a product message image
{' '} {' '}
Limited time offer
SAVE % on your upgrade

Page 1

152 2019

Where ideas and people meet

Tech at a turning point

Reckoning with digital transformation


Nowadays, we recognize them as businesses that believe in technology as a way of creating value, in innovation as their business model, and in the world as their market where they operate. And if you’re one of them or if you want to invest in their growth, at CaixaBank, we present dayone. The CaixaBank new service created for start-ups, scale-ups and their investors. www.CaixaBank.com/dayone

NRI: 2142-2017/09681

unicorns are much more than a fantasy


EDITOR’S NOTE

Principles for the digital world Antonio Argandoña Editorial Director of IESE Business School Insight AArgandona@iese.edu

T

he Terminator. Hackers and cyberattackers. Social manipulation through bots, trolls and fake news. The Big Brother state – or, increasingly, Big Brother multinational corporations. Often, technology is presented as a set of dangers. This dystopian view has lately turned public opinion against tech companies – what The Econo-

mist calls a “techlash” particularly against Facebook, Google and Amazon for questionable practices around transparency, privacy, accuracy and competition. And yet technology remains an indispensable resource to improve our lives. Cer-

tainly, it has its risks, and we try to use regulation to address them. Unfortunately, because the risks are global while the regulators are local, our best regulatory efforts can sometimes fall short, amounting to too little, too late. As such, business leaders must learn to regulate themselves, using ethical frameworks to guide their behavior. Indeed, for managers in the digital age, one of the key leadership traits highlighted in this issue of IESE Business School Insight is to exercise exceptional moral judgment and transparency. Ethics need not limit technological activity. Rather, ethics function like the guardrails of a highway, protecting both yourself and others. Ethics help identify problems and provide criteria to assess alternatives, make better decisions and put them into practice. There are already some agreed ethical principles for the digital world, like transparency, as well as responsible use of data and respect for privacy and security. But as technology evolves faster than regulation can keep up, we must keep raising the bar higher. For example, it’s one thing to tell users they have the ability to adjust their privacy settings, quite another to tell them upfront what you intend to do with their data and then require their informed consent before you can collect or monetize any of it. Do all parties know their rights and responsibilities with regard to the use of your technology? Is there discrimination, intrusion or manipulation involved that could destabilize civic processes? Are your business protocols aligned with the broader values that society considers acceptable? Were any red lines crossed? More to the point, do you actually know what your red lines are? Let’s aspire to higher ethical principles. As our report says, we’re at a turning point in the Fourth Industrial Revolution. We must rise to the occasion. Otherwise, the current techlash will only get worse.


Contents #152

REPORT

Tech at a turning point Reckoning with digital transformation

How will digitalization affect your sector? A matrix to reflect on the scope and timing of the impact

18

6

Toolkit for tomorrow’s executives 7 traits needed to navigate change

24

Focus on the opportunities to make a positive social impact Interview with Hyperloop’s co-founder and chair Bibop G. Gresta

Any transformation needs transformational leaders

26

Yes, you can bypass IT

Interview with New York Times CEO Mark Thompson

20

IESE’s Robert Wayne Gregory offers 6 tips for taking a creative approach to IT  30

“A world in transition needs thoughtful, intelligent people. My model is: find really able people and then not get in their way”

“Sometimes, to keep pace with your market, working around your IT department may be necessary”

Mark Thompson

Robert Wayne Gregory

“We need to evolve from an economy of scarcity to an economy of abundance” Bibop G. Gresta


THE BIG PICTURE Are electric cars the future? It’s more complicated than you think

HACK

SMART PICKS 34

The right investment mix for retirement

36

Beware of hiring star talent

37

5 whistleblowing tips

37

Kickoff time for advertising

Super Bowl ads signal broader trends 

KNOW Leading with compassion

56

5 mistakes every family business should avoid

64

How rankings shape your growth story

68

By Jonathan Passmore

+IESE

By Josep Tàpies

Brexit views What are the impacts of the U.K. leaving the EU? 

38

“We need to serve multiple stakeholders” Interview with Paul Polman 

42

52

By Tony Davila, George Foster, Xiaobin He and Carlos Shimizu

Road warriors A project born in IESE classrooms reimagines bus travel 

46

Think big “Embrace challenge” is the motto of the Puig family’s fashion and fragrance business

Mariano Puig (right) is honored for his lifetime business achievements by Spain’s King Felipe at IESE

FULL STOP 50

Carnegie Hall’s Clive Gillinson discovers a talent for management

76


Staff #152

Editorial Director Emeritus

Illustrations

Antonio Argandoña

Raúl Arias, Jojo Cruz, Javier Tascón

Editorial Board

Design, Infographics and Layout

Fabrizio Ferraro, Strategic Management

Prodigioso Volcán

Carlos García Pont, Marketing Beatriz Muñoz-Seca, Production,

Marketing

Technology and Operations Management

Susanna Arasa, Nuria Fragoso, Maria Subarroca

Sebastian Reiche, Managing People in Organizations Joan E. Ricart, Strategic Management

Advertising

Carles Vergara, Financial Management

M&N Consulting - Antonio Moré. Tel.: 93 544 12 34

Managing Director

Printing

Gemma Golobardes

QP Print

Editors

Published by

Marta Comín, Emily McBride, Jordi Navarrete,

IESE Business School — University of Navarra

Roger Perelló, Cintra Scott, Philip Seager

Legal Deposit: B 24325-2018 — ISSN 2604-5907

Editorial Contributors Cristina Aced, Nick Corbishley, Javier Moncayo, Larisa Tatge, Michelle Wallin

Audited circulation: 43,151 Spanish edition (average): 32,668

Photos

English edition (average): 10,485

Javier Arias, Jake Chessum, Seb Daly, Simon Dawson, Oriol Gil, Chris Lee, Piotr Redlinski, Quim Roser, Juan Ude

The opinions expressed in the articles published in this magazine are solely those of the authors. Articles may only be reproduced with prior written permission of IESE Business School, University of Navarra, and the original source must be cited. www.iese.edu insight@iese.edu

Barcelona Avda. Pearson, 21

Munich Maria-Theresia-Strasse 15

08034 Barcelona, Spain

81675 Munich, Germany

Tel.: +34 93 253 42 00

Tel.: +49 89 24 20 97 90

Madrid Camino del Cerro del Águila, 3

New York 165 W. 57th Street

(Ctra. de Castilla, km 5,180)

New York, NY 10019 USA

28023 Madrid, Spain

Tel.: +1 646 346 8850

Tel.: +34 91 211 30 00


The future is what is happening now. We are constantly working on offering you new digital solutions to make your life easier.

naturgy.es


REPORT

Tech at turning Reckoning with digital transformation


a point The World Wide Web just turned 30. How should we manage, learn and innovate better for the web’s next 30 years, all while ensuring our customers’ trust is never breached?


REPORT

Tech at a turning point

T

his year, for the first time, more people in the world will be online than off. Yes, the 50/50 line was finally crossed, connecting nearly four billion of us around the globe.

The year 2019 also marks the launch of 5G, the biggest upgrade to cellular networks in a decade, promising a level of digital services previously unachievable. And the World Wide Web just turned 30 years old: virtual adulthood reached.

Piyush Gupta: data is the new air

Yet, for all the benefits, new problems are arising at an alarming rate. “Techlash” is now a thing. Data breaches, fake news and cyberattacks are every-

I used to say data is the new oil. I’ve

day threats.

now changed. I think data is even

What can we do better to meet the challenges of the web’s next 30 years?

more democratized than oil, so I call data the new air. Because oil you can still control: “This is my oil.” Air you can’t control. The air I breathe and the air you breathe: how do I control and make a distinction? As you go forward, when data is springing from everything – there’s a chip in my glasses, a chip in my tie, a chip in the table, a chip everywhere – and data is freely being created, it will be very hard to control that data. Now what that means is that we’re going to have to come across a new social rule where use of data is going to be

And consider how the web’s power players have

driven by context and use as opposed

consolidated. Alphabet (Google), Amazon and

to notice and consent. The analogy

Facebook all recently reported record profits. In

I draw is “how do you control a gun

early 2019, they were worth a collective $2 trillion, more than most nations’ GDPs. In the Fourth Industrial Revolution, we have arrived at a pivotal point. In 2019, there’s a new reality that business leaders must reckon with as they

8 | IESE Business School Insight | no. 152


credit :

PIXELSTUDIO

continue their digital journeys. If data is the new oil (or the new air, as DBS Bank CEO Piyush Gupta described it to IESE Dean Franz Heukamp) what is at risk in its pursuit? Are we in danger of turning people against what was once thought to be a great equalizer, a conduit of real information, a beacon of democracy? At one of the world’s largest tech gatherings, the Web Summit, held in Lisbon in November 2018, 70,000 participants from 170 countries grappled with tough questions regarding our digital future. Various members of IESE’s faculty participated, versus how do you control a knife?”

speaking to tech-optimistic entrepreneurs and

For a gun, you need a license. For a

executives on what we can do better to meet the

knife, you don’t need a license, but it’s

challenges of the web’s next 30 years.

a question of context and use: if you use the knife to cut your food, you’re

While there are no easy answers to the lofty ques-

okay; if I use the knife to stab some-

tions raised, the business leaders of tomorrow

body, I get thrown into jail. We’re going

clearly must acknowledge citizens’ digital rights,

to have to develop similar rules for

along with the true impact of technological change.

data. What are the problems of data, what were the expectations when the data was collected, was the data used in a way that made sense for people or was it used to the detriment of people or society? We haven’t even started thinking about how these rules will play out, but in my own view, this is the only way that we are going to take society forward, in a world where data is so free and ubiquitous that you can’t control it in any other way.

no. 152 | IESE Business School Insight | 9


REPORT

Tech at a turning point

Bridge the digital divide

Its first 15 years, as Berners-Lee describes it, were

The inventor of the World Wide Web, Tim Bern-

incredibly optimistic, connecting people with tech-

ers-Lee, says the most crucial aspect of the web

nology – blogs, Wikipedia, Skype calls – to make

to preserve is its universality. In bringing it to life

great things happen. But the next 15 years were

back in 1989, he recalls “it had to work with any

more problematic, with privacy abuses, misuse of

language, any hardware, any software, and it had

personal data, and “fake communities of fake peo-

to be open and free” – the original net neutrality.

ple with fake views” dominating the recent past.

Annual % increase in the global number of people coming online (2005-2017) 20%

15%

10%

5%

0%

2006 source:

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

ITU World Telecommunications Database, 2018

A digital divide is quietly widening. Online growth rates have slowed 10 | IESE Business School Insight | no. 152


Why does this matter? The short answer: at this 50/50 moment, a digital divide is quietly widening. Earlier projections about connecting the world’s poor, especially poorer women, have proved overly optimistic. Online growth rates, especially in the past three years, have slowed. Now we have two problems, says Berners-Lee: getting the other half of the world online while making sure that “the next billion connect to a web worth having,” a place that’s better than what we have today. As such, Berners-Lee has announced an ambitious “contract for the Web,” a manifesto to make the web more “safe, accessible, diverse and open.” France was the first country to sign on; Germany is another early backer. Government reps, tech companies (including Google) and prominent stakeholders in civil society are busy hammering out the details in working groups. For example,

Prioritize privacy concerns

The most oft-repeated abbreviation at the summit,

one working group is seeking “commitments from

after AI, was GDPR, the General Data Protection

government and the private sector to achieve af-

Regulation of the EU, which marked the most signif-

fordable access, connectivity and accessibility

icant change in data privacy regulation in decades,

standards online” while another is outlining “steps

affecting companies around the globe if they handle

that governments and companies can take to en-

European citizens’ data. More than “just a regula-

sure privacy is respected.”

tion in Europe,” for Berners-Lee it represents a sea change in “the global conversation about privacy.”

Will the United States cooperate? Will China? What role should the private sector play in this?

European Competition Commissioner Margrethe

There are still so many open questions. Yet,

Vestager, arguably one of the most powerful pol-

whether the contract achieves its aim of “trying

iticians in the tech world, echoes this sentiment

to make the web a better place” for everyone, the

about privacy and data rights. Her office is famous

issues it raises and the impetus behind it remain

for fining Apple, Google and Amazon to the tune of

highly relevant to business. Expect to hear more

billions in the name of just and competitive prac-

about this in the year ahead.

tices, online as well as off. Her main message is

no. 152 | IESE Business School Insight | 11


REPORT

Tech at a turning point

that the right rules can help fix what currently ails

“Where in America do we store the internet?” If

the web. She notes that, in our homes, electricity

these are the people responsible for developing

is risky; it can kill us. But we don’t fear our homes,

the relevant regulations, he says, this doesn’t in-

thanks to good regulations that are being followed.

spire much confidence.

“If we can regulate nuclear power, why can’t

The growing consensus among the experts seems

we regulate some code?” asks Chris Wylie, the

to be that more oversight is imminent. The ques-

whistleblower who revealed that the U.K. polit-

tion is: how to do it well? Early indications suggest

ical consulting firm, Cambridge Analytica, had

that Europe’s GDPR, years in the making and now

developed profiles of Facebook users (using data

several months in practice, could serve as a glob-

obtained without their consent) deemed most

al standard for data privacy protection. Compa-

likely to spread fake news. Fake-news spreaders

nies are learning how to work with GDPR and that

were then manipulated in 2016’s Brexit referen-

knowledge should help shape what’s next.

dum and the U.S. election of Donald Trump. Wylie says he has been deeply worried by the

See the big picture

As the digital and physical worlds continue to

level of discussion coming out of the United

blend (or collide), IESE’s Javier Zamora insists

States, with one congress person asking him,

there are emerging opportunities in such “digital

If we can regulate nuclear power, why can’t we regulate some code? Chris Wylie

credit :

Seb Daly/Web Summit

12 | IESE Business School Insight | no. 152

The Cambridge Analytica whistleblower says he has been deeply worried by the level of discussion coming out of the United States, which he says does not inspire much confidence.


credit :

Web Summit

density.” Managers should keep a close eye on the internet of things (IoT), blockchain and even quantum computing. Luckily, managers don’t need to be experts in qubits or distributed ledgers; they just need to know what, generally, the next threats and opportunities are. He recommends making tech media such as Wired and TechCrunch.com part of your daily reading. “And take an aspirin with that,” he jokes, because the endless possibilities you read about will make your head hurt. After the aspirin kicks in, step back to consider the big picture. Consider what is happening, why it is happening, and how to adapt to maximize value in your company while minimizing the challenges. Zamora cites BBVA to explain the business model implications of connected data, as digitalization opens traditional businesses up to new competitors and new opportunities, even partnering with potential competitors. Of course, these partnerships present challenges. Integration works best when there are widely shared standards and application program interfaces (APIs), which allow apps to share data and work together.

