KPMG Executive Exchanges | 1

Dan Cobley, Partner at Blenheim Chalcot and former Google UK MD, on how the highest paid person in the boardroom may not be the best informed. Inside, top CEOs also reveal their secrets to successful business transformation.

“Kill the HiPPO”Executive Exchanges: Bringing you strategic insights from the boardroom

Insights from inside the boardroomIt can be lonely at the top

That’s why KPMG’s Executive Exchanges programme brings UK business leaders together to explore the latest thinking on boardroom issues.

Since 2016, Executive Exchanges has brought members:

• interviews with 30+ business leaders• 30+ events• 20+ reports • regular webinars• video content viewed by 15,000+ C-Suite members on LinkedIn

Members include Chief Executives, Chief Financial Officers and Chief Operating Officers as well as Executives in charge of HR, Technology, Marketing, Customer and Transformation.

Some of the thought leaders in this issue:

Rahima Valji, former Chief Innovation Officer at Eurostar

Dan Cobley, former MD of Google UK, now Partner at Blenheim Chalcot

Will Whitehorn, former President of Virgin Galactic and founder of Purplebricks.com

Martin Griffiths, CEO of Stagecoach Group

Tim Richards, CEO of Vue International

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You’re in good companyTake a seat at the Executive Exchanges table

Businesses like yours are thinking big about transformation. We know this because we hear the same conversations arising between our Executive Exchanges members as they think strategically about their organisations’ future trajectory.

We speak to business leaders about how they are tackling some of the challenges and ask them to share their successes and experiences.

• Page 4 - Dan Cobley (Partner at Blenheim Chalcot and former Google UK MD) highlights the importance of data-driven decision-making and reveals his seven secrets for business transformation

• Page 7 – Alastair Marsh (Lloyd’s Register), Tim Richards (Vue International) and Chris Wakerley (KPMG Boxwood) discuss why established businesses must take the lead in today’s changing landscape in order to survive

• Page 9 – Rahima Valji (former Eurostar Chief Innovation Officer) shares her tips on working with everyone from the front line to the boardroom to drive change

• Page 10 – Business leaders from across the UK talk to the Financial Times about the importance of building an innovation culture and forming strong external partnerships

• Page 12 – Martin Griffiths (Stagecoach Group), Tim Richards (Vue International) and Will Whitehorn (Purplebricks.com) share different viewpoints on evolution in the boardroom

We know that disruption comes out of left field. That’s why we work with our clients to take an outward view of opportunities and to manage risk proactively. But we also know the value of peer experiences and insights.

The Executive Exchanges programme acts as a platform, providing the tools and forums to help you to tackle tomorrow’s issues, today.

So, if you like what you read and would like to join Executive Exchanges, go to the back page to find out how to register.

Warren MiddletonKPMG

The HiPPO dilemmaSo, what have we got against the highest paid person’s opinion? When it comes to digital transformation, it often proves to be a blocker to innovation, says Dan Cobley, Partner at Blenheim Chalcot and former Google UK MD

Dan Cobley may highlight the importance of bringing technical knowledge into the boardroom as one of the key insights from his time as MD of Google UK, but that alone is not enough. He believes in decisions determined by data.

For true business transformation, he says, you must also think beyond incremental gains and innovate by an order of magnitude – in other words, offer products and services that are not 10%, but 10 times better than the competition. “Businesses that aren’t prepared to cannibalise themselves with new technologies, and really change their approach, get left behind,” he explains.

Take the driverless car as an example of this ‘10x thinking’ culture. People die in car accidents because of driver error. So why not get rid of drivers? It may seem like a radical solution, but keeping an open mind can facilitate breakthrough technologies that allow you to move beyond the problem to the solution.

Dan revealed seven secrets to transformation, particularly the creation of an innovation culture, in a keynote speech at the London Science Museum to a select group of business leaders brought together by KPMG to discuss challenges and opportunities in our technology-driven business landscape.

