a razor-sharp blade in a stunningly minimalist ebony handle. $178; bestmadeco.com
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We’ve made it easy for you! Shop these gifts and more at peopleshop.com/giftguide.
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A BOOM WITH A VIEW
AGE OF DISSONANCE
A ﬂood of new money and a lack of good investment opportunities are making things awkward in Silicon Valley. BY ERIN GRIFFITH
THE AGE OF UNICORNS, while glorious, is over. So
far this year, fewer startups have hit the prized billion-dollar valuation than did any in a single quarter last year. Proﬁtability and sustainable growth have come into vogue, and it almost feels gauche for startups to aspire to unicorn status. Rather, executives brag about “clean terms”— meaning favorable liquidation preferences on their term sheets—and reasonable valuations. But we’re not in the Age of Workhorses yet. Bill Gurley, the prominent venture capitalist at Benchmark, is still issuing sky-is-falling bubble warnings. He’s not a lone Chicken Little. Fellow investors echo his sentiments behind the scenes.
FOR MORE Follow Erin Grifﬁth on Twitter (@eringrifﬁth) or at fortune.com/ boom.
FORUM The difference now is that Gurley and his peers are done warning about out-of-control spending at overcapitalized startups. The savviest startups spent 2016 cutting their burn rates, scaling back overly ambitious growth plans, and bragging about being on track for “proﬁtability in 2018.” The not-so-savvy ones, well, they’re dead or coasting on fumes. Instead, VCs are fretting over increased competition. Low interest rates and public market jitters have lured too many new sources of capital to the closed-off world of startup investing. For the past few years hedge funds and mutual funds have ﬂooded the market with showy $100 million checks. But those unsophisticated investors, known behind closed doors as the “dumb money,” retreated this year. They felt burned by bad early-stage bets or tired of waiting for the “pre-IPO” companies they backed (ahem, Uber) to get on with the IPO already. We’re not likely to see a giant hedge fund do another early-stage deal, such as Tiger Global Management’s $15 million Series B investment in Kitchensurﬁng in 2014. The on-demand chef service collapsed this spring. The mutual fund retreat hasn’t stopped new sources of venture money from emerging. Sovereign wealth funds, multi-corporate venture funds, ambitious pension funds, and Fortune 500 companies with billions in cash on their balance sheets are now dabbling in startup investing. SoftBank and Saudi Arabia’s sovereign wealth fund recently announced a $100 billion tech fund, for example. Traditional VCs are raising increasingly bigger pools of capital to keep up. But the new dumb money isn’t quite as dumb as the VCs would like us to think, nor is it as ﬁckle as its mutual fund predecessors. With fewer new unicorns and a focus on proﬁtability, it has become easier to tell which companies have a working business model and which ones are doomed for the dead pool. That means the competition to invest in Silicon Valley’s small handful of winners is even stiffer. Investment bankers say their phones are ringing more than ever with new money looking to back startups. Demand is soaring as unicorns become as rare as they were before this so-called bubble. Until the sluggish IPO market makes a comeback, stiff competition will be the norm. No guts, no glory.
49 ILLUSTRATION BY MICHAEL GEORGE HADDAD
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HOW TO MASTERCHANGE
Chipmaker Nvidia can teach us a few things about corporate transformation. BY DAN LYONS
GO TO ANY BUSINESS CONFERENCE and you’ll hear people talking about transformation. For a lot of companies it’s a matter of life and death. Their legacy business is fading, and they need to become something new. The problem is that most companies, like most people, aren’t good at change. Some, though, are amazing at it. Like those Hasbro toys that start out as a robot but can be bent into the shape of a car, these companies start out doing one thing, then—poof!—ﬂip a few switches and become something else. Consider Nvidia, a chip company in Santa Clara, Calif., that started out 23 years ago and originally became successful in the somewhat humble business of making graphics boards that videogame fans used to soup up the performance of their PCs. Then, in 2006, Nvidia ﬁgured out that its graphics chips could be hooked together to make a supercomputer. Today its graphics processors power many of the brawniest computers
DAN LYONS Our brand-new columnist is the bestselling author of Disrupted: My Misadventure in the Start-Up Bubble.
in the world, and they will be used in two nextgeneration supercomputers being designed by U.S. Department of Energy labs. That line of business generates $150 million a year for Nvidia. But now the chipmaker has spotted a market that could be its biggest opportunity yet: selfdriving cars. To make a vehicle autonomous, you need to gather massive streams of data from loads of sensors and cameras and process that data on the ﬂy so that the car can “see” what’s around it. Turns out Nvidia’s graphics chips are great for that. So far, 80 companies, including Volvo, Audi, and Tesla, are using Nvidia technology in their research around autonomous vehicles. “We’re transforming into an artiﬁcialintelligence company,” says Danny Shapiro, a senior director in Nvidia’s automotive group. Why has Nvidia been such a natural quickchange artist? Well, it turns out that it and other “transformers” have a few traits in common: BIG EARS. They listen to customers. Nvidia’s selfdriving-car business grew out of a long-standing relationship with auto companies. Car guys used Nvidia chips for computer-aided design, then used Nvidia supercomputer chips to do crash simulations. When the car guys started thinking about autonomous vehicles, Nvidia leaped at the chance to help them solve the problem. AN IMPATIENT BOSS. Transformer CEOs like change and will drive it down throughout the organization. Nvidia’s CEO, Jen-Hsun Huang, is an engineer and a chip designer. He cofounded Nvidia and still runs it like a startup. ACTIVE IMAGINATIONS. Conventional companies try to ﬁnd new uses for capabilities they already have. Transformers look at what the market needs and then go build it, hiring new people and/or taking people off other jobs. A BRUSH WITH DEATH. That’s not the case at Nvidia, but a close call with the corporate undertaker can sometimes provide a necessary spark. Think of Apple’s multiple rebirths under Steve Jobs. FINALLY: Yes, transformation is hard—but not changing can sometimes be fatal.
50 fortune.com // dec.01.16
ILLUSTRATION BY STUDIO TAKEUMA
ITâ€™S IMPOSSIBLE T O B E A T C A N C E R. A L O N E.
Julie Bowen SU2C Ambassador
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Lead. Inspire. Succeed. While healthcare has changed since UHS opened its doors in suburban Philadelphia in 1979, our mission has remained the same: put patients ﬁrst, provide high quality facilities and build long-term partnerships so we are the leaders in the communities we serve. In today’s challenging environment, a healthcare facility needs the support of a ﬁnancially strong, experienced system to provide skill, knowledge and guidance. UHS answers the call and through its subsidiaries operates more than 240 acute care hospitals, behavioral health facilities and ambulatory centers in the United States, Puerto Rico, the U.S. Virgin Islands and the United Kingdom.
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we can promise the decision makers are right here in Philadelphia. If you run a business and have ever needed a loan of any kind, you probably understand the above headline all too well. While many of the banks in the Philadelphia area try to act “local”, when it comes to calling the shots, they’re anything but. Any decision of consequence happens in some headquarters thousands of miles away. A fact that can cost you both time and money. Beneﬁcial Bank, on the other hand, has been serving the community and businesses of Philadelphia for over 160 years. Our loan committees are made up of people who live and work, right here, where you do. People with a keen knowledge of business here. Call Marty Gallagher, Chief Lending Officer, at 215.864.3540
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Philadelphia is a diverse, global destination on the rise. We are known for our rich history, but are also a birthplace of technology and innovation. Centrally located in the Northeast, we are a thriving metropolitan area with more than $8 billion in major developments underway. Our vibrant, walkable downtown is home to world-class arts and cultural institutions, spectacular attractions, a highly acclaimed restaurant scene and a full array of hotel options â€” all just steps away from our magnificent, state-of-the-art Pennsylvania Convention Center. Whether youâ€™re looking to start a business, host a major meeting or convention, or simply select your next travel adventure, Philadelphia is the smart choice, and stands ready to welcome you.
BUSINESS IS GREATER HERE GREATER PHILADELPHIA is a thriving mega-market strategically located at the core of the countryâ€™s wealthiest and most densely-populated region.
in millennial growth rate
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IBM Watson and Marchesa present the ďŹ rst cognitive dress. Fashion house Marchesa worked with Watson to create something no one had ever seen before. They applied Watson cognitive technology to help identify materials and colors. The unique dress debuted at the Met Gala, and throughout the night it changed colors in response to social posts from around the world. ibm.com/outthink
IB IBM BM an andd its its log l o, o ibm m.co .com m and an Watson are trademarks of International Business Machines Cor Co p., p re r gis gister tered ed in man manyy juri jurisdi sdicti ctions ons wo world rldwid wide. e See curre r entt lis listt att ibm b .co .com/t m/traddemark. mark. Ot Other h product and service names might be trademarks of IBM or oth her o her com mpanies. es ÂŠInt Intern ernati ationa onall Bus Busines nesss Mach Machine iness Corp o p. 2016 0 6.
When everything thinks, you can outthink.
zuckerberg N O S . 1- 2 0
businessperson of the year
How does one choose a Businessperson of the Year? We think you have to start with the basics: Is the top dog delivering results? To answer that question, Fortune’s data guru, Scott DeCarlo, constructed an exacting screen. It parses and ranks companies by 12- and 36-month increases in proﬁts, revenues, and stock performance, and factors in return on capital and debt. (We give the 12-month results more weight to capture who’s killing it today but also include the 36-month ﬁgures to eliminate those who had one lucky year.) Then, of course, come the intangibles: Is the CEO inﬂuencing business? Taking bold, visionary steps? The proﬁles and list that follow reveal star executives with wildly varying styles and approaches, but one thing in common: They deliver, big-time.
NA DE L L A
WA N G
MARK ZUCKERBERG FOUNDER AND CEO, FACEBOOK Is the socialnetworking visionary underrated as a manager?
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M A RK
BY ADAM LASHINSKY
HOW TO LEAD LIKE ZUCK THE FACEBOOK FOUNDER—AND FORTUNE ’S BUSINESSPERSON OF T HE Y E A R—H A S B UILT HIS S OC I A L NET WORK INTO A GLOBAL PHENOMENON AND A GROW TH POWERHOUSE. HERE ’S W H AT YOU C A N L E A RN FROM HOW HE MANAGES.
67 PHOTOGRAPH BY GRAEME MITCHELL—REDUX
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BUSINESSPERSON OF THE YE AR
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FACEBOOK PROFILE NO. 1
From top: Zuckerberg bro-hugs President Obama at an entrepreneurship summit at Stanford in June; Zuckerberg and his wife, Priscilla Chan, meeting Pope Francis in August.