Anticipate shifts & impacts

For all the promise of IoT, the lion’s share of “meaningful and valuable” data still comes from people and organizations, not things, Zamora points out. Which brings us back to privacy con-

In our homes, electricity is risky; it can kill us. But we don’t fear our homes, thanks to good regulations that are being followed Margrethe Vestager

The European Competition Commissioner, famous for fining Apple, Google and Amazon in the name of just and competitive practices, believes the right rules can help fix what currently ails the web.

cerns: transparency and trust are paramount. IESE’s Sandra Sieber, predicting the top trends for 2019, uses healthcare as an example: if a drug is prescribed, the patient’s pharmacy could communicate directly with the drug’s manufacturer and get a car service to deliver the prescription

no. 152 | IESE Business School Insight | 13


REPORT

Tech at a turning point

The consumer should have the right to move their data from one service provider to the next credit :

to the customer’s home. If the relevant organizations’ technology architectures were such that all the necessary data could be shared, then building new service offerings with new partners, like the one just described, would be possible. Connected data would move to B2B2B2C. But, Sieber stresses, “ultimately that C (the consumer) is the owner of their data.” And that consumer should have the right to move their data from one service provider to the next.

Javier Arias

Trust + data = winning combo BBVA was one of the first global banks

ultimately “data belongs to custom-

to embrace “open banking.” Although

ers” and “customers have to be able

it sounds futuristic, BBVA already runs

to decide who can access their data,”

a commercial platform for finan-

the management of BBVA also recog-

cial-service APIs serving business

nizes that incumbent banks are very

clients in Spain, the United States

well positioned to be not just money

and Mexico. Working with potential

banks, but also trusted “data banks”

competitors, the company plans to

in the future. Maintaining customer

start embedding third-party products

trust via transparent and benevolent

into its offerings. The goal is to offer

practices is fundamental, he said.

customers a wider range of innovative services than BBVA could on its own.

“We are in a world full of opportunities, thanks to technologies such

14 | IESE Business School Insight | no. 152

Throughout this process, “data, and

as biometrics, cloud computing and

the application of technology to data,

artificial intelligence. Our purpose is

are key,” BBVA CEO Carlos Torres

to bring the age of opportunity to ev-

Vila (left) told an audience at IESE in

eryone. And this is the path we need

December 2018. Recognizing that

to follow.”


ON A SCALE OF 1-10...

With business models and responsibilities shifting like this, an important exercise for managers is to ask themselves: what will their company look like as digital density inevitably increases, and in what ways will their value propositions grow ever more complex?

Keep learning

More complexity necessitates new and con-

What is the digital maturity of your company?

0

We’ve got some work to do!

will need a massive investment in education, but a different sort of education.” What matters now is not learning “things” but learning “how to learn things.”

Learn outside the box

The need for “a different sort of education” is also one of the takeaways of a recent IESE study in Spain. According to the Education for Jobs

stant learning. In agreement with Zamora, IESE

Initiative, most (72 percent) of the 53 large firms

Dean Franz Heukamp emphasizes that, “To-

surveyed say the digital revolution has had a high

day’s business leaders must know enough about technology to know what’s possible, what’s being impacted, and how it affects their business model.” With change now “the normal state of affairs,” leaders need to learn how to be sharp

2.5

We’re digitally aware

or very high impact on the profile of workers needed. Yet up-to-date know-how in job candidates is lacking: 68 percent of companies surveyed note an important knowledge gap in technology and digitalization among university graduates and 48

decision-makers with “good judgment,” able to

percent see that gap in vocational training gradu-

“handle change in their organizational architec-

ates. Looking ahead five years, survey respondents

ture and in their business models.” “We see that the implementation of digital strategies has a lot to do with the implementation of organizational change. And that, of course, has a lot to do with people,” says Heukamp. “If you have the right people, and you manage them well, you will be able to implement your strategy,” working to provide “new things that are better than what they are replacing.” This emphasis on continuous learning is echoed by U.N. Secretary General Antonio Guterres. With new technologies come disruption and a consequent impact on social cohesion. “It’s clear we aren’t prepared for that, and we’re not preparing fast enough for that,” he warns. “We

5

believe knowledge gaps will widen further in areas such as big data, digital marketing, artificial intelligence and blockchain. Spanish education needs

to be more responsive to labor market needs, sugWe’re gests the report. On a practical level, that may inincreasingly adopting digital clude more vocational training and boot camps to methods learn skills like coding. and practices

7.5

We’re a digitally enabled business

10

On an enterprise level, can large companies learn in a different way? Yes, according to other IESE research released at MWC Barcelona (formerly Mobile World Congress) in February 2019. Julia Prats and her coauthors studied corporate venturing, a collaborative framework for established companies to work with startups in the pursuit of innovation. By using certain mechanisms such as scouting missions, challenge prizes, hackathons,

We’re a digital pure play

no. 152 | IESE Business School Insight | 15


REPORT

Tech at a turning point

Buzzword: techlash “The coming techlash” was already presaged when Daniel Franklin, editor

result of an industry that can’t govern itself,” she wrote. “No wonder even

of The Economist, made his annual pre-

insiders, such as Apple’s Tim Cook, are

dictions at IESE in early 2018. At the end

now calling for the sector to be regulat-

of 2018, Financial Times’ Rana Foroohar

ed.” (Apple’s chief executive has been

chose “techlash” for “the year in a word”

speaking out in favor of tougher privacy

column. “Techlash is the predictable

regulations in 2019.)

corporate venture capital and acquisitions, big

• Train your workforce in digital skills (reskilling).

companies are able to spark innovation and bring

• Set up learning hubs and innovation com-

innovative ways of working into the fold.

munities. • Coach management on digital strategy and on

With regard to people management, digital trans-

building a personal brand on social media.

formation favors emotional intelligence and

• Practice reverse mentoring, whereby young-

non-hierarchical leadership. To this end, IESE’s

er professionals help senior executives stay

Carlos Rodriguez-Lluesma, in line with Prats’ re-

abreast of the latest trends.

port, recommends adopting agile principles – flatter structures, delegated authorities, freedom

With the web’s 50/50 moment upon us, and more

to test new ideas, a bias toward action – and cre-

uncertainty the only certainty for the near future,

ative methodologies such as design thinking and

reckoning with digital transformation means open-

scrum. This has implications for hiring decisions

ing up to new ways to manage, learn and innovate.

and ongoing training. Recognizing there is a digi-

All that while making sure your customers’ trust is

tal divide, even within companies, managers must

never breached.

promote continuous learning, so no one is left behind. How? Specifically, Rodriguez-Lluesma lists:

16 | IESE Business School Insight | no. 152


IESE Business School ranked 1st in the world for Executive Education by Financial Times for 4 years in a row.

AMP

Advanced Management Program Fall edition: Barcelona, November 2019 Spring edition: New York, March 2020 Learn more about the AMP: www.iese.edu/amp

IESE gives you a unique view of global business and the people who make it happen. With campuses in Barcelona, Madrid, New York, Munich and SĂŁo Paulo, and a world-class faculty, IESE has unparalleled reach and scope. Our Executive Education programs for top executives have a common aim: to optimize your knowledge, your integrative thinking, and your global mindset and to empower you to become a true leader who delivers positive, immediate and lasting impact.


REPORT

Tech at a turning point

How will digitalization affect your sector? New technologies can enhance or destroy your business proposition, either sooner or later.

Timing

OIL/GAS/ MINING HEALTHCARE

EDUCATION

Imminent

RETAILERS (STANDARDIZED GOODS)

MASS MEDIA

Delayed

TELECOM

Capability destroying

Use this matrix to reflect on the scope and timing of the impact of tech on your sector.

GROCERS

Capability enhancing

Scope

FINANCIAL SERVICES

Principal impact factors Given the dynamic nature of tech, the position of any one sector is not fixed but will constantly evolve over time. Various factors will influence that evolution, but here are four key ones whose interplay may provoke a shift.

1

Ease of digitization

How easy is it for your product or service to go from being “atoms” (physical) to “bits” (virtual)?

2

Proximity to consumer

How much power does the consumer have to dictate your terms of service? The more democratized your value chain, the faster and more disruptive the shift.

18 | IESE Business School Insight | no. 152

3

Degree of regulation

How regulated is your sector? The more heavily regulated, the longer it will take to change.

4

Requirement of CAPEX

How much capital do you need to invest up front? A CAPEX-intensive industry, like mining, means its disruption will be much more difficult.


Airbnb Advent of online booking

Eliminates the need to go to a brick-and-mortar travel agent, putting consumers in control

Airbnb launches its site

Netflix

1996

2008

By acting as a platform for homeowners to offer their own rooms to travelers, Airbnb eliminates the need for a hospitality business to own any real estate, effectively transforming hotel rooms from atoms to bits

Launch of its mobile app Greatly facilitates the user experience and expands the community, spurring Airbnb’s international growth

Pushback from regulators

2013 2014

1998

2007

Having expanded from home-sharing to trip-planning, Airbnb announces it’s exploring getting into the airline business next

2018

Netflix launches its streaming service

Begins moving away from mailing DVDs to offering video-on-demand via the internet (from atoms to bits)

2010

Blockbuster announces bankruptcy

2013

Shift from distributor to producer

2019

Disney to launch its own streaming service

Netflix’s expansion is given a regulatory boost when the FCC Open Internet Order affirms that U.S. telecoms and cable providers cannot limit content providers like Netflix from riding “over the top” of their infrastructures

In cities around the world, the hotel industry, tourism authorities, city councils and landlords complain about tax avoidance, lack of regulation and licensing, illegal renting and negative socioeconomic impacts on neighborhoods

A one-stop shop for end-to-end travel

Netflix launches website Users rent movies online that are mailed to them, eliminating the need for going to a physical video store

Netflix ramps up production of its own original content, weaning itself off others’ content to begin competing against studios and networks with its own award-winning movies, documentaries and series

Disney acquires 21st Century Fox, vastly expanding its catalog, and winds down licensing deals with Netflix, which it now sees as a competitive threat


REPORT

Mark Thompson

Tech at a turning point

President and CEO, The New York Times Co. Former Director-General of the BBC. Author of Enough Said: What’s Gone Wrong With the Language of Politics? (St. Martin’s Press, 2016).


Any transformation needs transformational leaders

N

o matter what kind of company you work

pass the million digital-only subscription mark, and some of

for, you’re probably grappling with a com-

its new digital experiments, such as its podcast, “The Daily,”

mon challenge: taking the enterprise you’ve

are winning those awards that Thompson talked about.

inherited and deciding what to keep, what to scription-based news business in the way that Spotify, Net-

And how do you do it without the past and present suffocat-

flix and others in the music and entertainment business are

ing the future?

proving scalability there,” he says.

“For managers trying to figure that out, this is where the

Here he discusses the keys for maintaining the quality of your offer while making your digital transformation sustainable.

Jake Chessum/The New York Times

“Now we’re trying to prove that it’s possible to scale a sub-

medals get won,” says Mark Thompson, President and CEO of

credit :

add and what to throw away. How do you run

the legacy business and the new business simultaneously?

Seven years later, the Times’ gutsy gamble appears to have

up a paywall. But they made the decision on the basis that

paid off. It was the first news organization in the world to

the opportunity was a relatively small one. Originally they

The New York Times Co., which had over 160 years of history behind it when he joined in 2012. It was a pivotal moment, as

What was the situation like when you joined?

the paper had recently implemented a paywall when it wasn’t

It was like every other company on the planet: they want-

clear whether paywalls would stem or speed the decline of

ed change. The paywall decision had been made before I

print media. All that was known was that something had to

got there. There were a lot of people, maybe even half the

be done to respond to the digital disruption that was upend-

company, including half the leadership, who were worried (1)

ing traditional business models.

that there’d be no demand for subscriptions and (2) that the Times was betraying an idea of the open internet by putting

no. 152 | IESE Business School Insight | 21


REPORT

Tech at a turning point

thought they might pick up 200,000 digital subscriptions. At the very peak of the print business in the ’90s, the Times had about 1.8 million subscribers. Now we have 4 million. And the majority of those are digital. Being British, to what extent do you think being an outsider helped? I think being an outsider is quite useful. So is being an optimist. That can-do spirit of believing in the future needed to be awakened. Once people had been given permission to think big about what could be done, suddenly the really crazy ideas started coming. What kind of executive do you look for?