Great expectationsThe rate of technological change is increasing, he says. Where it once took 70 years for electronic discoveries to become established, the internet took just a decade; today, an

“ Keeping an open mind can facilitate breakthrough technologies.”

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application like WhatsApp can scale up in a matter of months.To see the impact of this increased pace, just think of how Kodak lost market-share, Dan says. “In 1989, there were 80 billion photographs taken on film and printed around the world. Last year, more than three trillion photographs were uploaded to social media.”

That means that more images were uploaded to social media in the past six months than in the whole history of photographs being printed on paper. This change of pace also means customer expectations evolve quickly.

The question is – if you’ve got enormous opportunity created by these digital and technology transformations and the enormous threat of being disrupted – how can you swing the balance in your favour? How can you be nimble, be innovation-driven, get the right people and move faster?

“ Be terrifyingly open: communicate your strategy regularly.”

1. Have a clearly aligned mission: your people need purpose and a clear objective. For instance, Google’s stated mission is to “organise the world’s information and make it universally accessible and useful”. Your company must articulate a motivational message to staff about your community and how you collectively add value to customers.

2. Give people real autonomy: allow time for non-core business innovation. At Google, employees are allowed to spend 20% of their time on something “which adheres to the company’s mission”, but is outside their normal day job.

3. Fail twice as often: learn quickly and cheaply through failure (avoiding areas where there is risk of brand reputational damage, such as compliance, data security and health). One marketer conducted an experiment – they attached an Android phone to a balloon and sent it into space. This experiment’s results provided a strong business case for the robustness of the Android technology, and was endorsed by NASA.

4. Kill the HiPPO: use data to inform decision-making; don’t let the ‘HiPPO’ (highest paid person’s opinion) steer decision-making. Instead, test and measure and fight your corner. Google tested click-through links to see which shade of blue people prefer to click on. By using the preferred purple hue, it increased advertising revenue by $200 million a year.

5. Be terrifyingly open: communicate your strategy regularly and listen to your people; when employees feel invested, they bring new ideas. Every week at Google, leaders stand up in front of the whole organisation and answer questions about its strategy.

6. Redefine training and learning: make knowledge transfer engaging, interactive and collaborative. Google’s own people present short, interactive and engaging sessions to each other, in whatever format they choose.

7. Keep one eye on the future: don’t get distracted by one shiny thing. Focus not only on core operations, but also on what will be important in the future. By allowing employees to spend 20% of their time working “around the edges” of their day job, innovation at Google has become “every day”.

Here Dan provides seven strategies to help businesses meet today’s challenges:

More insights from Dan on leadership, innovation and transformation will be shared here

The UK’s exit from the European Union may mean we have to rip up the rules on how supply chains operate across Europe. But your response doesn’t have to be just about mitigation. A minority of firms – probably as low as 10% – recognise Brexit as a strategic opportunity to challenge their supply chain status quo and do things differently: to exit unprofitable lines or to make them profitable again.

1. Brexit-check your network Analyse what it will cost to serve customers and how you strategically approach those particular markets, product lines and customers after Brexit. Use the data to drive difficult discussions with customers and colleagues alike.

2. Ensure you can meet obligations Where do your organisation’s liabilities lie at a contractual level? Once identified, test whether your network can still meet those commitments if trade barriers are raised.

3. Identify sensitivities to delay Brexit will increase border delays which will, in turn, impact on your movement of goods. Identify where you are most vulnerable, whether as a result of perishable goods or reliance on speed of delivery.

4. Be Brexit-ready and proud Advertise the fact that you have already built in Brexit resilience – reassure your EU customers that you are committed to continuing to serve them and that you can still hit their SLAs.

5. Consider the other ‘Ireland issue’ The fate of the land border between the UK and Republic

of Ireland shouldn’t blind planners to what Brexit means for the sea crossing between the UK mainland and the Republic. Will you require extra infrastructure nodes on either side of the Irish Sea?

6. Think beyond Dover Have you considered increased inbound traffic to the UK in addition to Dover? You’ll need a solution for Calais, Cherbourg and Zeebrugge too. Assess your third-party logistics provider against these criteria, not just on cost.