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the first time i interviewed Mark Zuckerberg, back in 2005, he was all of 21 years old and could have passed for 16. He had recently dropped out of Harvard to move his startup to Silicon Valley and was obviously enjoying the novelty of being called CEO. Facebook’s website—there was no mobile version yet—had 6 million users and was open exclusively to high school and college students. It had only just added a feature allowing users to upload multiple photos to their proﬁles. But the company was already a hot commodity, valued at $100 million and coveted by buyers who were willing to pay far more. And despite his callowness, it was obvious that Zuckerberg was an entrepreneur who was, as I wrote at the time, “preternaturally levelheaded.” If there was one point Zuckerberg was most forceful about that day, it was this: He wasn’t the least bit interested in selling his year-old company. “I’m in this to build something cool, not to get bought,” he said with a bloodless sincerity that was altogether convincing. Eleven years later Zuckerberg has built something beyond cool: He has willed into being a global phenomenon. Facebook is a nearly 16,000-employee media powerhouse worth $350 billion—and also an advertising-technology juggernaut on track to annual revenues of more than $27 billion in 2016 and gaudy proﬁts of $7 billion. Its core product now has 1.8 billion users, and Zuckerberg has shrewdly assembled a portfolio of properties to buttress Facebook. The complete “family of apps” includes the photo-sharing tool Instagram and the communications service WhatsApp, plus two homegrown apps, Facebook Messenger and Facebook Groups. In addition, Zuckerberg believes the company’s Oculus virtualreality headset represents the next way people will communicate with one another. Facebook’s immense accomplishments already have conferred superstar status on Zuckerberg, inviting comparisons
OBAMA : KE VIN L AMARQUE—REU TERS VIA ZUMA PRESS; POPE: COUR TESY OF FACEBOOK
OF THE YEAR
EFFEC TIVE NE T WORKING
CONVERTING LOTS OF “LIKES” INTO TONS OF GROWTH $15 billion
Facebook has turned its core product into an advertising force. Huge gains in sales and proﬁts have helped Zuckerberg’s company rise in the Fortune 500 rankings while its stock has soared.
10 SALES 5 100
100 FACEBOOK’S FORTUNE 500 RANKING
$6 billion 4
CHANGE IN FACEBOOK’S STOCK PRICE
0 FY 2013
through 2015 Q3 2016
2016 SOURCES: BLOOMBERG; FACEBOOK
to the likes of Bill Gates, Steve Jobs, and Jeff Bezos. At 32, he is as fresh-faced and casually dressed as a decade ago, yet today the Facebook CEO is a celebrity wherever he goes. He huddles with Presidents, Prime Ministers, and the pope. He is photographed jogging in Beijing and Barcelona. (This year he ran his ﬁrst half-marathon.) Together with his physician wife, Priscilla Chan, he has become one of the world’s most ambitious philanthropists, most recently pledging $3 billion to an initiative with an audacious goal: to cure, prevent, or make manageable all diseases in their children’s lifetime. Zuckerberg is rightly recognized for his outsize success. Nevertheless, he is surprisingly underappreciated for his business acumen. Yes, he has delegated the commercial aspects of Facebook to Sheryl Sandberg, Facebook’s polished chief operating officer, a Harvard MBA who is 15 years Zuckerberg’s senior.
Sandberg’s presence has fostered an “adult supervision” narrative familiar to the Valley. But unlike, say, the Google founders, who turned over the CEO job to Eric Schmidt for a decade, Zuckerberg has remained chief executive throughout Facebook’s 12-year sprint to greatness. Despite repeated doubts—when Facebook missed the shift to smartphones, when it was thought to have botched its IPO, when it was seen as losing its luster with young people— Zuckerberg has remained the company’s chief product visionary and business strategist. Through bold acquisitions and the articulation of a remarkably constant mission, Zuckerberg has kept Facebook on track in the face of full-frontal assaults from the likes of Google, Twitter, Snapchat, and others. Admirers attribute Zuckerberg’s business success to his inquisitive nature as well as to his relatively grounded approach to technology. “He’s always been a learn-
it-all person, to a level that is sometimes maddening, considering how much more I have to learn from him than he does from me,” says Matt Cohler, a venture capitalist at Benchmark and an early Facebook employee who has remained close to Zuckerberg. “He maintains a relentless focus on innovation, but at the same time he’s an applied-science and engineering guy.” What Zuckerberg has engineered at Facebook is growth that is astounding considering the size of the company. For four years running, it has grown revenues at a 50% clip, while proﬁts have jumped ﬁvefold. Unsurprisingly, Facebook’s stock has followed suit, doubling in two years. In its most recent quarter, Facebook increased its revenues 56% over the year before and its net income 166%. (And yet the stock dipped on the news, as some investors expressed fears the company won’t be able to keep up the scorching pace.)
Growing at scale is the holy grail of business leadership—and this feat alone makes Zuckerberg an easy choice for Fortune’s Businessperson of the Year for 2016. Facebook’s products are frequently dissected, as are its missteps as a reluctant media titan. (Facebook seems to enjoy the ﬁnancial fruits of advertising dominance far more than the editorial responsibilities that go with it.) Yet for all the celebration of Facebook’s success and the adulation of Zuckerberg as a visionary, what’s less well understood is how he goes about his day job as an executive. What makes him so effective as a businessperson? An examination of Zuckerberg’s management approach reveals that his success rests on three pillars: his unique ability to look into the future, his otherworldly consistency, and the business discipline he has nurtured in an industry quite often enamored of bright, shiny objects. A
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closer look reveals just how levelheaded he has remained over the years.
Being a visionary is harder than it looks. mike vernal graduated from Harvard in 2002, a few months before Zuckerberg arrived on campus, and took a job at Microsoft. Five years later he joined Facebook as an engineer, and later rose to head the company’s search, local, and marketplace product groups, reporting to Zuckerberg. Earlier this year he left Facebook to become a venture capitalist—meaning his new job is to ﬁnd the next Mark Zuckerberg. Having watched Facebook’s CEO up close, Vernal believes the key to Zuckerberg’s success is his ability to think for the ages while knowing when to go deep. “One of the things that deﬁnes Mark is that he takes a very, very long view of things, almost a geological view,” says Vernal. “Most people think day to day or week to week. Mark thinks century to century.” (Indeed,
Zuckerberg’s favorite video game is Civilization, which allows players to consider the vast sweep of history while plotting their next move.) Somewhat less grandiosely, Vernal cites Zuckerberg’s audacious 10-yearand-beyond quest to connect the half of the planet that doesn’t yet use the Internet. Facebook’s plan to do this involves ﬁxed-wing drones that will deliver connectivity from high above the earth. Vernal says Zuckerberg typically has a pile of books on his desk, visible to all through the glass walls that surround it. “For a while there was a book on free-space optical communications,” says Vernal, referring to a technology Facebook is pursuing that will beam signals from the atmosphere. “It is telling about Mark’s personality that he reads a college textbook on free-space optics.” An introvert given to long stares and awkward silences, Zuckerberg does more than think deeply. Where CEOs with more emotional intelligence rely on their gifts
A consistent message helps rally the troops. zuckerberg has proved adept at selecting talent, relying on a core of top executives who have been at Facebook for much of its existence. He claims to draw more inspiration from his coterie of senior managers than from any mentor or adviser. While he retains his reputation as a boy-genius coder, in reality Zuckerberg is something of a grinder—a 99% perspiration guy who has surrounded himself with a group of people he respects and with whom he is constantly stress-testing his hypotheses. “Ideas typically do not just come to you,” he said in a 2014 public Q&A session at Facebook. “They
COURTESY OF FACEBOOK
Zuckerberg inspecting Aquila, a solar-powered, ﬁxed-wing drone, before a test ﬂight in Arizona in July. Facebook plans to use the aircraft, which can stay airborne for up to 90 days at a time, to beam down Internet signals to people in remote areas of the globe as part of the company’s mission to make the world more connected.
for gab, Facebook’s CEO attributes his management technique to his training as an engineer. “For me engineering comes down to two real principles,” he told a group of Nigerian software developers this summer. The “engineering mind-set,” he said, dictates thinking “of every problem as a system” and breaking down problems “from the biggest stage down to smaller pieces.” Over time, Zuckerberg told his rapt audience in Lagos, “you get to the point where you’re running a company,” itself a complicated system segmented into groups of high-functioning people. “Instead of managing individuals, you’re managing teams. And if you’ve built it well, then it’s not so different from writing code.”
BOSWORTH: PAUL SAKUMA—AP; COX: CHRISTOPHE MORIN—IP3/GE T T Y IMAGES; IRIBE: HARRIE T TAYLOR—CNBC/NBCU PHOTO BANK VIA GE T T Y IMAGES; KOUM: MANUEL BLONDE AU—AOP.PRESS/CORBIS/GE T T Y IMAGES; OLIVAN: JIM WILSON—THE NE W YORK TIMES/REDUX; SANDBERG: ALLISON SHELLE Y—GE T T Y IMAGES; SCHROEPFER: DENIS ALL ARD—RE A /REDUX; SYSTROM: MAT T EDGE—THE NE W YORK TIMES/REDUX
OF THE YEAR
happen because you’ve been talking about something or thinking about something and talking to a lot of people about it for a long period of time.” From such thinking came Zuckerberg’s realization that three broad themes matter most to Facebook: connectivity (his goal of bringing the Internet—and the wonders of Facebook, of course—to those who don’t have it), artiﬁcial intelligence, and virtual reality. What’s more, because he is always pushing, Zuckerberg has shown an ability to recognize big ideas from others early—including when Facebook has been late—and has been able to act with bold conviction to buy what others have created, if necessary. Examples include spending $1 billion to buy photo-sharing site Instagram in 2012; $2 billion for Oculus VR two years later; and $19 billion for WhatsApp, also in 2014. Instagram, with estimated revenues of $2.5 billion this year, already is a runaway success, while at a minimum Oculus and WhatsApp have positioned Facebook to succeed in important areas adjacent to its core product. One of Facebook’s key business innovations is a “growth team”—today made up of hundreds of people— that designs tactics for various parts of the company, relying on a rigorous set of metrics to gauge success. The unit has broad latitude to weigh in on any aspect of Facebook’s business. “The
THE INNER CIRCLE
ZUCKERBERG’S KEY LIEUTENANTS
Zuckerberg’s core brain trust is composed of ﬁve key execs, plus the CEOs of the company’s three billion-dollar acquisitions. Most have remarkably long tenures, especially given that Facebook itself is just a dozen years old.
ANDRE W BOSWORTH
VP ADS AND BUSINESS PLATFORM
CHIEF PRODUC T OFFICER
CEO, OCULUS VR
A 10-year Facebook veteran, “Boz” was a teaching assistant for an AI class Zuckerberg took at Harvard. He runs the products that make Facebook’s money.
Cox, an engineer who has been at Facebook for 11 years, looks after the company’s golden goose, the core Facebook product. He once headed HR.
Iribe once worked on Zuckerberg’s favorite game, Civilization. He cofounded virtual-reality ﬁrm Oculus VR and sold it to Facebook in 2014 for $2 billion.
A longtime Yahoo engineer, Koum cofounded WhatsApp in 2009 and sold it to Facebook for $19 billion ﬁve years later. He’s now on Facebook’s board.
KE VIN SYSTROM
VP GROW TH
CHIEF OPER ATING OFFICER
CHIEF TECHNOLOGY OFFICER
CEO, INSTAGR AM
Zuckerberg’s No. 2, Sandberg joined in 2008 from Google. She oversees most of what isn’t engineering-related and has gained fame for her bestselling book, Lean In.
At Facebook for eight years, Schroepfer has led all engineering eﬀorts at the company and now minds 10-year bets like artiﬁcial intelligence and virtual reality.
The onetime Google product manager cofounded the photo-sharing app and sold it to Facebook for $1 billion in 2012. Now he’s turned it into a fastgrowing business.
The Spaniard has been at Facebook for nine years, all as part of the company’s “growth team,” which oversees initiatives to help the company grow across all its platforms.
growth team’s discipline has had as big an impact on Facebook as anything else,” says Vernal, the former top product executive. “The team owns no single product. Instead, it owns
any issue that is preventing people from signing up for or using Facebook.” Silicon Valley companies are now widely replicating the concept of the growth team invented at Facebook.
Patience pays, even for a young company in a hurry. facebook has a simple, if grandiose mission: “To give people the power to share and make the world more open and connected.” Zuck-
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BUSINESSPERSON OF THE YEAR
ADVICE FROM THE CEO
THE FACEBOOK FOUNDER IN HIS OWN WORDS Zuckerberg often muses on management. Here, a selection of quotes from public Q&As posted on Facebook.