“A world in transition needs thoughtful, intelligent people. My model is: find really able people and then not get in their way”

Any transformation needs transformational leaders. Most of the hard work of transformation is not done by chief executives. The chief executive needs to create the space and maybe set a broad direction, but it’s going to be, in military terms,

you’ll begin to experience the negative economics of un-

one-star or two-star brigadiers and three-star generals who

winding economies of scale. You can put in regular price ris-

are actually going to fight the battles and get the job done. My

es so that the revenue from subscribers declines at a slower

model is: find really able people and then not get in their way.

rate. But as your number of copies declines, print advertising goes away and, even with price rises, the unit costs go up. At

Although the paywall model seems to be successful,

what point does the per unit cost of manufacturing and de-

critics say it could have a polarizing effect: those who

livery, and the per unit revenue delivered, essentially cross?

pay get access to quality, while those who don’t pay end

The economics could steady, where it could make sense for

up with fake news. Is that a concern?

indefinite print-platform continuation. But we’re planning

I would say we’ve got not a paywall but a pay model. In a typ-

our future on the basis that there will be a crossover, at which

ical month, we have around 140 million unique users world-

point we will stop printing. In some ways, it will be in the col-

wide, of which 4 million are paid subscribers. That means we

lective choice of our users at what point the prices become

let about 136 million people every month read our content

too much for them.

without paying. We keep it porous. When there are national emergencies or big elections, we often take down our paywall

How do you make sure the legacy platform doesn’t over-

entirely. We want to make sure we are distributing our content

whelm or distract you from building the platforms of

very broadly, so that almost anyone who wants to sample our

the future?

content can do so without paying. The hope is they’ll fall in

I think we’ve solved that problem. We’re a digital newsroom

love with it and, when they can pay, they’ll start paying.

where we have multiple different ways of expressing our journalism – websites, smartphones, podcasts, live events, a

How and when do you, as a leader, make that difficult

TV show – and print just becomes another platform for what

decision of pulling the plug on something that still seems

we do. And it’s likely that one day it’s not going to be with us.

to be working but you know has an expiry date?

So, let’s treat it as that. You’re crucially never going to allow a

It’s an economic decision but one very much based on how

print consideration to stop you from doing what you need to

customers value your product. As the demand for print falls,

do in digital – simple as that.

22 | IESE Business School Insight | no. 152


“The Daily” podcast is a good example of one of these new activities. It used to be assumed there was no market for serious speech radio among young people – that they only wanted to listen to music. Yet “The Daily” is demonstrating otherwise. The audiences of today – not just young people, but all audiences – want to get a sense of “who is telling me this.” The Times has always stood for authoritative, quality journalism, which of course we want to keep, but the editing process was designed to take the personality out and standardize the voice of the Times. We’ve done a 180-degree turn on that. The podcast enables this humanizing, personal experience. To me, it’s an example of a platform which emotionally broadens the tone of the Times. I think that business of heart, as well as head, can be a way of attracting a wider audience. If the fundamental task is to engage and form a deep relationship with an ever bigger global audience, having multiple different ways of doing that, and using each kind of medium for what it’s best at, makes good strategic sense. Our experience shows there is, in fact, a massively underserved market for engaging, The New York Times headquarters credit : Piotr Redlinski/The New York Times

emotionally authentic, true speech radio for people under the age of 30.

I think software-as-a-service and the idea of paying a reg-

To what extent is your industry actually thriving on all

ular fee for access to cloud-based services of every kind is

this disruption?

transforming both B2B and B2C. Netflix is an obvious ex-

Our world is transforming in unknowable, complex ways,

ample. At the New York Times Co., we’re trying to create

and with all sorts of puzzling issues for business, for govern-

an engine of growth where we get better and better at the

ment, for society, for industries. There are enormous chal-

tactics of growing a digital subscription business. The suc-

lenges like globalization, automation, climate change and in-

cess of that business enables us to invest even more in con-

equality. That sense of a world in transition, where we don’t

tent. We’re trying to break the downward spiral which news

quite know what the destination is, is a world which needs

is facing across the Western world and get into a virtuous

thoughtful, intelligent people. You could say it’s a great com-

upward spiral. There’s no reason why we cannot be bigger,

mercial opportunity, but the real point is, the societal need

better and, ultimately, more profitable after the age of print.

for our profession has never been greater.

We’ve now got a path for creating a great news organization that doesn’t depend on print if the economics go as I think they probably will. That’s the key.

no. 152 | IESE Business School Insight | 23


REPORT

Tech at a turning point

Toolkit for tomorrow’s executives Technological advancements are expected to shake up multiple professions over the next few years. Alongside fears that thousands of current jobs will cease to exist is the allied concern that there won’t be enough skilled talent able to fulfill the essential leadership roles that can’t be performed by machines.

80%

of CEOs say they’re worried about finding and hiring employees with the key skills they need to succeed in the digital world, according to PwC’s 21st CEO Survey.

24 | IESE Business School Insight | no. 152

INNOVATION Never settle but think flexibly: connect the dots, take calculated risks, try new things

02

VELOCITY Review and revise actions quickly in response to fast-paced changes

01

DEEP KNOWLEDGE AND CAPACITY TO PREDICT CHANGE Understand your competitive context, reading the landscape in anticipation of cultural shifts

Here we highlight seven key traits needed to navigate current changes, based on interviews with media and entertainment executives, who are among those most affected by digital transformation. Their insights can be applied to other sectors likewise facing disruption.

03


We have to broaden the types of leaders we recruit and bring up higher levels of competencies in technology”

source: “The Media Landscape: From Showtime to Screen Time” by Josep Valor, Indra Chair of Digital Strategy at IESE.

Frank Bennack Hearst Corporation

04

TALENT ATTRACTION Foment a supportive environment in which employees are encouraged to speak their minds, experiment and occasionally fail

05

CONSUMER FOCUS

“Leaders must have clarity of vision, plans for end goals, an openness to solutions and a willingness to take risks Jeff Boehme comScore

Make the consumer a priority: value is created through links with people, not the product per se

06

STRATEGIC MINDSET Understand your firm’s long-term goals in order to pursue alliances that further those goals

07

TRANSPARENCY Take moral responsibility for what you are offering and uphold integrity in all you do


REPORT

Tech at a turning point

credit :

Focus on the opportunities to make a positive social impact

Juan Ude


on a track along the Abu Dhabi-Dubai border, with the aim of having a Hyperloop operational there by 2020. Here Gresta discusses what it takes to turn the possibilities of technology into reality. When it comes to technology, there’s no shortage of crazy ideas. But what else is needed? Dreams are the initial seed of a well-planned system. You can make a dream a reality if you can imagine the step-by-step process to arrive there. The difference between a successful entrepreneur and just another crazy guy is this capability of imagining the future step-by-step without skipping one step. Abu Dhabi has one of the most conservative governments on the planet. They’re super serious. They’re not going to throw their money away. They challenged me: “You want this project, you move here.” So, I really had to immerse myself

Bibop G. Gresta

Co-founder and Chair, Hyperloop Transportation Technologies. A venture capitalist and software developer since the age of 15, he previously helped launch more than 70 startups through the incubator Digital Magics. He used to be a TV host and musician in Italy.

in their culture to understand it. You also need to find allies who share your vision. For example, that part of the world has some of the biggest oil reserves, yet they have a bold vision to switch to renewables. They can see the long-term environmental benefits. They have the vision. In trying to coordinate a large multi-stakeholder project like this, how do you manage to bring people along with you?

F

You have to distinguish between the micro and the macro. At the micro level are all the operational or logistical or regulatory issues that arise for which you need to employ specific aster than a speeding bullet! More powerful

tactics. But those are temporary. The real work is at the mac-

than a locomotive! It’s a bird! It’s a plane! It’s…

ro level, looking at the future of humanity: how do we tackle

Hyperloop? The idea of an ultra-fast train has

the bigger problem of sustainable transport and human mo-

been around for decades, but not until recently

bility, and not just make a dent in it but actually solve it for a

has the technology reached a stage where it’s not

generation? You have to be very strategic in understanding,

science fiction. The visionary entrepreneur Elon Musk threw

out of all this mass of noise, which are the stakeholders that

down the gauntlet in a 2013 white paper: why doesn’t someone

really want to pursue your long-term strategy. We’re not go-

build transport capsules that shoot passengers through vacu-

ing around doing feasibility studies or marketing campaigns.

um tubes at plane-like speeds, solving problems of long-dis-

We’re focused on solving a problem, not following the me-

tance travel and commuter congestion in one fell swoop?

dia cycle. That’s how you keep stakeholders together and the project on track.

Bibop Gresta took up the challenge, joining a team of entrepreneurs and inventors in the race to build the world’s first

How have you harnessed the power of the crowd?

Hyperloop. It’s a crazy idea, but the Italian entrepreneur says

Being able to reach anyone on the planet using the internet

he’s just crazy enough to do it. For the past five years, he’s been

and new technologies has unleashed new and unprecedent-

going around the world, drumming up support, financial as

ed possibilities to put together the best minds on the plan-

well as moral, for what could potentially revolutionize the way

et to tackle the biggest topics. This is incredibly powerful. It

we move people and goods as much as the car or airplane did

means we can solve problems at a planetary level. If we only

more than a century ago. A prototype train was unveiled in

ever look at the local state logic, we don’t go anywhere – it’s

Cadiz, Spain, in October 2018, and building work has begun

all short-term tactics and election cycles. But we’ve been able no. 152 | IESE Business School Insight | 27


REPORT

Tech at a turning point

to crowdsource hundreds of scientists from dozens of countries around the world who collectively lend their expertise to collaborate on this project a few hours a week. You’d never be able to do that with a traditional company. Technology is an enabler but some would say it is also a destroyer. If predictions are right that 30-40 percent of the global workforce will be displaced by technology, for me that means we’ll have more time to dedicate to what we do better: creativity. But that does mean business people will need to evolve from an economy of scarcity to an economy of abundance. Hyperloop is one example of this new economy: for every challenge

“We need to evolve from an economy of scarcity to an economy of abundance”

(moving people from A to B), there are 10 opportunities (harnessing the wind and kinetic energy created by the movement

trip, people are willing to pay you for your time. People’s

of the capsule through the tube to generate electricity, for in-

time is precious, so maybe we add that to the value equa-

stance). Stop competing in red oceans for the same thing, and

tion. That’s the beauty of technology: it allows us to exper-

start creating your own blue ocean. Focus on the opportuni-

iment with business models that don’t depend on buying

ties to make a positive social impact.

a ticket anymore.

How has technology changed your business model?

Besides reframing the problem or changing people’s

When the energy that you’re producing is enough to subsi-

mindsets, what other challenges do you face?

dize not only the cost of the building but also the mainte-

Right now our biggest challenge is regulation. We’re not a

nance, and where the cost per passenger becomes almost

plane, a car or a train; we’re Hyperloop. So, we need to de-

zero, what do you charge people to ride? Maybe nothing.

sign new regulation in line with the possibilities that these

Or maybe, if you bring some freight with you on the same

new technologies are bringing to the table.

credit :

Hyperloop Transportation Technologies


KNOW LIVE SERVE

Master’s Degrees

IN THE UNIVERSITY OF NAVARRA WE BELIEVE THAT THE UNIVERSITY EXPERIENCE IS THE STARTING POINT OF AN INCREDIBLE JOURNEY, FROM BOTH A PERSONAL AND  PROFESSIONAL POINT OF VIEW. WITH US YOU WILL DISCOVER ALL YOU CAN DO FOR YOUR MOST IMMEDIATE ENVIRONMENT AND FOR THE SOCIETY AS A WHOLE. IN THE END, YOU WILL LIVE THE KNOWLEDGE. Get informed about the Master's Degrees of the University of Navarra and scan the QR code in order to know all the options: masters@unav.es | www.unav.edu | miportal.unav.edu


REPORT

Tech at a turning point

Robert Wayne Gregory

Assistant Professor of Information Systems at IESE. Recipient of the 2016 Early Career Award from the Association for Information Systems, for his research on digital transformation.

Yes, you can bypass IT


Y

ou need a tech solution to serve your customers, but your IT department says no. Letting your employees bypass IT sounds like a nightmare. But if a major bank can do it, surely you can, too. Here are six tips for taking a creative approach to IT that will transform anxiety into agility.

1. Bypass, if you must

4. Be guided by a shared purpose

Sometimes, to keep pace with your market, working

Moving away from a hierarchical model to a dis-

around your IT department may be necessary. For

tributed, networked one means not everything

firms established under different market conditions,

needs to be reviewed from above, yet the com-

bypassing IT can help ensure ongoing learning and

pany remains legally and ethically responsible for

adaptation to evolving customer expectations. I’ve

the handling of data. As such, a common mission

witnessed this in a major global bank with IT pol-

is key to guide autonomous teams to do the right

icies and standards dating as far back as the ’70s.

thing. Managers must check in on their digital

By allowing certain units to work directly with cus-

initiatives to ensure they are serving the broader

tomers and fintechs, the bank began creating an

purpose and fitting with the mission to serve the

ecosystem of new services, eventually leading to a

connected customer.

bottom-up transformation in IT governance. 5. Take bypassing as a sign of dysfunction 2. Insulate and empower bypassing teams

If you can’t work with your IT department as it

Shield bypassing teams from organizational pol-

currently stands, there’s a misalignment some-

icies and rules. Invest in them financially. Give

where that must be fixed. Is your current gover-

them leeway and independence. Locate them in

nance too rigid? Do you need a distributed, plat-

a different area, so they don’t interact with oth-

form-based architecture for more agility? In this

er units too much. Let them be speedboats while

sense, bypassing IT may treat the symptoms, but

others move more slowly. Bear in mind this might

not cure the disease.

cause culture clashes. Managers need to watch short- and long-term goals, so any tensions don’t

6. Look for the cure in digital transformation

pull the organization apart.

To find your cure, identify a viable pathway of

3. Link innovations back to the core

studied, it shifted to cloud computing and provid-

Once you have a prototype, it needs to be linked

ed workers with access to digital services through

to core processes and other complementary prod-

a self-service platform. Employees (not just IT

ucts; if not, the customer experience will suffer, and

staff) could easily and directly access a catalog of

so will your operations. An innovative app, for in-

services and recombine them as they developed

stance, may be created autonomously, but it must

personalized yet scalable solutions for their cus-

be plugged into the common digital platform via

tomers. This enabled the bank to serve the con-

APIs to ensure interoperability and integration with

nected customer anytime, anywhere. Think about

Quim Roser

other apps for a seamless end-to-end customer ex-

transforming the tech layer of your organization,

perience. Innovations shouldn’t be 100 percent new:

and connect it to transformations of structure

autonomous teams should reuse as much existing

(new product development) and strategy (busi-

credit :

transformation. In the case of the global bank we

technology and API-exposed functionalities as pos-

ness model innovation). Profound changes may

sible. If that’s not happening, that’s a red flag.

begin by bypassing IT.

read more: “IT Consumerization and the Transformation of IT Governance,” by Robert Wayne Gregory, Evgeny Kaganer et al. was published in MIS Quarterly.

no. 152 | IESE Business School Insight | 31


THE NEXT THE NEXT

WORLD WORLD CONGRESS CONGRESS WILL BE ON WILL BE ON MAY 27-29 MAY 27-29 IN BARCELONA IN BARCELONA

Welcome to Retail & Brand Experience World Congress, global Experience event to get Welcome to Retailthe & Brand inspiredCongress, and gain insight intoevent the future World the global to get of retail.and Thegain industry’s the inspired insighttop intoexperts, the future world’s leading retailers top andexperts, brands, the of retail. The industry’s and the leading most innovative retailbrands, solutions world’s retailers and providers will innovative explore best practices and and the most retail solutions new ways will to address most providers explore the bestsector’s practices and burning questions and challenges. new ways to address the sector’s most Join thequestions event that redefine retail. burning andwill challenges. Join the event that will redefine retail. TRADE SHOW TS RT A R DTE- U S PH O V IWL L A G E S P TVI A I LLL AR G E TX A PR ET R -I U EN E TEA I L R O U T E S EB XUPSEI R NIEESNST I&A L ERI ES TUARIEL R O U T E S B CU OSNI N G ER SE S S& L E I S U R E C O N G R E SEXPERIENCE S · CUSTOMER ·· ··

NEW RETAIL EXPERIENCE MODEL S & TRENDS CUSTOMER OMNICH ANNEL & DIGITAL NEW RETAIL MODEL S & TRENDS

SUPPLY CH AIN & DIGITAL ·· OMNICH ANNEL ·· SUPPLY REAL ESTATE CH AIN RETAILESTATE TECH ·· REAL · RETAIL TECH

DISCOVER THE COMPLETE SPEAKER LINE -UP: DISCOVER THE COMPLETE SPEAKER LINE -UP:

W W W. R E T A I L A N D B R A N D E X P E R I E N C E . C O M W W W. R E T A I L A N D B R A N D E X P E R I E N C E . C O M


#RBEWC

www.retailandbrandexperience.com

#RBEWC

www.retailandbrandexperience.com

Scott Galloway

Alex Cruz

Pascal Clouzard

Founder L2 Inc, now Gartner L2 Scott Galloway Founder L2 Inc, now Gartner L2

Chairman & CEO British Airways Alex Cruz Chairman & CEO British Airways

General Manager Carrefour France Pascal Clouzard General Manager Carrefour France

Bernd H. Schmitt

Alfonso Rodés

José Luis Durán

Professor of Marketing Columbia H. University Bernd Schmitt Professor of Marketing Columbia University

Deputy CEO Havas Group Rodés Alfonso Deputy CEO Havas Group

CEO Value Retail José Luis CEO Value Retail

Sebastien Badault

Seth Ellison

Bernard Meunier

Managing Director France Alibaba Group Sebastien Badault Managing Director France Alibaba Group

EVP President Europe Levi Strauss and Co Seth Ellison EVP President Europe Levi Strauss and Co

Durán

CEO Europe, Middle East, North Africa Nestlé Purina PetCare Bernard Meunier CEO Europe, Middle East, North Africa Nestlé Purina PetCare

Fuencisla Clemares General Manager

Google Iberia Clemares Fuencisla

General Manager Google Iberia

Vipul Parekh Co-Founder

Bigbasket.com / Angel Investor Vipul Parekh Co-Founder Bigbasket.com / Angel Investor

José Luis Nueno Professor of Marketing

IESE Business José LuisSchool Nueno Professor of Marketing IESE Business School


THE BIG PICTURE

A new perspective

Are electric cars the

?

future

Will electric vehicles (EVs) completely replace carbon-emitting vehicles? It depends. Analysts agree on the advantages: EVs are getting cheaper and easier to produce, they’re generally more efficient, and they pollute less – well, sort of. Here the story gets more complicated, as this infographic shows. The batteries on which EVs depend have some problematic issues associated with their sourcing. And if the wider means of electrification in a country are still carbon-based rather than green or renewable, the benefits of EVs are diminished. The most likely scenario is that both types of vehicle will coexist, but under a very different business reality in which EVs operate in niches where they can play to their strengths. In any case, the car industry must shift gear.

COBALT: KEY MATERIAL FOR BATTERIES 27

58.933

Co

1000 800 600 400

Critical threshold, implying cost parity between electric vehicles and internal combustion engines

Forecast

200 0

2010

2015

2020

2022-26

34 | IESE Business School Insight | no. 152

60%

Cobalt

2016-2018

from Democratic Republic of Congo

3x

The price of cobalt tripled

2050

7 of 10

The cumulative demand for cobalt would require all the resources known today, even with high recycling

largest cobalt producers in Congo owned by China

DESIGN IMPROVEMENTS

BATTERIES: KEY COMPONENT Costs are falling ($ per kWh)

World production of cobalt in politically unstable regions:

1/

Wheel-hub engines: moving the motor from the body to the wheels recuperates energy while allowing for torque vectoring (for better handling on icy roads, for example)

EFFECTS ON THE VALUE CHAIN

25%

EVs are cheaper to produce than today’s cars, with lower service requirements

Differentiation via software is bringing new tech players to compete in the car space


source:

RARE EARTH ELEMENTS (REE) Mining for the REE on which EVs (and consumer electronics) depend creates significant environmental damage

80%

of global production for some REE is concentrated in China

A limit on REE exports from China would have devastating effects on dependent industries

“Key Data of the Automotive Sector� by Marc Sachon, chair of IESE AUTO, and Beatriz Welter.

BEYOND THE TAILPIPE: THE FULL ENERGY MIX CO2 / NOx

A diesel car could drive several thousand kilometers before reaching the same CO2 / NOx emission levels as are generated by mining raw material for batteries and producing them.

Where energy generation is carbon-based (petroleum, coal, gas), more electric vehicles could actually increase CO2 / NOx emissions. For example, in China, a shift to 100% EVs would be much worse for the environment right now.

OPPORTUNITY SPACE: URBAN MOBILITY SOLUTION

2/

Battery and power electronics: in floor allows for good center of gravity and opens up space for passengers

1/

Lends itself to highly standardized assembly

2/

Batteries could be smaller

But when factoring in the whole energy chain (transformation of chemical into electric energy, transmission losses), overall energy efficiency falls*.

3/

Eases anxiety over short-distance refueling

4/

Slower city speeds reduce need for complex safety engineering

*Unless green energy is used, making EVs perform better

5/

Better setting for car-sharing business models

ENERGY EFFICIENCY Transformation of energy into kinetic energy:

90%

electric cars

40%

diesel cars

Despite the challenges, a small, connected, electric and eventually autonomous vehicle is promising for several reasons:


HACK Retirement investment: what’s the right mix? How much of your retirement portfolio should be in stocks versus bonds in order to best provide for your golden years? If you let history be your guide, take note that the following stock allocations offered optimal results for 30-year retirements in the following countries (and the world average):*

Optimal percentage invested in stocks

Portugal Sweden

60%

Spain Switzerland

70%

Austria

Denmark Japan Netherlands Norway

80%

90%

Australia Belgium Canada Finland France Germany Ireland Italy New Zealand South Africa U.K. U.S.A. World

100%

*Based on data from 1900 to 2014 covering 86 rolling retirement periods with 4% annual withdrawals (adjusted for inflation after year 1). Of course, past performance is no guarantee of future results.

Javier Estrada and Mark Kritzman propose a new metric in their paper, “Toward Determining the Optimal Investment Strategy for Retirement.”

36 | IESE Business School Insight | no. 152


From stars to black holes If you think the brilliance of a star hire will rub off on the rest of your organization, think again.

Five whistleblowing tips To ensure wrongdoing is reported in your company, check you have these components in place: DEFINED SCOPE

Does your company’s whistleblowing policy encompass all types of fraud (not just accounting) as well as sexual harassment, bullying, and dangers to health, safety and the environment? REPORTING CHANNELS

Although telephone tip lines are popular, have you considered setting up internet channels with dedicated email addresses and encrypted software?

Many managers jump at the

reputations are built on objective

chance to hire renowned talent,

manifestations of superior quality.

assuming those incoming stars will mentor incumbents lower on

By contrast, when status is more

the totem pole and trigger posi-

subjectively based, paying top

tive spillover effects throughout

dollar for star talent is likely to

the organization.

do more harm than good. This is because the hire could cause an

However, empirical evidence sug-

uneven redistribution of valu-

gests that hiring a star can cause

able resources, which may not be

lower-status incumbents to see

counterbalanced by the “superior”

their resources drain away and

knowledge of the newbie.

their performances suffer – to the detriment of the organization as

As the authors put it: “Managers

a whole.

who continue to hire stars may instead contribute to the further

To minimize the chances of this,

balkanization of their organiza-

executives must realize that their

tions and ultimately degrade per-

organizations are only likely to

formance at both the individual

benefit from hiring stars whose

and organizational levels.”

“Starstruck: How Hiring High-Status Employees Affects Incumbents’ Performance,” by Matteo Prato and Fabrizio Ferraro, appears in Organization Science.

ANONYMITY & CONFIDENTIALITY

Does your reporting mechanism contain these two critical features (the first pertains to the reporter, while the second refers to the process)? MORAL INCENTIVES

Are your employees conscious of the moral reasons behind reporting? Do they need training to understand why? FINANCIAL INCENTIVES

Are whistleblowers rewarded? For example, the U.S. Securities and Exchange Commission pays whistleblowers 10-30 percent of the sanction’s value for fines over $1 million. The technical note “Whistleblowing Systems and Policies” (BEN-139-E), by Antonino Vaccaro, Gianmichele Potito and Enrique Aznar, is available from https://www.iesepublishing.com


+IESE

BREXIT VIEWS What are the impacts of the U.K. leaving the EU?

Chris Daniels

Chief Commercial Officer, Satavia

mba ’00

The most difficult aspect of Brexit has

ted to stay and work in the U.K. and ded-

been not knowing – for example, wheth-

icate more resources to keep abreast of

er U.K. companies can continue to supply

legislative changes. In short, we have to be

EU aerospace companies. Short-term im-

nimbler to react when the final outcome

pacts may be resolved quickly but, longer

is known. For any company, it has been

term, manufacturing will likely shift away

difficult to plan adequately. If there’s any

from the U.K. Big market players are bet-

lesson, it’s that those in authority must put

ter equipped to shift capital, personnel

together clear guidelines for business early

and production to the EU. They’re able to

on. Going to the brink may be a useful ne-

hedge their bets by having operations and

gotiating tactic, but it’s fundamentally un-

legal entities in both the EU and the U.K.

helpful for business. With the end-points

But smaller companies, like ours, cannot

constantly shifting, being able to offer

do this so easily. Instead, we have to rely on

some points of clarity throughout the pro-

promises that EU nationals will be permit-

cess would have been helpful.

38 | IESE Business School Insight | no. 152


Adrian Caldart

Academic director of the Food & Beverage Industry Meeting, which produces the annual Vademecum on Food and Beverage Markets

Historically, the U.K. has always been a big importer

of

food-and-beverage-related

goods. Just within the EU, the U.K. imports twice what it exports, amounting to roughly $32 billion of goods, especially fresh fruit and vegetables, including 80 percent of its tomatoes and 90 percent of its lettuce. Strong price increases and logistical difficulties for basic staples like these will affect the distribution sector as well as food chains like McDonald’s. The U.K. will need to produce locally quite a few goods that they were importing. There may be some opportunity for substituting imports with more locally produced fruit, such as apples and pears. A devalued pound could make a local producer more competitive on global markets. The U.S., China and Latin America are interesting markets to explore. However, the purchasing power of customers in emerging markets is rather limited, so they may end up with niche rather than mass markets. Given that approximately 75 to 80 percent of EU food-and-beverage trade currently happens within the EU, the EU will remain a focal market for the U.K. But Brexit sees the collapse of many well-oiled value chains, increasing the cost of doing business for everybody – albeit worse for the U.K. because, while the U.K. market is important for the EU, the EU is much more important for the U.K.