In terms of attracting people, I think one of the most important things is just being upfront about what you stand for. Facebook is not a company for everyone. We believe that the world will be better when everyone has the ability to share what they think and to be able to connect to their friends and to be able to connect to the whole world. I believe very strongly that that’s good for the world, and if you believe that, then Facebook is a good company for you, and if you don’t, then maybe ﬁnd a diﬀerent one.
In a lot of ways building a company is like following the scientiﬁc method. You try a bunch of diﬀerent hypotheses, and if you set up the experiments well, then you kind of learn what to do… We invest in this huge testing framework. At any given point in time, there’s not just one version of Facebook running in the world. There’re probably tens of thousands of versions running because engineers here have the power to try out an idea and ship it to maybe 10,000 people or 100,000 people. And then they get a readout.
erberg, whose wooden public speaking style has improved with practice, is mind-numbingly efficient about slipping the statement into everyday conversation, as well as his speeches and interviews. The repetition makes for effective external and internal messaging. If something at Facebook can’t be explained by the oft-repeated catchphrase, then it doesn’t ﬁt. Virtual reality has a place because Zuckerberg thinks it’s the next “platform” for communicating, just as the web was when he started Facebook. Spending an outrageous amount of money for WhatsApp—which has challenged Skype as the trendiest
free international calling service—was acceptable because it ﬁt into the “open and connected” mantra. A corollary to staying on message is being patient and disciplined in pursuit of the mission. Zuckerberg was ultra-patient with Instagram, which had no revenues when Facebook bought it but is now booming. He appears to be playing a similarly long game with WhatsApp. Indeed, Zuckerberg’s achievement in guiding Facebook to where it is today owes as much to what he hasn’t done as to what he has. Unlike Alphabet, Google’s parent, Facebook harbors no separate unit
At Facebook’s F8 developers conference in April, Zuckerberg laid out the company’s 10-year road map, which includes continued development of artiﬁcial intelligence and virtual reality.
ON THE VALUE OF SURROUNDING ONESELF WITH TALENTED PEOPLE
ON RESISTING THE TEMP TATION FOR A QUICK FIX WHEN HIRING
If you’re in an environment where you’re not learning as much as you think you should be, if you don’t have the people around you who you think are going to inspire you to do the best work that you can, then think about changing something. Because that’s a big deal.
Over the long term, you’re really only going to be better oﬀ if you get someone really good. I’ve developed over time a simple rule, which is that I will only hire someone to work directly for me if I would work for that person.
for “moon shots.” It isn’t attempting to reinvent contact lenses or autonomous vehicles. Zuckerberg may have pledged part of his immense wealth to ﬁghting disease— his Facebook stake is worth nearly $50 billion—but his company has no subsidiary attempting to reverse the effects of aging. So he’s disciplined, collaborative, consistent, generous, and at least outwardly humble. He’s even a progressive role model. When his daughter, Maxima, was born just after Thanksgiving last year, Zuckerberg took a twomonth paternity leave. Zuckerberg is also big
on personal goals, having committed in the past to learning Mandarin and this year to designing his own AI-fueled personal assistant, named Jarvis, for his home. He recently told an audience in Rome that through Jarvis he can control the house’s temperature but that “much to the chagrin of my wife,” she cannot, “because it is programmed to only listen to my voice, which is one of the perks of being an engineer.” He added, “I’ll give her access once I’m done.” As ever, Zuckerberg is determined to build the next cool thing his way, even if it means a little domestic friction.
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COURTESY OF FACEBOOK
ON WHO SHOULD WORK AT FACEBOOK
regg ie-A LLY S INCE 2 011
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THE LIST NOS. 2- 4
BUSINESSPERSON OF THE YEAR
J F JEF
bezos ezos CEO, A M A ZON
utter retail domination and now … proﬁts. Amazon just recorded its sixth consecutive quarter in the black, racking up a cool $2.1 billion in earnings over the past 12 months, largely thanks to its booming cloud business. Meanwhile, Amazon is becoming a hardware force with a hit new gadget and an AI-powered voice assistant in Amazon Echo and Alexa, respectively, and a successful line of low-priced Fire tablets. Not enough for you? Jeff Bezos has also made the company a cultural force in original TV and movies, with the likes of Transparent. Then there are his side projects. Now worth $66 billion, Bezos bought and helped revive the Washington Post, which has been a must-read this presidential election cycle. And his space venture, Blue Origin, has launched four rockets into orbit. Bezos will be hard-pressed to top all of that in 2017. —Leena Rao
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PHOTOGRAPH BY WESLEY MANN
a veteran of stints at McDonald’s, Gatorade, and U.S. Cellular, Mary Dillon took the helm at fast-expanding Ulta in mid-2013, and all she’s done since is double sales and proﬁts, improve margins, and score hefty gains in same-store sales. Dillon has upgraded the company’s e-commerce backbone and elevated its product mix. Here’s how we put it in a recent proﬁle: “Ulta’s formula for selling beauty products—put them all under one roof and offer deals, deals, deals— turned the chain into a fast-growing juggernaut, a very rare success story in a gloomy decade for retail.” Though it largely eschews posh urban shopping districts, Ulta is now the country’s biggest specialized beauty retailer. What it lacks in glamour, it makes up for in concrete results. —Phil Wahba
corporate structure may not be what makes business legends, but Larry Page’s vision of a Berkshire Hathaway–like holding company for what was previously known as Google has been realized in the past year. Alphabet shares have risen 34% since the reorganization, which separated Google’s proﬁt-gushing advertising business, mobile operating system Android, fast-growing cloud business, and video network YouTube from its “moonshots,” such as self-driving cars and smart contact lenses. Operations have chugged along, with a 27% quarterly proﬁt increase. Some moonshots have crashed, but one, self-driving cars, is set to become a stand-alone unit within Alphabet. Page even has an equivalent to Bezos’s rocket project: ﬂying cars through a self-funded startup, Zee.Aero. —L.R.
DILLON: REBECC A GREENFIELD; PAGE: CHRIS T OPH DERNB ACH—DPA / ZUM A
C E O, U LTA BE AU T Y
CEO, A LPH A BET
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OF THE YEAR
Nadella discussing the intricacies of Minecraft coding with schoolkids in Dublin. More than mere ceremonial stops, the visits allow him to glean intelligence on how customers are using Microsoft products.
a blustery autumn afternoon in dublin. Sudden clouds have cooled the red rays of a setting sun, and the resulting grays cast soft shadows on the faces of students lazily thumbing their smartphones in the lobby of the library at St. Patrick’s College Drumcondra. Behind them more than a dozen children, teachers, and administrators sit quietly. They’re awaiting the arrival of Satya Nadella, chief executive of Microsoft, the Seattle-area technology titan that was once
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PHOTOGRAPHS BY VÉRONIQUE DE VIGUERIE
RE VIVAL IN REDMOND
MICROSOFT’S SHARES EMERGE FROM THE DESERT CEOs:
In October the company’s stock price reached a level unseen since 1999. However, Microsoft’s market cap, now about $460 billion, remains well oﬀ the $600 billion peak because huge buybacks have reduced the share count.
$60 50 40
MICROSOFT STOCK PRICE SINCE IPO
30 20 NOV. 8, 2016 $60.47
10 0 1987
SOURCE: S&P GLOBAL INTELLIGENCE
the largest and most powerful company on the planet. Glass doors swing open and in strides Nadella, a clutch of senior staffers in his wake. He makes a beeline toward the waiting schoolchildren, pumping the hands of several administrators along the way. He sits and asks four students, each about 10 or 11 years old, what they have been working on. A boy with Robert Plant locks indulges, gesturing to a tablet computer as he haltingly explains the three-dimensional world he has coded in the game Minecraft—Nadella’s ﬁrst major acquisition as Microsoft’s CEO. Nadella responds with a huge grin. “Amazing,” he says. “I need one of those.” And then Nadella is on his feet again. He’s six feet tall, but he’s got the lean physique of a long-distance athlete and a shaved head, both of which accentuate his taut silhouette, making him seem taller. Nadella runs 30 minutes each morning, preferring the treadmill to spare his 49-year-old knees from the ravages of concrete. He is deeply protective of this time; it’s one of the
few moments in his highly orchestrated day when he’s alone with his thoughts. But Nadella consistently reserves time for sessions with children—partly because they are the next generation of customers, and partly because it keeps him grounded. Nadella moves to another group of kids and then shifts his attention to a teenage student who is blind. The young woman has been working on building accessibility features using Cortana, Microsoft’s speechactivated digital assistant. She smiles and recites the menu options: “Hey Cortana. My essentials.” Despite his transatlantic jet lag Nadella is transﬁxed. “That’s awesome,” he says. “It’s fantastic to see you pushing the boundaries of what can be done.” He thanks her and turns toward the next group. “I have a particular passion around accessibility, and this is something I spend quite a bit of cycles on,” Nadella tells me later. He has two daughters and a son; the son has special needs. “What she was showing me is essentially how she’s building out as a
developer the tools that she can use in her everyday life to be productive. One thing is certain in life: All of us will need accessibility tools at some point.” All the better if Microsoft can provide them. And then Nadella is gone. The executive spent just a few minutes with each group of children, tearing through the room like a tempest. By the time the twentysomething students milling around St. Patrick’s realize that an important person has descended upon their campus, he has disappeared—on to the next room, the next city, the next country in a whirlwind fourday tour that will take him to the European continent and through some of his company’s largest markets. when nadella replaced Steven Ballmer as Microsoft’s CEO in February 2014, he inherited what you might diplomatically call a growth crisis. Undiplomatically, you might call it an existential one. “Microsoft is unable to connect with the new generation of users,” wrote Global Equities analyst Trip Chowdhry in
a 2010 research note to his clients, about as damning a sentence as you can muster for a technology company. Microsoft, the behemoth of Windows and Office, was fast approaching its 40th anniversary. It had the kind of cash reserves that military dictators kill for and the market share of business-school dreams. But none of the new products the company had produced under its second CEO—from its Bing search engine to its Zune, Kin, and Lumia mobile devices— generated anywhere near the revenues of the smash hits created under its ﬁrst, cofounder Bill Gates. Microsoft entered the twilight of Ballmer’s tenure as the most successful and wealthiest desktop-software company the world had ever seen—at a time when the world had moved on to search engines, social networking, mobile devices, and cloud computing. For the ﬁrst decade of the 21st century, Microsoft was the world’s most valuable company, topping out at more than $600 billion. Apple ended that run in 2010,
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OF THE YEAR
Nadella prepares for a speech at the Palais des Congrès in Paris.
80 fortune.com // dec.01.16
riding its legendary turnaround under CEO Steve Jobs. By this point, for the ﬁrst time in its history Microsoft was facing the prospect of a decline in its core business. Since Nadella took charge, the company has been engineering a stunning turnaround of its own. He has taken a company focused on personal computing but showing promise in its enterprise and cloud-computing businesses, and turned that equation on its head. In the past three years Microsoft sheared the $9.4 billion phone business it acquired from Nokia and sold its Bing mapping-data assets to Uber. It plowed billions into the construction of data centers around the globe to support its now cloud-ready products. And it made substantial leaps transforming its original software business from permanent licenses, where
revenue is a one-time affair, to subscriptions, where revenue is recurring. Nadella has even struck an audacious deal, plunking down $26.2 billion for business-networking company LinkedIn, the largest acquisition in Microsoft’s history. That’s a massive check to write, and “largest acquisition in Microsoft’s history” is a dubious title given the company’s, um, checkered track record in that realm. Optimism, it’s fair to say, has returned to Redmond. “Satya is a great leader for Microsoft,” says Ballmer, who is still the company’s largest individual shareholder. He adds that
Nadella “has done a great job improving perceptions of the company in ways that can advance its agenda— with developers, industry participants, and investors.” As rival Apple—with a market capitalization of $600 billion, still the world’s most valuable company—weathers criticism of ennui under CEO Tim Cook, Microsoft has sharpened its focus under Nadella. In October the company’s shares surged past their all-time high price of $59.56, recorded in the heady days of the dotcom bubble and at the tail end of a decade that the company unquestionably ruled. Never mind that because of aggressive stock buybacks that reduced the company’s share count, Microsoft’s market cap is $460 billion, far below the old peak. Still, the share-price resurgence was no small matter. For more than a decade Microsoft was a dead stock walking. Seemingly overnight the company was back with a vengeance. At its helm is a skinny, contemplative student of the world who revels in asking questions and couldn’t be bothered by so trivial a pursuit as warring with the company’s rivals. the palais des congrès, a hulking and angular 1970s-era convention center in the 17th arrondissement of Paris, was constructed on the former site of Luna Park, the largest amuse-
ment park ever built in the French capital. In the early 1900s the site was a monument to leisure. Today it is a temple to trade, with more than 344,000 square feet of glossy exhibition space on eight ﬂoors. On a sunny October day the Palais is humming with thousands of people who have come for Microsoft Experiences, the company’s annual customer conference in France. Brightly colored booths promoting mobility and collaboration technologies pack the exhibition area. Attendees scurry between technical talks on DevOps and brainstorms about digital banking. Inside one session, the “Blockchain Hackademy,” Nadella stands at the center of a scrum of engineers. He inspects a display showing energy-monitoring software and peppers an executive with questions. Nearby, a man wearing a costume in the shape of a Tetris block dances and hands out brochures about supply chain traceability. In Dublin, Nadella met his future customers; in Paris he is scouting future technologies. “From Bill to Steve to me, the worldview we’ve had is ‘long-term relevance,’ ” he later tells me. “It’s the batting average. You may strike out sometimes, but you’ve got to be able to, in this tech business, catch enough of them to survive in the major leagues.” Nadella is behind schedule today, owing to some
extended meetings with government officials earlier in the morning. “I’ve oftentimes described the role that Satya is in as almost like a head of state,” says LinkedIn CEO Jeff Weiner, comparing him to the CEOs of Apple, Facebook, and Google. “Tim Cook’s job, Mark’s job, Sundar’s job—it’s akin to that in terms of serving multiple constituencies.” The CEO’s schedule stipulates that he’ll remain at the blockchain session for 30 minutes, but he disappears through a side door in only a handful. His usual half smile has given way to a grimmer expression, and he charges down the crowded hall with his staffers in tow. Nadella moves so quickly that I lose him in the throng. When I ﬁnally ﬁnd him, he is seated behind an unmarked door, getting makeup for his keynote and reviewing points with Caitlin McCabe, his fastidious chief speechwriter. Nadella’s address will begin the same way as all the others he delivers this week. He will ﬁrst cite Microsoft’s mission to “empower every person and organization on the planet to achieve more” and acknowledge his own beginnings in India as a sign of the power of technology to democratize society. He will quickly move to painting a future of computing anchored in the so-called cloud. He will acknowledge the various forms this future takes—“small screens, large screens, in your living
rooms and your conference rooms”—and echo the view that the world is facing a “fourth Industrial Revolution.” (After mechanical, electrical, and digital, it’s a blurring of the three through the cloud-powered Internet of things.) And since he is in Europe, where data privacy laws are notably stringent, he will punctuate each address with no fewer than three mentions of the word “trust.” I will listen to Nadella give a version of this speech four times this week—in Dublin, Paris, Berlin, and London. The bulk of his preparation happens months before at Microsoft headquarters. There Nadella, McCabe, and company workshop ideas and test them out on a real audience. (“To get the brutal, honest feedback,” he says.) Onsite, the CEO reviews only localized elements meant to cater to his audience—a partnership with Allied Irish Bank in Dublin, a deal with Renault-Nissan in Paris. As Nadella prepares for his keynote speech in France, his chief of staff, a towering Princeton man who could double as a chief of security, stands guard outside the door. Every three minutes a staffer checks on his progress. Eventually Nadella emerges, slightly more at ease. He overhears my voice and pauses to ask how I’m doing, having followed him across international borders twice in 48 hours in pursuit
of this story, with two more countries to go. I ask him in kind. “Halfway, is it?” he says, referring to his week’s breakneck schedule. “Not even,” I reply. He smiles and chuckles at our mutual misfortune, then marches into battle. in many ways, Nadella was an unusual choice to lead Microsoft in a moment that called for transformation. He is a 24-year veteran of the company. He is an electrical engineer, not a product visionary. But closer scrutiny reveals a man who managed to thrive as an exception to a corporate culture built on type-A personalities—the very kind that his predecessor embodied. It is a skill that helped propel Nadella’s unlikely rise, says Blake Irving, who joined Microsoft the same year as Nadella and went on to work with him in the company’s cloudcomputing division before becoming CEO of GoDaddy. “There are two types of conversations you’d have at Microsoft when you’d explain things,” Irving says. “One type of person waited
Nadella has done “a great job improving perceptions of the company in ways that can advance its agenda,” says Steve Ballmer. 81 fortune.com // dec.01.16
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Nadella admires the skyline of Paris’s business district in between meetings.
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for a break in the argument to argue back. The other listened to learn. That was Satya.” Well before he was named CEO, Nadella “could suspend his disbelief and opinion to listen to you thoughtfully. The slight difference between listening to argue and listening to learn is not subtle. It’s huge. Satya is soft-spoken but energetic, which is a weird combination.” Satya Nadella—officially Nadella Satyanarayana—was born in Hyderabad, India, in 1967. He is the only child of Bukkapuram Nadella Yugandher, an officer for the Indian Administrative Service, the country’s civil service agency, and the late Prabhavati Yugandhar, a professor of Sanskrit. He grew up at a time when communist guerrilla ﬁghters called Naxalites clashed with the government of Indira Gandhi. The civil unrest shaped Nadella’s view on how to mobilize change. “One after-
noon I saw two photographs that haunt me still,” he recalled at a 2015 dinner held in honor of Indian Prime Minister Narendra Modi. “I saw pictures of two people who were lying, overturned, on charpoys [rope beds] with two transistor radios— Philips transistor radios— next to them. In subsequent years I came to understand much more about these two people. What I saw that day were two photographs of dead revolutionaries. The year was 1970, and the district was Srikakulam. They were schoolteachers who decided to leave teaching. I think about their lives and lives of others who have followed similar paths. I think about what those
people could have achieved with the true empowerment of technology and other resources.” In his ﬁrst month as CEO, Nadella gave each member of his management team a book called Nonviolent Communication. For most of his childhood Nadella attended the Hyderabad Public School, an opulent institution founded to serve the children of aristocrats. Between cricket games Nadella met his wife, Anupama, whom he married in 1992. After HPS, Nadella obtained a bachelor’s degree in electrical engineering from the Manipal Institute of Technology. Meticulous, driven, and inquisitive, Nadella then moved to the U.S. to study computer science at the University of Wisconsin at Milwaukee—his master’s thesis concerned graph coloring and parallel algorithms—and work as a software engineer at Penta Technologies. After graduation, Nadella relocated to California to take a job at Sun Microsystems, which was just beginning its ascent at the dawn of the era of personal computers. At 25, Microsoft poached him and brought him to Redmond. Nadella was “super-young, awkward, and insecure, still trying to grow into the potential he had,” his hiring manager, Richard Tait, told the Puget Sound Business Journal in 2014. But he was incredibly smart and had a deep understanding of the computer systems that busi-
nesses were using. “He was a secret weapon for us.” it isn’t until i get to London that I ﬁnally sit down with Microsoft’s CEO. By the time I arrive, Nadella has ticked almost every box on his daily schedule: government meetings, check; keynote speech, check; educational event with children, check. I catch him leaving the offices of the Economist on an unusually warm day in the British capital. There’s a spring in his step, perhaps because he’ll be home soon. We pile into a waiting black van, and his driver takes off toward Luton Airport, 34 miles northwest of London. I ask Nadella how this European trip ﬁts into his broader strategy since he became CEO two years ago. He notes the tactical importance of the company’s cloud build-out in Europe and the “words and actions” needed to smooth its progress. (Once an antitrust bête noire, Microsoft can enjoy one beneﬁt of no longer being the biggest, baddest boy on the block: a bit less scrutiny from regulators. The company is now content to let Brussels officials tangle instead with Alphabet and Facebook. For its part, Microsoft is positioning its data centers as investments that support European data-protection laws.) Nadella articulates a broader purpose to his foreign missions. “What does a CEO get to do? You’ve got to pass judgment on an
uncertain future and curate culture,” he says. “For both, I feel, I learn a lot from these trips.” That’s what Nadella does: He learns, and others learn with him. The CEO extracted intelligence in each European capital. In car rides from the airport he received brieﬁngs on how regional businesses are faring. In meals with partners Nadella got up to speed on issues in a target market. (“They’re trying to size you up,” he says. “What is this guy like? What is he trying to get done with this company?”) In closed-door meetings with officials he digested government priorities and pushed Microsoft’s interests. (“Government leaders will give it to you straight: ‘Okay, here’s your relevance to me,’” Nadella says.) In solo speeches he clariﬁed the company’s priorities to rankand-ﬁle employees. “I’m a fundamental believer—because of maybe where I grew up—in the role of a multinational company,” he says. “You’ve got to be able to think about operating globally. If a for-proﬁt entity is only proﬁt seeking, then you’re not going to be a long-term proﬁtable company. That’s kind of a paradox of business, I think.” As is controlling the direction of a company that operates in 192 countries. I ask Nadella how he assembled his senior leadership team to spark the change he wanted to see at Microsoft. In 2015 he consolidated the company’s engineering efforts
under three executives—Terry Myerson, Scott Guthrie, and Qi Lu (who has since left Microsoft for health reasons)—and bid adieu to several more, among them former Nokia CEO Stephen Elop. His resulting management team, from CFO Amy Hood to Guthrie, whom Nadella earlier appointed to replace him as head of the Cloud and Enterprise Group, comprises mostly longtime company veterans. Can Microsoft really change from within? Has its moment of clarity, more than a decade in the making, truly arrived at the hands of people who also presided over some of Microsoft’s greatest ﬂops? Yes, Nadella maintains— if you ﬁx the culture. “I’ve optimized for people who want to work as part of a team,” he says. For years Microsoft “cultivated leaders who wanted to run their own show.” No longer. “To run the show you have to work as a team. That’s a very different Microsoft. That’s at a premium for me.” In his chosen leaders Nadella prizes the abilities to bring clarity, create energy, and suppress the urge to whine. “I say, ‘Hey, look, you’re in a ﬁeld of shit, and your job is to be able to ﬁnd the rose petals,’ as opposed to saying, ‘Oh, I’m in a ﬁeld of shit,’ ” he says. “C’mon! You’re a leader. That’s what it is. You can’t complain about constraints. We live in a constrained world.” Before long I run up against my own constraints,
and the van slows and pulls to the side of the six-lane highway to let me out. I ask Nadella if there’s anything I missed in my barrage of questions at 60 mph. He pauses. “I sometimes feel that business success is celebrated in much more narrow ways,” he says. “Real business success is not only surplus that you’ve created for your own core constituency but the broader surplus. After all, what is capitalism? Being able to get productivity gains that actually help the broader economy in society.” Perhaps. So far Nadella has taken huge strides. He has managed to gain the market’s conﬁdence and the goodwill of his own employees. His expensive push to reorient the company to the cloud rather than the desktop has proved shrewd. On the eve of his third anniversary of becoming Microsoft’s CEO, Satya Nadella is riding a hot hand—but it’s a long, daunting road back to becoming the largest and most powerful company on the planet.