+IESE

Brexit views

África Ariño

Joaquim Molins Figueras Chair of Strategic Alliances at IESE

Edward Orr

Cofounder & CEO, Mr & Mrs Smith

mba ’00

The automotive sector depends on highly interconnected global supply chains and frictionless trade to ensure components arrive on time, so cars can be assembled and

Brexit hasn’t yet led to a recession in the

shipped elsewhere. Investments and job

U.K. (our largest customer market, followed

security require long-term planning with

by the U.S.) so overall the travel industry

development cycles of up to five years –

remains relatively healthy. However, the

precisely what carmakers affected by Brexit

uncertainty about the impact on travel be-

don’t have. They were already losing money

tween the U.K. and continental Europe has

before Brexit. GM, for instance, had been on

had a short-term impact on our business.

track to turn things around after a decade of

We’re continuing to see strong year-on-

losses for Vauxhall/Opel, but currency shifts

year growth in visitors to our website from

and pound devaluations owing to Brexit ulti-

the U.S. while U.K. visits are somewhat flat-

mately led GM to sell its U.K. holdings to the

ter. Interestingly, Q1 bookings have been

French group PSA (Peugeot-Citroën), which

strong, while European summer bookings

thinks it could be useful to keep a U.K. base

have been weaker. It feels like people are

for U.K. production post-Brexit. The U.K.

waiting to see what will happen.

government has promised to help the sector, not least to prevent further job losses (Jaguar

Being a global operation, we employ peo-

Land Rover and Ford have cut 6,000 jobs).

ple across the EU. We’re doing all we can to support them through this uncertainty. My

The uncertainty is compounded by the high

advice is: be prudent, be brave and keep

cost of fielding new models, the push for

focusing on building your business. Above

cleaner alternatives to diesel, and the need

all, stay optimistic. Whatever form Brexit

to prepare for the autonomous age. To man-

eventually takes, I’m hopeful our modern

age these hardships, a good option is to work

economies will be able to handle it and

in alliances, even with rivals. We see this in

life will move forward quickly. Everything

Ford and Volkswagen’s decision to work to-

from fashion to exchange rates to ash

gether on self-driving cars. Ford needs an EU

clouds can impact our industry, but the

partner to continue building Ford-branded

joy of travel and the value of experience

products in Europe. And VW, still reeling

will always spur people to seek escapism –

from its emissions scandal, needs Ford’s ac-

even, and sometimes especially, in the face

cess to the U.K. market, a key one for VW.

of uncertainty.

40 | IESE Business School Insight | no. 152


Brexit is the perfect example of something

of the European Union for 40-plus years

I’ve been saying for years: managers don’t

was a semi-fixed aspect, but people tend-

spend enough time on issues of geopolitical

ed to treat it as fixed. Then there’s what’s

uncertainty. When the Brexit vote happened

going to happen over the next two, three or

in 2016, nobody in the international business

five years, which is where we are now.

community really expected Leave to win. But

Mike Rosenberg

Associate professor of Strategic Management at IESE

by not taking it seriously, businesses now

When you look at an event like Brexit, you

find themselves with bigger problems. Com-

need to plan for different possibilities.

panies with integrated global supply chains

What would happen if there’s a delay? Ob-

cannot afford to think that “business as usu-

viously, having plans, products and people

al” is ever the only scenario.

in place for different eventualities takes time and money, and requires a certain

Many companies have a function called

amount of organizational resilience. But

corporate affairs, but often it exists to ex-

constantly evaluating one’s ability to fulfill

plain the company to governments, not to

obligations to customers, employees and

explain the world to executives, which I

shareholders is in the manager’s job de-

think is the right function to have.

scription, right?

When you think about business and geo-

The U.K. has got itself into a bit of an im-

politics, you have to start with the aspects

possible situation where currently the only

that are fixed: the U.K. is an island cut off

way out appears to be delaying Brexit, un-

from Europe; that won’t change. Then

til we end up with what people are calling

there are semi-fixed aspects that might

“Brexeternity.” But being stuck in limbo is

change over 10, 20 or 30 years. Being part

no solution – least of all for business.

no. 152 | IESE Business School Insight | 41


+IESE

Paul Polman

Face to face

CEO of Unilever (2009-2018). Chair of the International Chamber of Commerce and The B Team, and Vice Chair of the U.N. Global Compact. Member of IESE’s International Advisory Board.


We need to serve multiple stakeholders

credit :

Simon Dawson/Bloomberg via Getty Images

Paul Polman reflects on corporate governance, the work of the CEO and board of directors, and the need to manage for the long term.

T

he global economic context has become unstable and uncertain. Governments that used to be predictable have become unpredictable. Megatrends such as digital transformation, the environment and new consumer behaviors

are making the business context tougher. What’s the role of a board of directors in this new world? Sure, boards are responsible for fulfilling companies’ fiduciary duties with shareholders, but they’re also responsible for the long-term health of the company and its impact on other stakeholders. A company may maximize profits in the short term but, as Paul Polman tells IESE’s Jordi Canals in this interview, if it doesn’t care about its customers or invest in its people, its suppliers or its community, then those profits will be suboptimal in the long term. That’s why board members need to keep developing new capabilities and keep learning about the burning issues that could put their companies at risk, so they’re ready for action. no. 152 | IESE Business School Insight | 43


+IESE

Face to face

“We try to see the social or environmental impact of a decision beyond the financial result”

deliver in the short to medium term, but investors need to understand that sustainable companies invest for the long term. Do shareholders understand that? Many do, and part of our job is to educate investors that not only financial performance but caring about customers, developing new products and driving sustainability are also part of a solid business model. It takes time because there’s still a generation of analysts and asset managers who are incentivized by short-term performance and don’t care too much about other dimensions. We also need to provide more transparency on materiality

How important is strategy?

and comparability, and get more CEOs to explain

Next to succession and talent, a company’s long-

their value creation model properly. It’s hard work.

term development depends on having a good strategy, so directors need to spend a lot of time

How should a board relate to shareholders?

on it. Boards need to be able to step back, look

First, ensure that the right shareholders are at-

at the big picture and constructively challenge

tracted in accordance with the strategy. Too many

management. Their discussions need to include

CEOs and boards try to cater to all shareholders

how the strategy relates to other stakeholders, be-

and focus on quarterly delivery vs. consensus vs.

sides shareholders. While it’s important to deliver

longer term plans. Second, ensure there is fre-

good financial results, strategy discussions at the

quent two-way communication and that out-

board level need to have this wider perspective:

side-in concerns are well understood.

we serve multiple stakeholders, and if we do that well, shareholders will equally benefit long-term.

Does it help to have a set of guiding values? It does. We need to move from “we have a li-

After the global financial crisis, you stopped

cense to operate” to “we have a license to lead

giving quarterly earnings reports. Why?

for the long term.” Companies and business

It was a way to make investors – and our own peo-

leaders cannot be bystanders but must be

ple – think and act longer term. Boards shouldn’t

part of the solution to today’s social problems,

be making decisions based only on the next three

speaking up where needed. It starts by having

months. That kind of thinking contributed to the

a clear purpose. We talk about this a lot, which

worst crisis in decades. Shareholders are import-

sends a clear signal that the board and senior

ant but, unfortunately, we see more passive in-

management are committed to it. That purpose

vesting, with many asset owners outsourcing their

and associated values need to inform every-

responsibilities to asset managers who are still

thing we do. So, when we discuss strategy, we

mainly rewarded for short-term performance.

try to see the social or environmental impact of

Short-term investors or speculators don’t fit the

a decision, beyond the financial result. We in-

strategy of most companies. If an investor buys a

vite key stakeholders to board meetings or seek

share today and sells it a week later, he or she may

other ways to make sure their voices are heard.

have made a profit, but what value has that trans-

We need to aggregate the many efforts to make

action added to a company? Of course we need to

an impact and expand the narrow definition of

44 | IESE Business School Insight | no. 152


participate in discussions about the company and its challenges, they can frame it in the wider context of what the company does. Increasingly, we need expertise around climate risk. We started an effort on climate-competent boards for that reason. How important is diversity on a board? Diversity is essential for having different perspectives and voices, whether on technology, consumer behavior or a geography such as China. Diversity of thought, as well as of gender, is a must. It adds to the quality of board discussions, resulting in richer, deeper insights. Most of all, it sends a strong message of respect and dignity for all. There is ample evidence suggesting that companies with more diverse boards perform better over time – hardly surprising. What are some key observations from working with different boards in different countries? How the board works with the CEO has a tremendous impact on the company’s development. A fine balance has to be struck between challenging each other and working in partnership. The CEO has to credit :

Quim Roser

execute the strategy, delivering financial and social results in line with the agreed corporate values.

accounting beyond just financial to include so-

The Chair has a very important role, which is to

cial and environmental. One example is our task

ensure that good governance systems are in place

force on climate-related risks.

and that the CEO works well with the board and the rest of the organization. Because the Chair and the

What makes a good board member?

CEO have different roles, I believe they need to be

Someone who understands the complexities of to-

separate jobs, held by different people. Ideally the

day’s world and can ask the right questions, who

Chair should be independent, especially when it

is committed and able to stay relevant. We need

comes to planning for CEO succession – probably

more board members who are concerned less

the most important decision a board has to make.

about themselves and more about the long-term

Board members should also spend time getting

wellbeing of the company and its people. Boards

to know senior managers in the company, so they

need directors with complementary skills, so that

have an idea of the internal talent that’s available.

each brings a different understanding of the issues

Developing a pipeline of candidates for future

and actions to take. The composition of a board

leadership is vital.

should be judged not just in terms of relationships and networks but by the specific expertise that each person brings – specific enough to add new thinking, but broad enough so that when they

source:

Paul Polman was interviewed by IESE professor and former dean Jordi Canals for the case studies “The Board of Directors and the CEO in Governance and Strategy” (SM1671-E) and “An interview with CEO Paul Polman” (SM-1672-E).

no. 152 | IESE Business School Insight | 45


+IESE

Entrepreneurship

ROAD WARRIORS

Rui Stoffel

Alex Canals

Seeing the threats facing his family’s bus company led him to search for new market opportunities.

emba ’13

Eva Romagosa

Her background in SME financing helped the trio secure initial funding from the European Commission as well as IESE’s Finaves seed capital fund.

His Portuguese background came in handy when expanding the business beyond Spain to Lisbon and São Paulo.

emba ’13

emba ’13 credit :

46 | IESE Business School Insight | no. 152

Oriol Gil


A project born in IESE classrooms reimagines bus travel, using technology to jump-start a stalling industry. You wait ages for a bus entrepreneur, and then three come along at once!

I

n 2013, Alex Canals faced a familiar challenge: technology and evolving consumer habits were disrupting his

BusUp Founded in

2016 100 B2B clients

14,000+ Users

€ 2-3m

Revenue estimate (2019)

sector. “The market for what we were doing was getting

Latest financing:

smaller and smaller,” he recalls. In his case, it was his

Total round

family’s bus company, Autocares Canals, which looked

like it would go the way of fixed telephone lines and trav-

Finaves

€ 895k € 212k

el agents. Revenue mainstays – workers and tourists – were shrinking, as workplaces became more decentralized, com-

muters turned to cars, and tourists sought travel experiences beyond organized bus tours. It was the perfect business dilemma to present while doing the IESE Executive MBA. Together with classmates Eva Romagosa and Rui Stoffel, Canals spotted an opportunity. Traditional bus travel might be slowing, but there was still underserved demand, particularly for medium-distance trips. Not everyone has a car to get to work. Companies on the city outskirts, where public transportation is thin or nonexistent, sometimes

YOUR TURN

IESE alumni have the unique opportunity to get their venture off the ground with the support of Finaves. Send us your pitch deck today and we’ll put you on the path to entrepreneurship. more info at :

www.iese.edu/callforentrepreneurs

struggle to attract employees because of their location. And not all concertgoers or sports fans want to drive to and from events, especially when the venue is outside the city. They launched BusUp, an Uber-like platform and app whereby users input their starting point and destination, and they are given pickup times, locations and routes for a shared bus journey. BusUp also works directly with companies to survey interested employees and build routes specially for them. Using algorithms to aggregate all the disaggregated demand is similar to what Uber and Airbnb have done. However, whereas those startups have undermined incumbents in the taxi and hotel industries, BusUp is doing the opposite: it matches consumer demand with existing bus companies,

no. 152 | IESE Business School Insight | 47


which remain key to its business model. For those traditional companies, “investing two, three or four million in technology is difficult,” says Stoffel. “We can help the traditional bus sector,” adds Canals. An early client was Canet Rock, a summer music festival held in the Spanish coastal town of Canet de Mar. From Barcelona, BusUp has expanded to operate in Spain’s main cities, as well as in Lisbon, Portugal, and São Paulo, Brazil. Users are growing at a rate of about 2,000 per month, and revenue is expected to grow to 2-3 million euros in 2019, divided roughly evenly among the three countries where BusUp operates. Besides focusing on clients for big entertainment events, BusUp is also trying to build up

Y

runs. “We look at the areas where there’s

CM

little public transportation,” says Stoffel.

MY

there’s no opportunity for us.” “What moves me most are the stories: the woman who tells you she couldn’t make

Oriol Gil

it to work before, but now can; the young person who can study,” says Romagosa. Women account for a majority of BusUp users. For entertainment events, as much as 75 percent

BusUp’s common uses Airport transfers

88%

Excursions

82%

Concerts

77%

of travelers are women looking for safe, reliable transport. The founders hope to solve the transportation needs of more people while contributing to sustainable mobility. “We can help reduce traffic and improve the environment,” says Stoffel, estimating that every shared bus on the road replaces 33 private cars. He envisions bus-sharing will become as standard a form of transportation as grabbing a taxi or hopping on a train.

Weddings/baptisms/ communions

60%

Commutes to work

57%

“We’ve watched this idea become reality,” says Canals. “Now we’d like to see it expanded on a large scale.”

article by :

48 | IESE Business School Insight | no. 152

M

its other core: daily commuters and school

“When there’s strong public transportation,

credit :

C

Michelle Wallin

CY

CMY

K


C

M

Y

CM

MY

CY

CMY

K


+IESE

Giving back

Mariano Puig

Former head of Puig. Member of IESE’s International Advisory Board (19992018). He chose IESE as the venue to receive the Kingdom of Spain Business Career Award, presented by King Felipe VI, in recognition of his outstanding achievements in creating employment, generating investment and promoting internationalization.

pdg ’64


Think

M

BIG

ariano Puig wasn’t even 30

in 150 countries. Indeed, the unique architec-

years old when he took over

ture of the company’s towering headquarters,

the reins of the fashion and

featuring illuminated glass panels, is a symbol

fragrance business that his fa-

of its ability to stand out from the crowd. And

ther founded in 1914. “My father

the company’s rise, like Puig Tower itself, rests

taught me that in life there are five stages: the first,

on firm foundations: three generations of the

learning to do; the second, doing; the third, teach-

Puig family.

ing others to do; the fourth, having others do; and the fifth, which I’m in now, letting others do.”

“When we went from the first generation to the second, we were only four brothers,” explains

Under the second generation of leadership, the

Puig, which made it easier for everyone to come

Puig company expanded well beyond its Bar-

to an agreement. But in going from the second

celona base to sell products around the world,

to third generation, “we have become 16 people

including such famous brands as Paco Rabanne

and 25 companies.” Working with diverse part-

and Carolina Herrera. As part of “learning to do,”

ners around the world has been a source of in-

he undertook a general management program at

novation and inspiration for new ideas.

IESE (PDG ’64) to learn how to deal with the chalsored a classroom and set up the Puig Chair of

fessors, Antonio Valero, made a real impression

Global Leadership Development at IESE with

on him. “He taught me to think before I speak,”

his son, Marc, the current head of Puig. The goal

he recalls, adding that he also learned how to

is to encourage research into effective talent

keep an open mind when making important de-

management strategies that enable companies to secure long-term economic growth and so-

Quim Roser

As part of “teaching others to do,” Puig spon-

gineer had not equipped him for. One of his pro-

cisions, especially in difficult economic times. Today, the value of “embracing challenge” is en-

global leaders. It’s an ambitious goal, one that

credit :

lenges that he says his training as a chemical en-

shrined in the corporate motto, allowing the com-

Puig realized more than 50 years ago and which

pany to go head to head with other multinationals

forms another part of his grand legacy.

cial progress through the training of responsible

article by :

Roger Perelló www.ieseinsight.com

read more at :

no. 152 | IESE Business School Insight | 51


Food for thought

SMART PICKS Super Bowl ads are indicative of broader advertising trends More celebs Ads featuring celebrities 2008: 2018:

Kickoff time for advertising The American football championship known as the Super Bowl is also an annual championship for advertisers. Averaging over 100 million viewers, no other TV program comes close to reaching as many consumers during a four-hour slot. For brands willing to spend $5 million for a 30-second spot (excluding production costs), the payback can be worth it. A 2018 survey revealed that 1 in 4 viewers tuned in just for the commercials. In terms of cost effectiveness, one brewer reported making $100 million more, thanks to its Super Bowl ads. Comparing 168 Super Bowl ads over a 10-year period, we see shifts in the way brands are using the event. It’s no longer a single-day affair but now includes the weeks leading up to the game, with digital media extending the life of the ad – and the brand – on other platforms.

From being product-centric to embracing social causes More emotional storytelling to associate the brand with some higher purpose or current conversation Longer 60-second ads 2008: 2018:

26% 59%

More tech advertisers, fewer retailers

Digital tactics to generate buzz before, during and after • Pre-hype ads, using social media teasers to create buzz • Live ad spots during the game, supported via Twitter and YouTube • Ad variations and extended storylines after the event to drive engagement

compiled by :

52 | IESE Business School Insight | no. 152

18% 50%

Lorenzo Panlilio


FROM MY DESK

By Iñigo Gallo

Assistant Professor of Marketing

2 trends in 1 ad: Stella Artois (2019) Actors Sarah Jessica Parker and Jeff Bridges revived their iconic roles to order Stella Artois instead of the usual drinks that they’re known for. But more than the celebrity appearances, this ad also featured a “do good” message: purchase a Stella Artois chalice, and a portion will be donated to Water.org to provide clean water to someone in the

Forget the hype! Traditional advertising is dead. How often have we heard that one before, along with other pronouncements like the need for a brand purpose and the importance of an influencer strategy? For an industry whose bread-and-butter is staying ahead of trends, marketing sure is susceptible to slavishly following the latest ones. Far too often, when so-called thought leaders tout the new frontiers of marketing and advertising, they’re actually just jumping on the bandwagon. To avoid the hype of so many marketing conversations today, I recommend following these two industry gurus whose perspectives tend to go against the grain.

developing world.

High-concept use of social media: Snickers (2017) Leading up to the game, Snickers teased it would air the first-ever livestreamed commercial: a Western, starring Adam Driver, performed in real time. When it finally aired, things appeared to go horribly wrong. Snickers tweeted an apology, followed by a press release and video mea culpa by the actor. Social media debated whether it was an elaborately staged hoax (it was). Snickers even upped the ante by offering a buy-one-get-one-free offer as a way to make up for (or rather to keep milking) the gaffe.

Mark Ritson

The Ad Contrarian

@markritson

@AdContrarian

www.marketingritson.com

http://adcontrarian.blogspot.com

His Twitter profile describes him as “A bigger threat than Google and Facebook combined. Apparently.” This Melbourne Business School professor, award-winning columnist and consultant strikes the right balance between academic theory and business reality. His provocative critiques are always anchored in traditional marketing frameworks. Those looking for brutally honest, irreverent takes on marketing will find his pieces eye-opening and amusing. Prepare to slap your forehead, just like in his profile photo.

Having been CEO for two agencies, Bob Hoffman is one of the world’s most influential bloggers, authors and industry experts. He doesn’t just call out short-term branding practices and misguided communication tactics, but he structurally breaks them down to explain why. From his blog site, you can also listen to his podcast as well as subscribe to his newsletter. His explainers are delivered “in plain English…so simple even a CEO can understand it.”


Thank you from the next generation of leaders. This is the message for every member of our alumni community who has generously decided to support a scholarship. You’re enabling an exceptional student to study at IESE, wherever they’re born or whatever their circumstances. At IESE, we believe leading starts with giving – giving guidance, support and inspiration. We’re thankful to alumni who are also giving to support scholarships for the next generation of leaders. This year, we have set ourselves the goal of doubling our funding for scholarships. With your support, today’s students will be equipped with the strong sense of corporate responsibility IESE is known for. They’ll learn from you the transformative power of giving.

If you would like to join other members of the IESE alumni community in supporting a scholarship, please visit giving.iese.edu .


KNOW

By Jonathan Passmore

By Josep TĂ pies

By Tony Davila, George Foster, Xiaobin He and Carlos Shimizu

Leading with compassion

5 mistakes every family business should avoid

How rankings shape your growth story

Page 56

Page 64

Page 68


Leading with compassion By Jonathan Passmore

Compassionate leadership has multiple benefits: less stress, happier emotional states, healthier workplace environments and improved morale. Here’s how to cultivate compassion in your company, so that you transform yourself, your teams and the world.

T

hink of all the different jobs you’ve held over the course of your career and picture all the different bosses you’ve had. Which of them did you like the most? Who left the

most positive impression on you? What was it that made them particularly special? Chances are that the one(s) who most transformed the way you feel about yourself exercised some form of compassionate leadership. As the adage goes, “People may forget what you said, people may forget what you did, but people will never forget how you made them feel.”

https://dx.doi.org/10.15581/002.ART-3244


Javier Tascón illustrations :

Compassionate leadership has multiple benefits,

– being fully present and highly attuned to the

not just for the employees on the receiving end of

needs of others. Finally, we expand this process to

it, but also for the organization as a whole, not to

the organizational level and beyond, by promot-

mention the leaders themselves. One of the great

ing a broad-based culture of compassion that rec-

things about compassion is that it can be con-

ognizes our common humanity.

sciously cultivated. But how? By mindfully choosing to enhance our compassionate responses in three vital areas (see exhibit on the next page).

Start with yourself

To have compassion for others, you must first learn to treat yourself with compassion. This

The first involves working on our own capacity for

isn’t as easy as it sounds. People are often ex-

self-kindness. It is only by learning to treat our-

tremely hard on themselves. Feeling bad when

selves compassionately that we can really begin to

things don’t go as planned may be a natural

do the same with others, including our teammates

response to adversity, but too much negative

and employees, which is the second dimension

thinking feeds a greater sense of helplessness.


KNOW

Leading with compassion

Learn to treat yourself with compassion

Foster a wider culture of compassion

We need to break self-defeating thought patterns by retraining our minds and nourishing the compassionate self – the parts of us characterized by patience, kindness and understand-

Common Humanity

Self Kindness

ing – rather than giving in to the angry self, the anxious self or the critical self. Being self-compassionate is beneficial, both at the personal and professional levels. According to a large body of research, the more self-compassionate you are, the more likely you are to experience

Mindfulness

better psychological health, reduced cortisol levels (the hormone that generates stress), lower levels of anxiety and depression, less perfectionism and fear of failure, and a greater ability to manage negative emotions. You will also be better able to cope with such adversities as academic failure, ill-

Consciously cultivate compassion for others

ness or chronic pain. Self-compassion may also be associated with such positive states as happiness, optimism, wisdom, curiosity, exploration, per-

What must a carpenter do when his chisel has be-

sonal initiative, emotional intelligence and good

come blunt? No matter how much pressure he’s

relationship functioning.

under, he must take time to sharpen it, otherwise he cannot finish the work. Likewise, for CEOs, it

So, how can we become more compassionate

is only by engaging in moments of inner stillness

with ourselves? Mindfulness and meditation are

that they can regain composure, strength and

key tools. Mindfulness is a state of mind that,

clarity of thought, before resuming their work and

practiced regularly, promotes an inclusive and

leading others with compassion.

authentic experience of the present moment. This can be achieved by purposely focusing your attention onto the present moment in a non-

Be mindful of others

Once you have learned to treat yourself with more

judgmental way. Extensive research has shown

compassion, it’s time to do the same with your

that mindfulness can contribute to physiological,

colleagues and team members. The good news is

psychological and transpersonal well-being.

that compassion tends to be contagious. People witnessing acts of compassion have reported being

Slowing down in a world that is constantly aiming

moved by what they have observed and inspired to

to go quicker may seem counterintuitive. Howev-

be more compassionate themselves. This is espe-

er, I would argue that only by slowing down can

cially true when the person exercising compassion

one be at once more effective and more satisfied.

is someone in a leadership role.

58 | IESE Business SchooI Insight | no. 152


Try this 5-minute workout Do this exercise regularly to retrain your thought patterns toward compassion. Wherever and whenever possible – at your desk, waiting for a meeting to start, on the way to work – pause for five minutes. Be still and silent, centering on your current mental, emotional and physical state. Ask yourself these questions:

In this moment, negative or uncomfortable feelings may surface, so it may be better to do this exercise somewhere private. It’s especially important to try to tune in to when your moods and feelings shift – to recognize what your personal triggers are.

• What thoughts are running through my

Let the answers to these questions flow naturally. Experience them by just sitting quietly and being aware of their presence on an almost subconscious level.

The purpose is to experience your real self at that moment in an authentic way, and to accept the reality with equanimity. Doing this regularly helps to train your mind toward compassionate characteristics of noticing, accepting and non-judging, so you have soothing self-conceptions to draw upon later when you need them most. This process of self-reflection should eventually become an unconscious part of your daily routine, like brushing your teeth.

Compassion for yourself and compassion for

Compassion can also help to instill an atmo-

others are closely linked, as the Berkeley psy-

sphere of psychological safety in which people

chology professor Serena Chen noted in Har-

feel comfortable being themselves and are more

vard Business Review: “Practicing one boosts the

willing to openly discuss – and ultimately ad-

other. Being kind and nonjudgmental toward

dress – workplace problems that concern them.

the self is good practice for treating others com-

Harsh discipline models and zero-tolerance pol-

passionately, just as compassion for others can

icies tend to have the opposite effect, finds the

increase how compassionate people are toward

University of Virginia professor Patricia Jennings.

themselves, creating an upward cycle of compas-

Although her research focuses on educational

sion – and an antidote to ‘incivility spirals’ that

environments, her insights regarding the effects

too often plague work environments.”

of trauma on cognitive, social and emotional

mind? How are they affecting me? • What emotions do I feel right now? Where am I experiencing them in my body? • What physical sensations can I detect in my body right now? How is my body reacting to them?

no. 152 | IESE Business School Insight | 59


KNOW

Leading with compassion

development are no less relevant to workplace

Like other moral virtues, empathy is a trait that

settings. Punitive measures “trigger reactions

is not innate, but can be developed over time. To

that amplify feelings of trauma,” she has stated,

that end, here are a few tips to increase your em-

reinforcing in people’s minds “that the world is a

pathic capacity:

dangerous place, that people don’t like them and that they are no good.” She recommends adopt-

active listening.

ing a more flexible approach to discipline that

world, you have to actively listen, not just to

To see inside someone else’s

seeks to “de-escalate a situation rather than ad-

what is literally being said, but to stand back

minister a prescriptive consequence.”

from it a bit and try to tune into the deeper, subjective meaning behind what is being said. This requires withholding judgment and asking

To see inside someone else’s world, you have to actively listen to the deeper, subjective meaning behind what is being said

open-ended questions to find out more. Warning: do you find yourself talking a lot, telling employees you understand what they’re going through and recommending what they should do? No matter how well-meaning, this doesn’t count as being empathic, and may, in fact, be “bossplaining.” This is more likely to make the other person feel worse rather than better. Resist your urge to speak, jumping in with advice and solutions. Try listening instead. focus on the story.

It’s not so much the person

per se we empathize with, as it is the situation that is affecting that person. Putting yourself in someone else’s shoes means focusing on the larger story and trying to imagine yourself going through that same experience: how would you feel?

You also need to pay attention to issues of gender,

practice makes perfect.

culture, ethnicity, age and power dynamics. The

thing to turn on and off like a switch. It needs

#MeToo movement has thrust these issues into the

to become a habit of character – and that takes

spotlight. Showing sensitivity to these matters can

practice. We all know someone – a friend, fam-

help create an environment in which employees

ily member or colleague – who could probably

feel secure and confident enough to explore and

use a listening ear. And when you can’t find a

realize their full potential. But fostering such an at-

real person, you can always use a movie, play or

mosphere is no easy task. It requires patience, skill

book to practice putting yourself in the shoes of

and, above all, deep reserves of empathy.

a particular character.