Foryears,Microsoft “cultivatedleaders whowantedtorun theirownshow,” Nadellasays.No longer.“Torunthe showyouhavetowork asateam.” 83
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OF THE YEAR
N O S . 6 -1 0
BRAD SMITH CEO, IN TUIT
huang while chip companies like Intel and Qualcomm have struggled in recent years, Nvidia has thrived. Videogamers love what Nvidia’s graphics processing units (GPUs) can deliver, and investors like Jen-Hsun Huang’s bets on two en vogue technologies: artiﬁcial intelligence and virtual reality. It turns out that Nvidia’s GPUs are adept at powering a type of AI called deep learning that helps computers ﬁnd patterns in enormous quantities of data. In August, Nvidia said its data-center business doubled quarterly sales year over year thanks in part to deep learning. And if virtual reality becomes a big business, more consumers may need computers with high-end GPUs to power VR headsets. Optimism about Huang’s bets is showing up in the company’s stock price, which has more than doubled over the past 12 months. —Jonathan Vanian CEO, N V IDI A
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PHOTOGRAPH BY ROBYN TWOMEY
S M I T H : B R I A N F L A H E R T Y—T H E N E W Y O R K T I M E S / R E D U X
brad smith is doing what every CEO of a successful incumbent company must do but few ever achieve: successfully disrupting his business as technology remakes his industry. Intuit this year sold off its original product, Quicken personal-ﬁnance software, and is betting big on making its QuickBooks accounting software a cloud-based service. His boldest decision, hotly debated internally, was opening the platform to all apps, including those that compete with Intuit’s own offerings, for example in handling smallbusiness payrolls. Through it all, Intuit has remained a regular on our ranking of the Best Companies to Work For. Investors looked past a temporary hit to proﬁts as Intuit transitioned to its new business model and have recently priced the stock near record highs. —Geoff Colvin
8 9 10
CHENG: COUR TESY DIDI CHUXING; SACKS: ALE X WONG—GE T T Y IMAGES; M A : IMAGINECHINA
CEO, DIDI CHU X ING
CEO, MONST ER BEV ER AGE
EXECUTIV E CHAIR M A N, A LIBA BA
when uber swaggered into China a few years ago, it seemed likely to dominate the market, just as it has elsewhere. But the U.S. ride-hailing service collided with Cheng Wei, who merged his smaller alternative with an equally sized local rival to form Didi Chuxing and then used funding from the likes of Apple and Tencent to wage a costly war of attrition with Uber. Didi offered to give away 1 billion yuan worth of free rides, popped up in 400 cities when Uber was just in a few dozen, and invested in U.S. rival Lyft. This summer Uber effectively conceded defeat, selling its China unit to Didi. The company, currently valued at $35 billion, hasn’t expanded outside China, but it now controls the world’s biggest transportation market. —Scott Cendrowski
energy drinks are booming, and Rodney Sacks’ company is chugging profits. In 1992 he bought a family-owned juice business called Hansen’s Natural for $14.6 million. Ten years later he and colleague Mark Hall unveiled a radically different drink: a neon-colored Red Bull competitor called Monster Energy. Soon Monster was providing a sugar rush of sales, and Sacks doubled down. In 2015 he swapped its natural drinks, which included Peace Tea and various juices, for Coca-Cola energy brands such as Full Throttle and Relentless. Last year Monster earned a record $546 million in proﬁts on $2.7 billion in revenue. It’s now neck and neck with Red Bull in the U.S., and thanks to a distribution deal with Coca-Cola, Monster is poised to caffeinate its sales overseas. —Laura Entis
when g-20 leaders met in Hangzhou this year, Jack Ma was there to propose a globally connected e-commerce plan. When George Soros predicted gloom in China’s economy, Ma countered with a bullish picture. When the list of the country’s top philanthropists was released, Ma topped it. With a merry personality, good English, and a willingness to give speeches almost anywhere, Ma has become the de facto leader of China’s business order. Alibaba has as well. After the company spent $1 billion to buy a leading Southeast Asian e-commerce site, Alibaba’s business expanded internationally, as it did in all other directions, from media to payments to food delivery. The result: Operating income has risen by a factor of nearly seven since 2012. And Alibaba’s stock is up 20% in 2016. —S.C.
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11 TIM COOK CEO, A PPLE
we all know the knocks on Tim Cook. First, Apple hasn’t released a mind-blowingly innovative new product during his ﬁve years as CEO. Second, he isn’t Steve Jobs. Fortune thinks different on these points. Cook has kept Apple extravagantly proﬁtable (almost $46 billion in the past year), one reason it’s the world’s most valuable company, at $600 billion. And innovation does continue in the form of the smartwatch and wireless earphones; it’s just not of the magnitude of the iPod, iPhone, and iPad. Don’t undervalue competence either. Apple shipped 212,000 iPhones in the past year, and unlike those of archfoe Samsung, none of them spontaneously combusted. Oh, and there will only ever be one Steve Jobs. Give Cook a break on that one. —Adam Lashinsky
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PHOTOGRAPH BY MARVIN SHAOUNI
T H E L I S T. N O S . 1 1- 1 3
BUSINESSPERSON OF THE YEAR
COOK : S TEPHEN L AM—GE T T Y IMAGES; HAS TINGS: AR T S TREIBER
CEO, GEN ER A L MOTOR S
“don’t let a good crisis go to waste” isn’t Mary Barra’s motto, but it might as well be. Taking the wheel of the automaker in the wake of its ignition-switch scandal—only a few short years after its traumatic and humiliating cycle through bankruptcy—the GM lifer would have been seen as a success if she had helped the company merely survive. But Barra has done much more, taking decisive actions, such as pulling out of the Russian market and attempting a bit of corporate angioplasty to unclog GM’s famously sclerotic culture. The latter is a daunting challenge, but here’s one concrete sign of change: Fusty old GM beat Elon Musk’s Tesla to market with a budget-priced electric car. And in the meantime Barra has tripled proﬁts, to $13.9 billion, in less than three years as CEO. Sure, the stock price has been stuck in neutral, but Barra has engineered a dramatic, seemingly improbable revival. —Nicholas Varchaver
REED HASTINGS CEO, N ETFLIX
four years into Reed Hastings’s bold bet on original content, Netﬂix is reaping some rewards. Recent hits like Stranger Things and Narcos helped bring quarterly streaming revenues up by a third year over year. About 40% of those revenues came from overseas—another big push for the CEO—and subscriber numbers have risen to 86 million. Netﬂix’s Emmys (nine this year) don’t come cheap; the company has said it will budget $6 billion for content next year, including 1,000 hours of original programming. Hastings recently inked some smart partnerships, including an integration with Comcast’s X1 platform, which allows customers to stream Netﬂix via their cable set-top box. The next goal in the company’s plan for world domination? Cracking the Chinese market. —Michal Lev-Ram
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OF THE YEAR
N O S . 14 -1 9
14 15 16 TRAVIS KALANICK CEO, UBER
C H A I R M A N , D A L I A N WA N D A G R O U P
when toby cosgrove told his med school professors he wanted to become a heart surgeon, they scoffed. That was for the A-team, and Cosgrove, due largely to undiagnosed dyslexia, was at the bottom of his class. He ignored them, became a renowned surgeon, and was soon leading the Cleveland Clinic’s celebrated cardiac unit. When the hospital made him CEO in 2004, he again had doubters: Too little business experience! Too nice! But under Cosgrove, the hospital—where doctors work on salary so there’s no incentive for unnecessary procedures—has enjoyed a stellar reputation and expanded abroad. It has even offered the unthinkable: same-day appointments. Last year 1.3 million patients (nearly everyone who asked) got one. Doubters beware. —Clifton Leaf
what happens when you invent a new business model, upend an industry on multiple continents, raise vast quantities of capital (at an eye-popping valuation of $68 billion), provoke regulators worldwide, and nickel-and-dime your drivers while trying to replace them with robots? If you’re Travis Kalanick, people start rooting for you to fail. It certainly looked as if Uber got its comeuppance in China this year, when it sold its business to homegrown rival Didi Chuxing. Maybe so. It was also a shrewd capitulation in that Kalanick—who had invested billions of Uber’s money and many hours of his life on the China quest—gained Didi as an investor and removed a costly distraction. Next step? An initial public offering of Uber shares sometime in 2017. —A.L.
wang jianlin is China’s richest man, and he shows no signs of resting on his laurels. Already the world’s largest owner of movie theaters, Wanda has expanded aggressively into Hollywood this year, paying $3.5 billion for Legendary Entertainment, then announcing a $1 billion deal to buy Dick Clark Productions. Wang has perfectly played China’s evolving economy and politics (years ago relatives of the ruling Politburo were offered cheap stakes in Wanda) and is becoming a global symbol of Chinese business prowess. He’s overseeing the company’s fourth transformation in its 30 years, moving away from real estate and into consumer services, such as theme parks. That took Wanda to $44 billion in sales last year— roughly the same as Coca-Cola’s—and he claims there’s a lot more to come. —S.C.
CEO, CLEV EL A ND CLINIC
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C O S G R O V E : M A C K E N Z I E S T R O H ; K A L A N I C K : R O B E R T S C H L E S I N G E R — P I C T U R E - A L L I A N C E / D P A /A P ; W A N G : S T E F E N C H O W
DELOS “TOBY” COSGROVE
MA: BOBBY YIP—REU TERS; FINK : MARCO GROB
CEO, ROSS STOR ES
CEO, TENCEN T
if you ﬁnd t.j. maxx too extravagant, Ross Stores just may be the ticket for you—and millions of Americans would agree. Indeed, despite intense competition from the aforementioned Maxx and others, such as Nordstrom Rack, Ross keeps opening new locations and ticking its same-store sales upward by sticking to its spartan “dress for less” approach to off-price retailing. Ross now has a market cap ($24 billion) twice that of Macy’s despite having half its revenue. The company and its CEO march to their own tune. Barbara Rentler, a company lifer who took the top job 2½ years ago, is so press shy that her PR team declines to provide even a photo of her, and she has bucked other trends, not least by declining to launch an online store (which admittedly would be tricky for a company that relies on selling leftovers). Still, Ross has been judicious in its approach to store expansion, not coming to the East Coast before it was ready. And the company has reduced inventory 40% and sped up turnover to make sure it has merchandise that will keep enticing customers to come two to three times a month, compared with less than one for the average department store. Rentler is betting that will help her build Ross to 2,500 stores from 1,500. Ross may not follow the standard path, but you’d be foolhardy to bet against it. —Phil Wahba
tencent is best known for its WeChat service (which has 800 million users), but the company now gets half its revenues from online and mobile games. Indeed, it is on track to become the biggest gaming company in the world after announcing an $8.6 billion deal for a controlling stake in Supercell Oy, maker of the videogame Clash of Clans. Meanwhile, Tencent has been turning in juggernaut numbers, with revenues of $18.8 billion in its most recent 12 months, nearly twice the ﬁgure for 2013, and a surging net income of $5.1 billion. Result: a 37% jump in stock price so far in 2016. Earlier this year, Ma announced he would donate shares worth $2 billion to charity; then, in September, he decided to direct an additional 2% of Tencent’s proﬁts every year to philanthropies. —N.V.