60 | IESE Business SchooI Insight | no. 152

Empathy is not some-


Workplaces are full of people or things that trigger means casting an inspiring vision and being focused us in some way. By pre-imagining our responses, on that vision at every level of the organization, we can use our everyday triggers as opportuni- through your behavior, what you monitor and what ties for change. So, tell yourself that “every time I you reward. It also means paying close attention to see/do/experience X, I will remind myself to slow employee concerns, understanding the causes of down, observe and choose a compassionate re- their stress and distress and working to eliminate sponse.” If you do this enough, desensitization will them. And the only way to do that is by building happen eventually, until your natural response to strong personal relationships with your teams. X will be more compassion for others.

Unleash a Compassionate Culture

Of course, if you’re a C-suite executive responsible for hundreds or even thousands of employ-

The ultimate goal of a compassionate leader should ees, this is easier said than done. But it’s not out be to foster the creation of a wider culture of com- of the question. passion. As I mentioned earlier, compassion can be contagious, especially when being exercised One way to extend your cross-organizational reach by someone in a leadership position. But, for that is to adopt the approach known as “management by to happen, the leader must lead by example. That walking around.” As its name suggests, it essentially

no. 152 | IESE Business School Insight | 61


KNOW

Leading with compassion

involves walking around the workplace in a random,

compassion. Of course, this has to be authentic,

unstructured manner, to call in on employees unex-

not fake smiles and mouthed pleasantries. People

pectedly and check the status of ongoing work. This

are more likely to develop stronger ties when their

up-close-and-personal approach helps to boost

interactions are authentic.

employee morale by giving employees a greater sense of importance, purpose and inclusion; it also

It’s no good being authentic in your relations with

helps managers keep a finger on the pulse of the or-

your employees if there is a gap between the es-

ganization as well as get to know employees, share

poused values of the organization you represent and

ideas and invite suggestions.

its actual deeds. Ask yourself: how well do we, as an

In walking around, try walking in love and kindness. By this, I mean smiling and greeting others warmly, telegraphing messages of openness and

62 | IESE Business SchooI Insight | no. 152


The author

Jonathan Passmore is director of the Henley Centre for Coaching at Henley Business School, University of Reading, U.K., and professor of psychology at the University of Evora, Portugal. A widely published author, he recently edited Mastering Executive Coaching with Brian Underhill and Marshall Goldsmith (Routledge, 2019).

if we think of wisdom as love, compassion and making decisions not based on ‘how will this help me now, how will this help my bank account, how will it help the next shareholders’ meeting, how will it help my next political campaign,’ but ‘how will this decision I make today affect future generations?’ That link seems to have been broken.” For Goodall, restoring that link to compassion is a fundamental issue that we all must address. Finally, some readers might ask whether it’s really necessary to be compassionate to be successful. organization, treat the environment or vulnerable

The answer is no. The business world is full of ex-

social groups? How ethical is our company’s supply

amples of companies and CEOs that treat their

chain? How big is the gap between our highest and

employees and other stakeholders terribly, but

lowest paid employees? Do we pay our suppliers on

nonetheless make huge amounts of money for

time? If the answers to these questions are far from

themselves and their investors. But stop for just

flattering, work clearly needs to be done.

a moment: is this the sort of company we would want our daughter to work for, or how we would

Speaking at the 2019 Davos summit, the scientist

want our son to be treated by his boss? There are

Jane Goodall expressed what she believed was

also many companies and managers who treat

behind many of today’s problems, from environ-

people with respect, courtesy and compassion,

mental degradation to rising social inequality.

and who thrive. This is our world, our life. It ulti-

“What’s gone wrong?” she asked. “We have bro-

mately comes down to our choice of what type of

ken the link between intellect and wisdom. And

world we want to build for tomorrow.

read more:

Marianetti, O. and J. Passmore. “Mindfulness at work: paying attention to enhance well-being and performance.” In Oxford Handbook of Positive Psychology and Work, edited by A. Lindley, 189-200. Oxford University Press, 2009.

no. 152 | IESE Business School Insight | 63


5 mistakes every family business should avoid Don’t mix business with pleasure: the same could be said about family. Family businesses must guard themselves against these occupational hazards.

By Josep Tàpies

W

almart may not be the first

It’s essential to identify individual vocations within

name that springs to mind

a family, respect each one’s wishes, and choose the

when you think of a fami-

most prepared person for CEO, which might well

ly business, but it is, in fact,

be someone from outside the family – as ended up

a family-founded and -run

being the case for Marriott.

corporation. Family businesses come in all shapes and sizes. The only common denominator is that a single family maintains some ownership, influence

2. Skipping proper governance

They say blood is thicker than water, but family

or control – no easy feat to sustain over multiple

ties shouldn’t muddle up how to run the business

generations, especially if the family makes any of

professionally. Fortunately, an increasing num-

the following five mistakes that I’ve seen repeated

ber of companies have governance mechanisms

during my decades researching these businesses.

to help formalize the separation between famil-

1. Assuming it runs in the family

ial and business realms, as stated in a study we published with Atrevia. The report, based on in-

One of the biggest mistakes a founder can make is

terviews with family businesses in Latin America,

bequeathing their business to their kids, regardless

Spain and Portugal, shows that, for governing the

of any management qualifications, as if business

company, 66 percent of family businesses already

acumen were genetic. Bill Marriott, for example,

have a board of directors in place. And for govern-

always assumed his son, John, would naturally take

ing the family’s involvement, 56 percent count on

over running the family hotel business, just as he

a family council, a forum in which interested fam-

had taken over from his father. But he eventually

ily members meet to discuss and agree on mat-

realized his son “wasn’t the right fit.” He explained

ters that will later be brought to the company. In

it this way in a 2013 interview: “He doesn’t have the

addition, 39 percent host an annual family assem-

temperament... He doesn’t want to be tied to his

bly, and 30 percent have a family office to manage

desk. Over time we both came to the conclusion

family assets. Such formal mechanisms are vital

that, wonderful as it would have been for me to hand

for keeping family members engaged with each

Marriott off to my son, he wasn’t the right choice.”

other as well as with the business.

https://dx.doi.org/10.15581/002.ART-3245


illustrations :

Jojo Cruz


KNOW

5 mistakes every family business should avoid

The author

Josep Tàpies is professor emeritus in the Strategic Management Department at IESE and holder of the FamilyOwned Business Chair, the first such chair in Europe.

3. Thinking the rules don’t apply

Family businesses may be special breeds, but they’re still subject to the same market rules as everyone else. They may prioritize long-term legacy concerns over short-term benefits, but their shareholders will expect rising share prices and dividend payouts nonetheless. What’s more, not all family members will be directly involved in the running of the company and yet they, too,

unity. Likewise, market rules should guide remu-

should be motivated to care about its future. For

neration. Being part of the owner family should

example, SC Johnson, whose catalog of house-

not entail salary privileges of any kind and, to

hold brands includes Windex and Raid, created

avoid them, it’s best to align pay with the going

a family trust in order to discretionally distrib-

rates. Applying double standards will undermine

ute dividends to members of the Johnson fam-

employee motivation.

ily and thus help them maintain harmony and

4. Not planning for succession

No matter what your company, the boss frequently has a hard time letting go and handing over the reins to someone else. This feeling of being irreplaceable is particularly acute when the boss is the one who started the company and it’s their baby. But not preparing for succession is a mistake that puts the very future of the company at risk. For anyone who genuinely cares about the long-term survival of their business, the best thing they can do is to make plans and start preparing the next generation of leaders well in advance. Alarmingly, more than half of the family businesses we studied lacked a succession plan.

5. Believing it won’t happen to me

Believing you’re immune to these mistakes renders you more likely to make them. Humility, honesty and an ability to detect weaknesses, both in the family as well as in the business, are key qualities to anticipate, identify and remedy problems before it’s too late. Whether you’re part of a family business or not, the old saying holds true: prevention is the best medicine.

source:

66 | IESE Business SchooI Insight | no. 152

Tàpies, J. Empresa familiar: 30 años de preguntas con respuesta. IESE, 2018.


How rankings shape your growth story By Tony Davila, George Foster, Xiaobin He and Carlos Shimizu

High-growth rankings can give small companies a quick reputational boost. But unless you understand the metrics involved, your time on the list could be very short indeed.


RaĂşl Arias illustrations :

https://dx.doi.org/10.15581/002.ART-3246


KNOW

How rankings shape your growth story

C

ongratulations! Your

company

won’t seem so great if you disappear from the

just made it into a prestigious

rankings club overnight. What kind of growth sto-

ranking. High-fives all around.

ry does that signal to potential investors?

Employee morale is through the roof. You know this ranking is

There are many rankings in the business world.

regularly consulted by investors and policymak-

Clearly, they seem to matter, otherwise people

ers, and your company appearing in it, besides be-

wouldn’t boast so much about getting into them.

ing good PR, means that new money and business

But how reliable are they for predicting a compa-

may be flowing your way soon.

ny’s long-term success? How are they designed? What are they actually measuring? And do their

But wait, before getting too carried away, consid-

metrics have anything reliable to say about your

er this finding from our research: only 30 percent

propensity for growth?

of companies that make it onto high-growth lists manage to stay on them the following year. And if

Our research on rankings suggests they have cer-

you do make it onto next year’s list, you only have

tain limitations. A company’s growth story can

a 30 percent chance of showing up again. In three

vary significantly depending on which factors are

years, your odds of still being ranked are down to

being measured.

around 3 percent. This holds true across all the major rankings of top startups.

That’s why it’s so important to understand how and why individual rankings were created, and with

Then what? Your company prospects will look

that understanding, take charge of the story you

very different. Your so-called “growth persistence”

want to tell about your company through rankings.

70 | IESE Business SchooI Insight | no. 152


Key points Making the grade

High-growth lists have multiplied over the years. Inc. magazine, founded in 1979 in the United States, was one of the first to systematically report a list of high-growth companies – the Inc. 100. That list became the Inc. 500 in 1982 and was expanded to the Inc. 5000 in 2007 (though the Inc. 500 continues to receive the most attention). Throughout the ’90s, high-growth company lists also took off in Australia and the United Kingdom, with global firms such

• Growth can be measured in different

ways and create very different perceptions for business clients or investors.

• Indicators are not immutable but can

be engineered to convey different messages.

• Learn how to interpret indicators and

why using different metrics can yield very different results.

as Deloitte publishing lists of the fastest growing companies by sector and region (the Technology Fast 500 Asia Pacific, for example). Companies often enthusiastically promote being on the lists, basking in the guaranteed media attention. But, as we mentioned earlier, even tougher than making the list is staying on it over time.

Growth: what’s the story?

On these lists, growth is typically measured as total revenue growth over three years or less. Occasionally, longer time periods of four or five years are used, along with headcounts – that is, the number of employees. Company profits are

Ask yourself • Which growth indicators are best for

me to use, not just to get ranked, but to get in a ranking that reinforces a positive growth story about my firm?

• Which indicators are the most

appropriate for my particular needs?

• How was this ranking constructed?

How does its design affect the interpretation of reality?

not reported on any of the lists we surveyed. One reason for this is that companies may worry that reporting such information might reveal their competitive strategy. Also, because some costs

We studied privately held companies from 11 coun-

can be treated as expenses rather than assets on

tries that required public disclosure of revenues:

the balance sheet, profits are generally not an ac-

Belgium, Finland, France, Germany, Italy, Japan,

curate reflection of value creation.

Norway, South Korea, Spain, Sweden and the United Kingdom. In total, 379,693 companies were

How growth is measured can lead to significant-

ranked based on revenues, and 221,183 were ranked

ly different outcomes, particularly in terms of

based on headcounts. These 11 countries were cho-

the time horizon. We discovered this after cre-

sen to eliminate any bias by companies that opt

ating our own database of high-growth compa-

not to report their revenues publicly. In the United

nies and juggling time variables.

States, for example, there is no mandate for private

no. 152 | IESE Business School Insight | 71


KNOW

How rankings shape your growth story

companies to publicly file financial statements.

headcounts. The shorter the time metric, the more

This means that some privately held companies

that singular events like the departure of a large

with high growth may decide not to submit data

initial customer or being acquired by another firm

voluntarily to prominent rankings.

introduced greater volatility into the rankings.

If you appear on a high-growth list, keep in mind that your chances of making the cut the following year are small

One interviewee had another theory to explain high turnover in the rankings: it was in the interests of the publication and its sponsors. With two-thirds of the list made up of newcomers, many interesting stories can be written on upand-coming companies, which helps attract more readers. In addition, financial institutions and consultancies often collaborate with publications to sponsor business conferences and dinners. High turnover on the lists appeals to those sponsors, because they have a fresh pool of business clients to target with their services.

Know thy ranking

What does all this mean for companies? First, if you are fortunate enough to appear on a highgrowth list, keep in mind that your chances of making the cut the following year are small.

Why would they do that? Some may be con-

Second, if you are participating in a ranking by

cerned with competitors using that information.

choice, think carefully about the parameters of

Another risk is that employees or suppliers will

the ranking first, particularly revenue over time.

try to renegotiate contracts following publication of positive results. On the other hand, there may

Depending on your sector, you may not even

be negative publicity if they do not appear on

have any chance of appearing. A biotech firm,

the list the following year. Finally, some business

for example, might be growing very quickly in

owners, for philosophical reasons, may simply

terms of headcount, but if the ranking focuses

choose to keep all information private that is not

on revenues, it will never show up. Since firms in

mandated by law to be made public.

this sector are focused on product development in their initial stages, biotech firms do not gen-

In our sample, we found that a longer time hori-

erate revenues. They can linger in the pre-reve-

zon increased growth persistence. This held true

nue stage for almost a decade as they build value

when measuring growth whether by revenues or by

through intellectual capital instead.