19 LARRY FINK
CEO, BL ACK ROCK
in larry ﬁnk’s 28th year as CEO, the world’s largest money manager surpassed a jaw-dropping milestone: $5 trillion in assets under management, up 10% since 2015. BlackRock’s ETFs now total $1.3 trillion, and that was before the ﬁrm made its ﬂagship iShares products even cheaper than Vanguard’s. Those assets give Fink a lot of weight in the market and in politics, where he’s bandied about as a potential Treasury Secretary in a Clinton administration. Fink says he wants the heretofore timid giant to wield some clout: In February he wrote to 500 CEOs urging them to invest for the long term. BlackRock even led its ﬁrst activist campaign this year, at a Hong Kong ﬁnancial company. Says Blackstone’s Steve Schwarzman, “Larry is an extraordinary businessperson.” —Jen Wieczner
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NO. 20 PROFILE
BUSINESSPERSON OF THE YE AR
OSCC A R
munoo BY SH AW N T U L LY
OSCAR MUNOZ CEO, UNITED C O N T I N E N TA L Can he close the gap with rivals Delta and American?
A MIRACLE COME B A CK AT UNI T ED OSCAR MUNOZ TOOK THE CEO JOB T O L E A D A T URN A ROUND AT THE TROUBLED AIRLINE. THEN H E S U F F E R E D A N E A R LY F ATA L HE A R T AT TA CK A ND GO T A T R A N S P L A N T. H O W H E B O U N C E D B A C Kâ€” A N D W H Y U N I T E D I S S TA R T ING T O SO A R A G A IN.
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PHOTOGRAPHS BY SAVERIO TRUGLIA
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OF THE YEAR
Munoz taking selﬁes with United employees at O’Hare Airport in Chicago. Earlier this year the CEO moved decisively to settle contract negotiations with the ﬂight attendants’ union, leading to better service and happier customers.
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oscar munoz is telling his pilots about the day he almost died. “I want to share with all of you the advice that saved my life,” he says. It’s mid-October and the CEO of United Continental is standing, microphone in hand, at one end of a conference room in a Radisson hotel outside Denver. Dapper and relaxed in a blue blazer and gray slacks, Munoz is here to address 250 of the airline giant’s veteran pilots, who have ﬂown in for annual training exercises. The charismatic 57-year-old executive has already won the room over with his sense of humor, pointing out that today’s crowd is in a far more jubilant mood than the tense group at the same event last year—before the company and the pilots’ union had agreed to a generous contract extension. “I was facing a room full of ﬁngers pointing at me,” he says. But suddenly his sunny mood turns somber. The room grows quiet as Munoz recalls the morning of Oct. 15, 2015. “This is the anniversary week of my heart attack,” he tells his rapt audience. Munoz had just returned to his downtown Chicago rental apartment after an early-morning workout. The ﬁtness freak— who had completed a triathlon weeks earlier and maintained a vegan diet—was mixing a protein shake when the phone rang. “As I went to answer, my legs buckled.” The words of a cardiologist friend he jogs with suddenly came to him. “He said, ‘If you
PREPARING UNITED CONTINENTAL TO FLY HIGHER ON-TIME PERFORMANCE
FINANCIAL PERFORMANCE 84.9%
Achieving labor peace has helped boost United’s allimportant on-time statistics. Now Munoz can try to catch his big rivals in margins and market cap.
UNITED CONTINENTAL 79.6% AMERICAN AIRLINES
in $ billion
2016 OPERATING MARGIN UNITED CONTINENTAL
ever feel something weird, call 911, and tell them where you are. You may not get past that ﬁrst phone call.’ ” Munoz grabbed his landline—“I used to work for AT&T”—dialed 911, and sputtered his address. Then, remembering that he had locked the front door, he stumbled across the apartment in a stupor. Just as he got the door unlocked, he tumbled backward into a closet door, breaking his nose in the fall. Moments later the paramedics rushed in. Within 37 minutes of making the 911 call, he recounts, he was on life support at Northwestern Memorial Hospital. The near-death experience occurred on Munoz’s 38th day as United’s CEO. And it marked the start of a series of medical trials that, on and off, kept him sidelined for six of his ﬁrst seven months at United. On Jan. 5, his birthday, Munoz received a heart transplant in an 11-hour operation. (He’s been told the donor was a 30-year-old but has no further informa-
tion.) But he returned to the job after an extraordinarily brief recovery of just over two months. In fact, Munoz is one of the very few CEOs of a major company to ever continue in the top job after receiving a heart transplant. “This is the craziest humaninterest story ever,” says Robert Milton, the former chief of Air Canada who joined the United board in March at Munoz’s behest and now serves as chairman. “I took the job in part because I wanted this guy to win.” Adds another new director, Ed Shapiro of PAR Capital, one of two hedge funds that threatened a proxy ﬁght earlier this year before reaching an accord with Munoz: “What impressed us was that he put his life at risk to lead United. He chose to come back when it would have been easy to say, ‘I had a life-threatening issue, so I won’t be coming back’ to this incredibly stressful job.” Almost as remarkable as Munoz’s swift return is the progress he has already
SOURCES: FLIGHTSTATS; COMPANY REPORTS; MARKET CAPITALIZATION: S&P GLOBAL, AS OF NOV. 8, 2016
made in turning around what has for several years been a struggling and divided airline. He has ended years of labor strife by reaching new deals with the company’s four major unions, recruited away top talent from the airline’s rivals, and boosted United’s on-time arrivals. And Wall Street has taken notice: As of early November, United’s stock price had soared 44% in four months—besting fellow mega-carriers American (37%) and Delta (17%). Indeed, a comeback at United promises to substantially shift the balance of power in the $700 billion global airlines industry. In hours of interviews, Munoz recently provided Fortune with a close-up, exclusive look at his ambitious goals for United, his strategy for reaching them, and his amazing recovery from his near-death experience. united has been an underperformer ever since the disastrous merger between
United and Continental in 2010. Prior to Munoz’s arrival, negotiations on contracts with ﬂight attendants and mechanics had been dragging on for years, causing a bitterly antagonistic relationship between management and labor. United regularly posted the worst on-time performance among America’s four major carriers. As a result, the U.S. industry settled into a hierarchy that most experts predicted would persist for years. Among the nation’s Big Three global carriers, Delta was the clear champion—with excellent reliability, strong margins, and a dominant market cap to match. After its successful merger with US Airways, American was a strong second place. Third-place United’s problems ran deeper than just poor reliability and grumpy onboard service. In recent years the U.S. market has proved extremely proﬁtable, in part because the
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MUNOZ NO. 20
Munoz with two of his doctors at Northwestern Memorial Hospital in Chicago on Jan. 11, less than a week after undergoing successful heart transplant surgery.
industry has shrunk to just four big carriers (including the leading budget choice, Southwest). But instead of expanding to beneﬁt from the packed planes and strong fares, United had neglected its U.S. business to focus on proﬁts ferrying passengers to Asia and Europe. Munoz has made bold moves to reverse these trends—and at least one blockbuster hire. In an August coup that astounded the industry, United grabbed the longtime president of American Airlines, Scott Kirby, to take on the same role at United. Kirby, a master of orchestrating schedules to maximize lucrative connecting traffic, is renowned as the best “network manager” in the business. Munoz is counting on Kirby’s network magic to close the gap with American and Delta. To be sure, today all three major carriers are proﬁtable thanks to a steep fall in the price of jet fuel and the industry consolidation that has helped lead to packed planes. But United trails its rivals by a wide margin on key ﬁnancial metrics: For the ﬁrst nine months of 2016, United posted an operating margin of 14.5%, far below Delta at 19.7% and almost two points under American’s 16.3%. Here’s why United actually has a shot at a strong comeback: It boasts what’s arguably the best array of hubs of the majors. It is the ﬁrst- or second-ranking carrier in more of the biggest urban markets than any of its rivals—holding the top spot in Denver, Houston, New York City/Newark, and San Francisco and ranking second in Washington, D.C. “The key is the opportunity to exploit all that potential we haven’t been exploiting,” says Milton, the United chairman. sitting in his 11th-ﬂoor office in Chicago’s Willis Tower (the former Sears Tower), the trim, athletic Munoz shows no outward signs that he’s powered by a recently implanted heart. The only apparent legacy of his health
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EXECUTIVE HE ALTH
issues is a slight looseness in the grip of his right hand. (He’s back cycling but with a special brake lever installed on the left handlebar that works both front and back wheels.) But he’s shaking hands where he used only ﬁst bumps a couple of months ago and says his grip is returning. To increase his stamina, he has shifted from being a pure vegan to what he calls a “ﬂexitarian,” by adding ﬁsh and poultry to his diet. United is making some splashy moves to attract business travelers. In December it will introduce a new service called Polaris that combines the former business- and ﬁrst-class cabins on international ﬂights so that every seat has direct aisle access. Polaris will also offer special, extraluxurious lounges serving
sit-down gourmet meals and equipped with showers. But Munoz doesn’t think that such amenities are what’s going to lift United above its rivals. “Everyone eventually matches or leapfrogs everyone else,” he says. Instead, he’s set on transforming the United culture—from extremely passive to highly aggressive. “Our employees and competitors thought we were docile,” he explains. “We want to be deﬁantly disruptive. I don’t mean necessarily by launching price wars but by being the best at the basics—having the best customer service, the best ontime performance, the best coffee—in a thoughtful, not a testosterone-laced, way.” Munoz learned about operational discipline early in life. He grew up in Southern California, the son
COURTESY OF UNITED AIRLINES
BUSINESSPERSON OF THE YEAR
A DEATH-DEFYING EXPERIENCE Oscar Munoz was one of roughly 2,200 Americans to receive a heart transplant in 2016. Here’s what it was like. DID HE KNOW HE WAS AT RISK
WHY DID HE NEED TO GE T A
WHAT DID HE DO TO RECOVER
HOW HAS HE MODIFIED
OF A HE ART AT TACK?
TR ANSPL ANT?
FROM THE SURGERY?
On Oct. 15, 2015, Munoz collapsed in his Chicago apartment after working out. He called 911 and just 37 minutes later was on life support at the hospital. Munoz had no family history of heart disease and had undergone annual checkups that included EKGs and stress tests. The tests showed no signs that heart trouble—caused by a excessive buildup of plaque—was imminent.
Munoz had open heart surgery on Oct. 30. A heart pump called a left ventricular assist device was implanted in his chest, powered by an eightpound battery attached to his side. After consulting with his doctors, he decided his best chance for a full recovery was a transplant. He got the call that a heart was available on Jan. 5, 2016, while on a United strategy retreat, and underwent an 11-hour surgery.
Munoz says that the recovery from the heart attack was more diﬃcult than from the transplant. After getting his new heart, he concentrated on aerobics—walking up and down stairs in the hospital, jogging on a treadmill, and riding a stationary bike. Munoz is back to biking on the open road, but no weight training is permitted. He returned to work full-time two months after the operation.
Prior to the heart attack, Munoz’s diet was exclusively vegan, and he did minitriathlons and ran several marathons (best time: three hours, 47 minutes). On the advice of his physicians, he now eats chicken and ﬁsh to increase stamina. His biggest concern is infection. Munoz doesn’t hesitate to shake hands, but he keeps Purell wipes handy at all times. He’s on a twice-daily medication regime.
of a union meat cutter born in Mexico and the oldest of nine children. “We didn’t have nine brands of cereal at home,” he recalls. “We’d line up to ﬁll our bowls from a giant vat of oatmeal.” After graduating from USC in 1982, Munoz rose through an ascending series of ﬁnancial analyst and controller jobs, ﬁrst at PepsiCo, then at Coca-Cola Enterprises. In the mid-1990s he secured a coveted chief-ofstaff-like role under legendary Coca-Cola CEO Roberto Goizueta. He moved on to stints at Qwest and AT&T. In 2003, Munoz made a big jump when he joined railroad operator CSX of Jacksonville as CFO and chief of strategy. “Oscar brought a certain steeliness,” says its general counsel, Ellen Fitzsimmons. He helped streamline the bloated
managerial ranks by eliminating 800—or 20%—of the management positions. He also developed new analytics that identiﬁed the most proﬁtable product segments, steering CSX to increase its shares in high-margin coal and chemicals. Over his 12 years at CSX, its market cap soared from $7 billion to $28 billion with a 15.9% average annual stock return that was double the performance of the S&P 500. In mid-2015 the CSX board chose Munoz to succeed CEO Michael Ward at the end of the year. But then a challenge appeared that Munoz couldn’t turn down.
embroiled in a crisis that might end the tenure of CEO Jeff Smisek. For months the Justice Department had been investigating charges that David Samson, chairman of the Port Authority of New York and New Jersey, had pressured United to reinstate a ﬂight to Columbia, S.C., near his vacation home in exchange for improvements that United sought at Newark’s Liberty Airport. United reinstated the money-losing ﬂight because of Samson’s demands, according to New Jersey’s U.S. Attorney. The federal investigation and United’s internal probe led to Smisek’s ouster in September 2015. (In July 2016, Samson pled guilty to bribery. United paid a $2.25 million penalty and agreed to substantially improve its compliance pro-
cedures. Neither Smisek nor other United officials were charged. Smisek has never commented.) The United board didn’t see a good internal candidate to replace Smisek, who had consolidated power by holding the positions of president, CEO, and chairman. One potential contender, CFO John Rainey, had already left to take the top ﬁnancial job at PayPal. The directors had hired an executive search ﬁrm to look at outside candidates if Smisek was forced to leave. But they wanted to avoid a long-term search that could leave United even more rudderless. Their fellow director Munoz, with his knowledge of the airline and track record at CSX, seemed the logical candidate. Munoz recognized the opportunity. He felt that if
united needed a savior. And as a director of the airline—he had joined the Continental board in 2004—Munoz knew well that the company had been
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OF THE YEAR
Munoz recognized the need to fortify the board with more airline experience. So on March 7 he had launched a preemptive strike by naming three new directors, including two airline veterans—Air Canada veteran Milton and James Whitehurst, former COO of Delta. Munoz proposed appointing Milton as chairman and deferring his own ascension for a year, until mid-2018. The choice of a seasoned airline veteran was crucial to forging a deal. The hedge funds dropped their demands for Bethune to head the board. In April the two sides reached an accord by agreeing to three additional directors, including two picked by the hedge funds. Munoz, at O’Hare, isn’t shy about sharing his survival story with his employees. “It’s kind of my public service announcement,” he says.
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he could ﬁx morale at United, performance would follow. “There was a high level of distrust and disengagement with employees,” says Munoz today. his heart attack wasn’t the only major hurdle Munoz had to overcome to start the turnaround at United. Just two months after receiving his heart transplant and days before he returned to work full-time on March 14, Munoz faced a potentially crippling proxy battle with investors. Two Boston hedge funds that specialize in airlines—PAR and Altimeter— had decided they could no longer tolerate United’s terrible record and demanded major changes to the board. They supported the selection of Munoz as CEO but, given his lack of an operating background in airlines, argued that he needed guidance from directors with long experience in the industry. None of United’s 12 directors had ever worked
for an airline. In a March 8 letter to the board, the two hedge funds castigated United’s board as “underqualiﬁed, ineffective, complacent, and entrenched.” The hedge funds demanded a slate of six new directors headed by former Continental CEO Gordon Bethune, whom they wanted as chairman. For Munoz, naming Bethune chairman was a deal-breaker; he argued it would inﬂame the old divisions between United and Continental. But he also sought to avoid a debilitating ﬁght with major investors. “I didn’t want weeks and months of cultural damage and brain damage that would continue to undermine the company.”
if part of being a successful airline executive is connecting with the rank and ﬁle, Munoz checks that box easily. He’s a natural at charming and connecting with everyone from ticket agents to baggage handlers. On a recent trip to Houston, Munoz arrived at around 9 p.m. and went directly to a maintenance hangar to meet with a crew of mechanics. The next morning he strolled through the airport taking selﬁes and giving pep talks to ticket agents and customer service folks, then descended to the tarmac to hang out with the workers who move bags from planes to carousels. “I feel most comfortable in the hangars and ramps,” says
Munoz. He also met for 30 minutes with a Teamster who had returned to work two days earlier following a heart transplant, after two years off the job. Even before his own heart attack, Munoz set a new tone with a crucial shift in policy. Under Smisek, United was outsourcing jobs to non-union customer service reps and ramp workers in small cities such as Jacksonville and Boise. Munoz, who regularly ﬂew out of Jacksonville while at CSX, saw ﬁrsthand how the policy annoyed travelers, since inexperienced new hires frequently provided below-par service. Shortly after becoming CEO, in the fall of 2015, he halted the outsourcing, which went a long way toward winning the conﬁdence of the unions. Munoz also played a decisive role in clinching the new attendants’ contract. Under Smisek, the talks had been grounded. “It was a lot of stalling and talking around in circles,” recalls Sara Nelson, a United ﬂight attendant who now heads the AFA, the national ﬂight attendants’ union. “We couldn’t get past things like compensation for jury duty, let alone the big pay issues. Probably 90% of the issues weren’t settled after three years of talks.” Reaching an agreement was essential to ﬁnally integrating United and Continental: Bizarrely, the rules barred the legacy Continental ﬂight attendants from working on planes
owned by United before the merger, and vice versa. Let’s say a plane arrived late in Houston and the “Continental” ﬂight attendants onboard had ﬁnished their shift and a “United” reserve crew was free. The “United” attendants weren’t allowed to service the ﬂight to its next connection. Under the previous regime, United felt that it couldn’t afford to match the “market” wages and beneﬁts paid by Delta and American. Munoz took a different view. “This is a pattern-bargaining industry, like railroads,” he says. “You need to pay market to get a contract at all, and without contracts, you have a poor relationship with workers.” So Munoz directly intervened to break the ﬁnal deadlock, authorizing a more generous deal. The payoff has been a remarkable improvement in on-time performance. According to statistics complied by FlightStats, for the ﬁrst three quarters of this year, 82% of United ﬂights opened their doors at the gate within 15 minutes of scheduled arrival—the deﬁnition of “on-time.” That’s an improvement of ﬁve percentage points from the 77% number in the same period last year. United actually beat American by more than two points and narrowed the gap with Delta from six to under three points. now that he has achieved labor peace, Munoz is focused on improving
network management. He wants to fully exploit the potential of United’s powerful collection of hubs. And luring Kirby was essential in making the leap. The story of how American’s president landed at United is a closely guarded secret, but Fortune has learned that Munoz and the board heard Kirby would be leaving American about two weeks before his departure. In a surprise move, American’s board had decided to promote its COO, Robert Isom, to president—tabbing Isom as the heir apparent to CEO Doug Parker rather than Kirby, and forcing Kirby’s departure. United got a big break because Kirby wasn’t restricted by a noncompetition agreement that would have prevented him from joining another airline for an extended period. “I jumped on it right away,” says Munoz. American disclosed Kirby’s departure at 4:15 p.m. on Aug. 29, and United announced his appointment as president at 4:18 p.m. The move wins praise from the crusty Bethune. “A lot of guys won’t hire strong people because they’re afraid of being overshadowed,” he tells Fortune. “But Oscar had the balls to hire Kirby—the right guy for the job. He rose 1,000% in my estimation.” Munoz pounced for an obvious reason: Getting the rightsized planes to the right places, all funneled through hubs, is Kirby’s specialty—and the keystone
of any airline’s proﬁtability. Of the three mega-carriers, United’s network management is by far the weakest. And Kirby, who had been targeting United to win customers to American just a few months ago, knows its problems inside-out. the weekend after this speech to the pilots near Denver, Munoz marked the anniversary of surviving his heart attack by celebrating with friends and family. His wife has remained in Jacksonville to allow the youngest of their four children, a teenage boy, to ﬁnish high school. The pair ﬂew up to Chicago, accompanied by two of the son’s friends and their parents, for a sports super-weekend—featuring excursions to watch the Bulls on Friday (they won) and to Soldier Field to see the Bears lose to Munoz’s last hometown team, the Jacksonville Jaguars, on Sunday. On Saturday night the group joined revelers in a restaurant to watch the Cubs defeat the Los Angeles Dodgers in game one of the National League championship series. “When [Chicago catcher] Miguel Montero hit that grand slam,” says L.A. native Munoz, “I transferred my lifelong loyalty from the Dodgers to the Cubs.” The home run came on Oct. 15—one year to the day after Munoz had managed to stumble to his apartment door, and salvation. For an airline in need of a comeback, it’s hard to imagine a better-qualiﬁed leader.
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Seventh Generationâ€”acquired by Unilever this fallâ€”is cracking the code on how to make eco-
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I T I S Nâ€™ T E A S Y
BE ING G R E E N
friendly cleaning products. The challenge now? Selling them to the masses. By BETH KOWITT PHOTOGRAPHS BY DAN SAELINGER
T HAD BECOME, suddenly, all about the pods. Ever since Tide’s breakout
product landed on supermarket shelves in 2012, the brightly colored candy-size pillows of liquid detergent had surged in popularity, becoming the closest thing to a craze the laundry industry had seen since the stacked washer/dryer in the 1980s. Here, in a realm of wash, rinse, and repeat, was a bona ﬁde innovation—a new category of products that let consumers skip the sticky step of measuring out soap and that now accounted for about 15% of the laundry detergent market—and it had caught one of the most innovative companies in the sector ﬂat-footed. And then some. Seventh Generation, the green cleaning-products company based in Burlington, Vt., had been late to the liquid pillow party as it was. But almost from the minute it began to develop its own offering, in January 2015, it ran into a problem. There was something about the packets that were already on the market that made them more dangerous than other liquid laundry detergent, it appeared. Data suggested they were responsible for more than half of the incidents reported to poison control centers related to kids’ exposure to detergent. And the outcomes in such cases were often more frightening too. Ingesting regular detergent rarely leads to more than an upset stomach. But kids who discovered the bright little packs and popped the morsels into their mouths were much more likely to experience excessive vomiting, wheezing, gasping, and sleepiness. More alarming was that no one could ﬁgure out what was happening chemically within the packets to make them so hazardous. (Procter & Gamble, the maker of Tide, says that since it has made changes to its packaging and begun an educational campaign, accidental-exposure rates to its liquid pods have dropped 27%.) Seventh Generation, which since 1988 had grown its business on the promise of nontoxic green products, thought it could sidestep the problem. For the ﬁrst half of 2015 the company’s formulation team worked on the recipe at its Burlington headquarters, using a roster of ingredients primarily derived from plants rather than petroleum, the industry norm. But then Martin Wolf, the company’s director of sustainability and authenticity, sounded the alarm. All the ingredients that Seventh Generation used in its detergent capsules met the company’s safety standards, but Wolf thought there was not enough evidence that their interaction within the small water-soluble ﬁlm packs would be any better than what was already on the market. “We just don’t understand enough about the toxicity,” says Wolf, who internally is referred to as “Scienceman.” “We’re still trying to ﬁgure it out.” Wolf and his team decided to pull the plug on the project and sent the
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company’s scientists back to the drawing board with a mandate to scrap the liquid ingredients. This past July, Seventh Generation’s new laundry packs—made this time with powder—went on sale at Target and Amazon. The company’s deliberateness and caution may seem out of step in an age when management gurus celebrate a “fail fast” ethos. But for nearly three decades it has been a pace that has seemed to sit well with health-minded and environmentally conscious consumers, who have made Seventh Generation the biggest green cleaning brand in the U.S. market, with some $250 million in annual sales. In a relatively sleepy industry, the company’s revenues have averaged double-digit growth rates since 2006. The biggest endorsement yet of Seventh Generation’s prospects came in October, when Unilever completed its acquisition of the company for a reported $600 million to $700 million
Seventh Generation CEO John Replogle looks out over Lake Champlain at the company’s Burlington, Vt., headquarters.