72 | IESE Business SchooI Insight | no. 152


High-growth company lists examined MULTI-SECTOR Inc. 500 (U.S.)

SINGLE SECTOR

BRW Fast 100 (Australia)

Fast Track 100 (U.K.)

Deloitte Tech Fast 500 (North America)

Deloitte Tech Fast 500 (EMEA)

Deloitte Tech Fast 500 (Asia Pacific)

4/3

5/4

5/4

3/2

Tech Track 100 (U.K.)

5/4 (1982-2003)

5/4 (1993-2000)

4/3 (2005-2010)

4/3 (2001-2010)

Revenue of base year reported

Yes

No

Yes

Yes

No

No

Yes

Headcount of base year reported

Yes

Only since 2001

Yes

Yes

No

No

Yes

Company age reported

All years except 1982, 1995 & 2010

Only since 2007

Yes

No

No

No

Yes

Growth

Last/first

Averaged annual

Annual compound

Last/first

Last/first

Last/first

Inclusion rules

First year >$200k First year >$500k

First year >£250k

First year >$50k

First year >€50k

First year >$50k

Last year >$5m

Last year >€800k

Years/periods used to compute growth

Last year >$2m

3/2 (2001-2007) 4/3 (2008-2010)

First year Last year >£5m headcount <=200

Annual compound

First year >£250k Last year >£5m

As the time metric used for growth measure-

in their growth paths. An example is Siebel Sys-

ment increases, changes in strategy, manage-

tems, one of the fastest growing companies from

ment and company culture play larger roles

1993, when it was founded, until 2001, when it

in ranking outcomes, making the reasons for

was acquired by Oracle. In this case, changes in

growth more complex.

the company’s competitive environment probably led to its downturn. Rankings that use longer

What’s more, longer periods of time increase the

growth periods more reliably identify companies

risk of initially high-growth companies drop-

that are building an infrastructure to manage the

ping from the sample, due to sudden changes

challenges of high growth.

no. 152 | IESE Business School Insight | 73


KNOW

How rankings shape your growth story

On the flip side, using a longer time horizon

competitor â&#x20AC;&#x201C; can have more dramatic effects, par-

when examining revenues limits the number of

ticularly on early-stage companies.

firms eligible to appear in some rankings, since they have to report information for more years. Some rapidly growing ventures simply may not

Tell your own story

In her classic work, The Theory of the Growth of

have the necessary data yet. This means that lists

the Firm (1959), the celebrated economist, Edith

with longer time horizons may be missing im-

Penrose, noted that smaller firms generally have

portant high-growth firms.

a harder time than larger firms when it comes to growth. While she may have been speaking in

The bottom line: longer periods of time for com-

terms of resource deployment and management

puting growth are more likely to identify compa-

capacity, a similar point applies that small, grow-

nies with sustained high growth. But if they are

ing firms need to work harder at understand-

too long, the reasons for making the list become

ing the metrics underlying the measurement of

more difficult to identify, since the companyâ&#x20AC;&#x2122;s sit-

growth before going after rankings. Take time to

uation becomes more complex.

consider your own sector and firm characteristics, and target rankings accordingly.

When time periods used to measure growth are shorter, singular events â&#x20AC;&#x201C; such as economic shocks,

Remember this sobering statistic: 70 percent of

the loss or gain of a customer, the entry or exit of a

companies published on lists make one-and-done


The authors

appearances. And the probability of being included on the list declines the longer the company remains on it. Moreover, as our interviewee attested, there is some evidence that rankings are engineered to serve other interests beyond the growth interests of the firm being ranked. By having a clear-eyed view of rankings, compa-

Tony Davila is a professor of Entrepreneurship and Accounting & Control at IESE Business School.

Xiaobin He is an associate professor at the School of Social Sciences, Tsinghua University.

George Foster is the Konosuke Matsushita Professor of Management at Stanford Graduate School of Business.

Carlos Shimizu is a Morgan Stanley Private Wealth Management analyst and former researcher at Stanford Graduate School of Business.

nies can better ensure they are included on the lists that genuinely help them shine in the public eye. So, by all means, enjoy the kudos of being ranked – but make sure you know what story it is telling about you. Use appropriate metrics – longer measurement periods to estimate growth, average growth rather than the difference between the first and last year, and minimum organizational size – to increase persistence.

source: Davila, A., G. Foster, X. He and C. Shimizu. “Measuring Growth and Its Impact on Reported Growth Persistence.” Available at https://ssrn.com/abstract=3049894 or http://dx.doi.org/10.2139/ssrn.3049894


FULL STOP

credit :

Chris Lee/Carnegie Hall


A talent for Clive Gillinson never set out to be a manager. But the Carnegie Hall executive has discovered in management a new way to be creative. What kind of music is coming out of your leadership?

C

live Gillinson became a manag-

no point in you considering a career

er by accident. Ever since he be-

in management. As a mathematician, that’s a

gan studying the cello at the age

difficult concept to deal with. But, the fact is, be-

of 11 – apart from a slight detour

ing a manager has turned out to be the most excit-

studying math at university be-

ing thing of my life.”

cause his mother, a cellist, urged him to “get a real profession” – the one thing he was “absolutely

certain” about was that he was “never going to be interested in management.”

Money follows vision

Take the financial aspect. “Raising money is not raising money,” he says. “It’s about relationships and sharing a vision. You never chase the money. Money

But while working as a cellist in the London Sym-

follows vision, so you’ve got to start with a compel-

phony Orchestra (LSO), he got tapped to serve as

ling vision. Then you share that vision with people

finance director when the company fell on hard

who care about it, and special things happen.”

times. He was eventually promoted to managing director, a position he held for 21 years until be-

Gillinson’s vision has been to transform the role

coming the executive and artistic director of New

of a concert hall in the 21st century, based on

York’s famous Carnegie Hall in 2005.

three pillars:

“The irony for me is that when I first went into

• the core activity: providing “the greatest mu-

management, I said, ‘I will only do it on the basis of

sic in the greatest concert hall in the world.”

two things: one is I never have to make speeches;

• a commitment to education: to reach the

the other is that I never have to raise money.’ So,

next generation, particularly those with fewer

here I am in New York, where all you do is make speeches and raise money.”

opportunities. • technology: streaming, broadcasting and making the most of media platforms.

This reluctant manager has been surprised in other ways, too: “I discovered that unless you can

In support of its core, Carnegie Hall launched city-

make one plus one equal more than two, there’s

wide festivals, not just of music but encompassing


FULL STOP

A talent for management

babies, which he says has “a powerful healing ef-

“With music we have an extraordinary vehicle to create bonds and understanding”

fect on people in incredibly trying circumstances.” The final pillar is technology: “In a world of almost infinite content, infinite choice is just as challenging as having no choice at all. What we want to be is a curator who helps people make choices and find what they want to listen to online. We also create original online content. And given people’s shorter attention spans, we aim to deliver content in succinct yet impactful ways.”

Building trust

In trying to transform an established organization along these lines, Gillinson initially encountered some resistance due to caution. “Like any new chief executive, you have to earn trust. There’s no rea-

dance, theater, film, literature and visual arts. “Each

son why anyone should automatically accept ev-

year we partner with some of the greatest N.Y.-based

erything you suggest. And even if people love your

organizations. We want to take people out of their

ideas, there will always be nervousness.”

comfort zones, because the arts should be about stimulating curiosity and enabling us to grow.”

Gillinson handled this by asking his board to give him a chance to test the waters with some

The second pillar – education – includes pro-

trustees who were questioning the Hall’s ability

grams aimed at families, but also a National Youth

to take on two new major projects at once. By

Orchestra. The concerts they stage allow budding

talking ideas through with individual trustees, he

musicians to engage with their peers nationally

was able to earn their trust and eventual back-

and worldwide. “These kids come from all sorts

ing. “I think the board did exactly what a board

of backgrounds. Many of them never had pass-

should do, which is to test the idea, really chal-

ports before. Now they’re acting as ambassadors

lenge me, but then, when they felt they had the

for their country. I’ve had real ambassadors say to

right answers, they fully backed us.”

me, ‘You’ve done more with your concert for the relationships between America and this country than I could do in years.’ With music we have an

Managing egos

Another key for organizational change is “under-

extraordinary vehicle to create bonds and under-

standing the people you work with and how they

standing between people.”

tick.” This requires emotional intelligence and “using your ears more than your mouth. When peo-

As a further example, Gillinson cites a music pro-

ple complain, sometimes you have to respond,

gram they run in New York State’s Sing Sing pris-

but sometimes you don’t, because that’s simply

on. “The men are learning music and it has trans-

their way of dealing with pressure. Some people

formed how they think about their lives and their

need praise all the time, and if they don’t have it,

futures.” Another program supports young moth-

they struggle. A huge amount is reading the per-

ers to compose lullabies that they can sing to their

son. And that takes time – and empathy.”

78 | IESE Business School Insight | no. 152


Gillinson’s tips for hitting the right notes Never take no for an answer

objective to try to make ev-

When I first proposed the idea of

erything available online.

festivals with other arts organiza-

Nothing you do should

tions around the city, everybody said,

ever be led by media.

“There’s no point. New York organizations don’t work together because they’re all chasing the same money.”

Don’t blame others If you can’t persuade

But when I went to see them, they

other people, then

all said, “We’d love to.” Always test

either your idea isn’t

an idea, even if everybody tells you it

good enough, or you ha-

won’t work.

ven’t done enough work

Ask the right question

Most people ask, “What’s best for this company?” That’s not the right question. The only question you should

on it. Take it away and look at it again.

Timing is everything

One of the biggest things I’ve found

ever ask is, “What’s best for how we

in life is if you get the timing wrong,

can transform people’s lives?” If you

an idea can be wrong. It can still be

answer that properly, then that is

the right idea, but the wrong timing

what is best for the company.

makes it the wrong idea.

Stay curious

See the big picture

couldn’t sleep at night because I knew

programs will probably never visit

absolutely nothing and I couldn’t

Carnegie Hall. So why do we spend

imagine the answers. Now almost

money on them? Because we’re

nothing keeps me awake, not because

looking after the future. It’s a bit like

we have all the answers, but because

the environmental movement: a gener-

I have faith in our team’s ability to be

ation ago, that wasn’t really on the

curious and ask questions.

agenda, yet now almost every kid has

When I moved into management, I

Make media your servant, not your master

Most of the kids who benefit from our

a green gene. Likewise, we’re trying to transform the culture so that everyone has the chance to engage with the

Just because all these opportunities

arts. That has to be part of what we

exist, I don’t think it’s a meaningful

exist for.

no.152 | IESE Business School Insight | 79


FULL STOP

A talent for management

This is especially important when it comes to managing egos. “With artists, they usually demand that they’re talking to ‘the person in charge.’ This means ‘the person in charge’ has to have those people skills. I think management has changed a lot in this regard. Conductors, for example, used to work on the basis of fear, like tyrants. Now, most conductors want a relationship. People are

“Management has changed a lot. People are more sensitive and aware”

more sensitive and aware.” Gillinson recounts the story of a diva who was in a

I had to become a different manager,” he recalls.

car, going to the airport, when she phoned her man-

Delegation requires, first, getting “the best peo-

ager to say, “Tell the driver to drive more slowly.” She

ple,” and then, “Empower them.”

wouldn’t actually speak to the driver herself. “Again, you need to understand that person. You may de-

Empowering them doesn’t mean you just let peo-

cide, ‘I don’t want to work with her again because

ple go off and do things on their own without any

her behavior interferes with getting the best results

reference to anyone else. “That’s never any use,”

for everyone.’ But there are times when, to get the

he says. “People need to work together as teams,

best results for everyone, you’ve got to understand

believing it’s ‘our success’ not ‘my success’.”

how that person’s ego works and let them travel the journey they need to travel in order to get to where

Finally, it means giving it your all. Gillinson tells the

you feel you all need to be.”

story of his idol, Mstislav Rostropovich. “Somebody

Empowering the team

would ask, ‘Which is your favorite piece?’ And Rostropovich would answer, ‘It’s the piece I’m playing

One thing that doesn’t work is micromanage-

now or I shouldn’t be playing it.’ His view of every-

ment, as Gillinson learned when he moved from

thing was that, no matter what you’re doing at the

the LSO to the much larger Carnegie Hall. “I knew

time, you always give 100 percent.”

credit :

Carnegie Hall Archives


We manage our customersâ&#x20AC;&#x2122; hard work and dreams by taking care of their finances.

bancomediolanum.es


Hyundai KONA. Best Car of the Year 2019 in Spain.

Different, unique, special… That’s Mireia. A genuine champion, both in the pool and out. Different, unique, special…That’s the Hyundai Kona. A genuine champion both on the road and off. They both demonstrate that the most demanding goals can only be achieved through hard work, dedication and technical excellence. You drive it. You define it.

Hyundai Kona Range: CO2 emissions (g/km): 129-189. Combined fuel consumption (L/100km): 5-8.3. Fuel consumption and emissions values obtained according to the new WLTP approval cycle. CO2 emissions (g/km): 108-158 obtained according to the correlated NEDC cycle. The 5-year unlimited mileage warranty offered by Hyundai Motor España S.L.U to end-customers only applies to Hyundai vehicles originally sold by the official Hyundai dealership network, according to the terms and conditions of the service passport. Model shown: Kona Style. For more information, consult your Hyundai dealer or visit www.hyundai.es

Profile for IESE Business School

IESE Business School INSIGHT No. 152  

IESE Business School INSIGHT No. 152  

Profile for iese