in cash. Seventh Generation CEO John Replogle, who says Unilever approached him without solicitation, believes the company’s new parent can help it become a multibillion-dollar enterprise over the next 25 years. For Unilever, it’s a “valueadded brand in a category where consumers are not going to be fooled by a revamp in packaging,” says Morningstar analyst Philip Gorham. “It’s truly differentiated in a category that’s hard to differentiate in.” The deal is a bet by Unilever on the continued evolution of a species: the eco-conscious consumer—an alert, premium-paying shopper. Initially that group was concerned only (or mostly) with what they put inside their bodies. Next they became more selective about what they put on them—and ﬁnally with what’s around them. In other words, says Nitin Paranjpe, president of Unilever’s home-care business, “it started off ﬁrst in food, then moved to personal care, and now to
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home care as well. The entire natural segment is clearly on trend.” These shoppers, the theory goes, don’t just want cleaners that sound as though they’ve got a whiff of sage and citrus, but ones that are actually free of ingredients that consumers can barely pronounce and don’t understand. This demand for purity and simplicity, after all, has been one of the biggest drivers in the food industry for the past few years. But it’s one that has been slow coming to the cleaning side of the consumer packaged goods (CPG) world. Seventh Generation learned that the hard way. The brand started as a catalog business that lost money for more than a decade selling products free of things like phosphates and volatile organic compounds before consumers had any awareness of such chemicals. The company’s early base of customers—best described as Earth Day enthusiasts— was passionate, sure, but small in numbers. The question now is whether the company can substantially grow its ranks of customers without losing the passionate core—what’s more, while being owned by a global $59-billion-a-year CPG giant that sells everything from Axe deodorant to Vaseline. Seventh Generation’s faithful customers tend to be wary of big business to begin with (perhaps even one well-regarded for its commitment to sustainability, as Unilever is). Replogle, for his part, is sensitive to any suggestion that the deal was a compromise of principles. “We’re not selling out,” he says. “We’re moving forward.”
OEY BERGSTEIN, Seventh Generation’s
chief marketing officer and general manager, was speaking at a conference six months after joining the company when someone in the audience raised his hand and said, “I just want to tell you I love Seventh Generation. I’ve been using your brand since long before it ever worked.” Even the company’s cofounder and onetime CEO Jeffrey Hollender used to quip that when Seventh Generation debuted its laundry detergent, he could sell it only to people who wanted to pay twice as much to walk around in dirty clothes. There was a little too much truth behind Hollender’s jest for most shoppers. So in the past decade Seventh Generation has started to operate more like a traditional CPG company by work-
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“What you have tospendto gofrom90% effectiveness to100% doesn’tpay backforthe consumer— it’s not noticeable.”
ing continuously on improving both its operating margins and its product efficacy. Surprisingly, the margin challenge in many ways has been easier—thanks in part to the declining cost of green ingredients. Seventh Generation, for instance, uses a lot of palm kernel oil—certiﬁed sustainable, of course—which largely comes from the kernel of the African oil palm tree. It has gotten more plentiful and cheaper as palm oil (which derives from the tree’s fruit) is increasingly used in the food industry. Addressing the issue of making cleaning products that actually, well, clean has been harder. It’s no longer enough for sprays and detergents to just be nontoxic; they have to work if they’re going to appeal to folks beyond the type employed by the Vermont company—a place where there are four separate trash-sorting containers in the bathrooms and Patagonia-wearing eco-warriors argue about whether black plastic can be recycled in the ﬁrst place. In some cases the company’s R&D team has clearly hit the mark on product performance. In its May issue, Consumer Reports rated the brand’s all-purpose spray cleaner best in class among all spray cleaners, natural and otherwise. But Seventh Generation executives acknowledge—indeed, with remarkable candor— that they’re not aiming for perfection when it comes to cleaning prowess. Rather, they try to get all products to within about 90% of the effectiveness of the leading conventional brands, such as Procter & Gamble’s Tide laundry detergent or its Cascade dishwasher liquid and powder. Tim Fowler, Seventh Generation’s senior vice president of R&D and operations, says it’s not worth it to try to match those products’ efficacy. “What you have to spend to go from 90% to 100% doesn’t pay back for the consumer,” he says. “It’s not noticeable.” Still, they’ve got to get close to that 90% threshold—and, in some cases, they simply haven’t yet. In that same May buying guide, Consumer Reports—which measures only a product’s cleaning performance, not the toxicity of its ingredients—gave some Seventh Generation offerings rather middling reviews. Its Natural Dishwasher Detergent Packs earned a rating of “very good” but came in 17th place out of 25 products reviewed. Its so-called Energy Smart dishwasher capsules, meanwhile, came in dead last in the category. The big challenge is that the company has long had a limited arsenal with which to work: The natural ingredients that Seventh Generation has used since the late 1980s can’t match the clean-
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ing power of chemically abrasive agents. Typically four out of ﬁve chemicals used in a conventional laundry detergent wouldn’t be allowed in a Seventh Generation product, according to its current standards. (“Cleaning products are pretty gnarly,” says Errol Schweizer, a former Whole Foods executive who is now an industry adviser.) So the company has doubled down on its investment in discovering new natural cleaning elements. The laundry packs, for example, now include two additional plant-derived enzymes— one that works on gums that are in things like salad dressing and ice cream, and the other that removes pills on clothes that entrap soil and give the appearance of dinginess. Unlike with food and personal care items, manufacturers are not required to list ingredients on cleaning products. Seventh Generation does it anyway. But until (or unless) the competition follows suit, full disclosure doesn’t give the Vermont company much of an edge in the marketplace because consumers simply have nothing to compare its ingredient list to when they’re browsing the supermarket aisles. Says Joel Makower, chairman and executive editor of GreenBiz Group, a media and events company focusing on sustainable business: “The value proposition for most green products is doing less bad.” And that is not as easy a sell as you might think.
ET ANOTHER CHALLENGE for Seventh
Generation now isn’t getting things clean, necessarily, but changing shoppers’ minds about what clean means. Consumers typically evaluate a detergent based not only on whether it removes stains and brightens clothes but also on whether it leaves them smelling “clean.” The problem is, clean isn’t supposed to smell like anything. “Consumers aren’t thinking, ‘Did you remove odor out of my clothes,’ but rather, ‘Did you deposit the smell of Tide on my clothes?’ ” says Fowler. “It’s about the addition, not about the removal.” That right there—the subjective feelings people have about what clean should look and smell like—may be the biggest hurdle to the mass adoption of green cleaners, even more so than price and efficacy. But the company’s managers acknowledge they can’t change such deeply ingrained assumptions
PROBLEM PRODUCTS SOME HOME CARE PRODUCTS ARE HARDER TO CLEAN UP THAN OTHERS. HERE, A FEW OF THE TOP CHALLENGES.
T OILE T PAPER Fibers in recycled paper break down in a way in which softness and absorbency are lost. Seventh Generation concedes it can’t match conventional brands in these areas— but it sells t.p. anyway. AIR CARE This is Seventh Generation’s next big product line. The challenge will be convincing shoppers that such products should remove things like odors from the air, not just mask them with fragrance. FEMININE CARE Tampons and pads make up one of the fastest-growing segments of the green market. But organic cotton is expensive, making it hard to price the products competitively and still earn a good margin.
overnight. So in recent years Seventh Generation has begun catering at least in some part to this sensory bias. Scented products now account for about 60% of the company’s sales—although those fragrances come from natural oils and botanical extracts. In the same way, the company has given in to another apparent consumer crutch: the need for color. Though Seventh Generation doesn’t add any dyes to its liquids that would give them the electric-blue hue we associate with cleaners, it has lately taken to brightening up their packaging. Many consumers would prefer to buy a green product—just as long as it doesn’t look too different from what they’re used to. That’s why, in the case of the laundry packs, the company is still trying to come up with a liquid solution because “consumers don’t ﬁnd the aesthetics as pleasing” with powder, Wolf says. Even when the technological means are at hand to make a product more eco-friendly, the customers aren’t always ready for it, however. Take the case of laundry detergent. The company sells a liquid soap that’s twice as concentrated as the industry standard—but it has the means to market a detergent that’s four times as concentrated as that (or eight times the norm). But consumers may be thrown by how little they have to use per laundry load and may feel cheated by the small size of the bottle. “We can’t get that far out ahead from a technology standpoint, even though we can deliver it,” Replogle says. Seventh Generation made that mistake when it rolled out spray cleaner that was 10 times as concentrated as usual. The product was sold in miniature vials, with the idea that consumers would pour the powerful liquid into a larger spray bottle and top off with water. The company marketing team discounted the price of the super-concentrated cleaner by a third— ﬁguring that it would be difficult for shoppers to spend the same price for a tiny container. That worked just ﬁne for customers in naturalfood stores, who seemed to appreciate the value proposition. But the product utterly ﬂopped in traditional grocery stores—so much so, in fact, that the company killed it. Mainstream consumers just aren’t there yet, says Replogle. And getting them there will require them to accept a tenet of sustainability that’s at odds with how most Americans shop: that less can be more. “That consumer science is really hard to crack,” says Replogle. “We haven’t ﬁgured it out yet.”
106 fortune.com // dec.01.16
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2016 BREAKDOWN OF THE U.S. CORPORATE CASH PILE
TOTAL FOR NONFINANCIAL COMPANIES
IF CASH IS KING, then big U.S. technology companies truly reign supreme. Moody’s, which tracks the cash and liquid investments of more than 1,000 U.S.-based nonﬁnancial companies, estimates that the total U.S. corporate cash stockpile will reach $1.77 trillion by year-end 2016—a 40% increase in ﬁve years. About one-third of that total is held by just ﬁve tech titans. The biggest cash hoarder by far is Apple, which should ﬁnish 2016 with more than $250 billion in its coﬀers. Where is the cash stashed? Mostly overseas and out of reach, for now, of U.S. tax authorities. — BRIAN O’KEEFE
TOP 5 TECH COMPANIES
REST OF TECH
B I L L I ON
ILLIO N ET $85 B
ON CISCO $67 BILLI
O RA C L E $ 6 8 B I L L I O N
CASH STOCKPILE U.S. NONFINANCIAL COMPANIES
4B ILL ION
CH $584 BILLION
$82 BIL. TOP 5 TECH COMPANIES
CASH IN THE U.S.
108 fortune.com // dec.01.16
SOURCE: MOODY’S INVESTORS SERVICE, 2016 ESTIMATES
GRAPHIC BY NICOLAS RAPP