7. Contemplate changes to tariffs Different tariff levels on different constituent parts of a single product may require a review of where you carry out certain processes. Consider whether you should export raw materials for production in the end consumers’ market instead.

8. Keep watching for unexpected opportunities Think creatively about how your location places you in a better position than competitors to help customers (and potential customers) facing Brexit complications.

For more information to help you address some of the most urgent issues arising out of Brexit, Click here

8 ways to strengthen your Brexit supply chain No one knows what trade will look like post-Brexit,

yet those seated around the board table must plan for it anyway. We outline the eight things they should consider.

Andrew Underwood, Partner and Brexit Supply Chain & Procurement Lead

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partnerships as these can lead to lucrative new propositions – and to whole new business models being created.

However, it is important to understand how your business operates at the coalface before making decisions in the boardroom, he concedes. “Use this insight and data to expose what’s going on in your business so you can make proper decisions.”

Innovation defends against declineTim Richards, founder and Chief Executive of entertainment group Vue International, also says that just because an industry is being targeted by disruptors does not mean decline is unavoidable. It is possible for established companies to innovate and stay ahead of new challenger brands.

“The demise of our industry has been predicted for the past 80 years,” he notes. “But, post-Netflix, we’re still here.” In fact, innovation is at the heart of everything Vue International does. “We are constantly trialling and testing new ways of doing business, new operating systems and new goods for serving.”

And how do you know if you have been successful? According to Chris, this can be measured by reviewing the kind of ideas coming through, as well as engagement surveys and staff retention. “If you get the culture right, tangible results will follow,” he concludes.

The realisation that innovation is vital for survival, even for long-standing businesses in more traditional industries, can be a shock. In fact, Alastair Marsh – Chief Executive of 257-year-old maritime stalwart Lloyd’s Register – says that three years ago this revelation had resulted in a “call to arms” at the organisation.

“We realised the world was changing,” he explains. “So, we asked our clients how they saw us and, while they trusted us as a technical advisor, we were not seen as innovative. Our staff disagreed, however, pointing out that they do innovate but our culture meant there was nowhere for their innovations to go. So, our journey started there.”

Lloyd’s Register already worked with ships and oil rigs that generated vast amounts of data. By improving analysis of that information, the potential for component failures could be predicted more accurately. The result is new technologies which are being rolled out and driving change across the industry.

Look at industry challengesChris Wakerley, Managing Partner at KPMG Boxwood, points out that thinking strategically about innovation also means knowing where your business makes money today and where it is going to find opportunities in the future.

This may also require radical, not incremental, change, he says. This potentially may even include forming cross-sector

It’s never too late to innovateInnovation is not just for start-ups. Even a company that is hundreds of years old must be prepared to undergo substantial change, according to thought leaders who took part in a panel discussion on business transformation hosted by KPMG at the London Science Museum.

Serving upresultsFeel-good restaurant chain TGI Fridays (TGIF) is all about delivering good vibes. That includes making sure their customers can get their favourite dish, whether it’s a green chilli cheeseburger or an iced tea. A new, cloud-based enterprise resource planning (ERP) technology solution, implemented by KPMG Crimsonwing, is putting that on the table.

We led the implementation of new cloud-based Dynamics 365 from Microsoft, helping TGIF to bring all of its finance systems onto a single, flexible platform for the future, and revolutionising finance processes. Bolstered by Power BI, management can now analyse spend in each store – down to the actual menu items ordered.

Cloud scalability means that TGIF’s new finance system will continue to deliver as the franchise expands. And by providing access to real-time data and up-to-the-minute insight, TGIF has clear visibility over the results each of its restaurants is serving up.

We know how to get things done.

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Keep transformation on trackRahima Valji, Eurostar’s former Chief Innovation Officer, is renowned for her talent for implementing change. Here, she reveals how it is only by seeing the big picture that true transformation can be achieved.

Every leadership team is tasked with the same challenge – to make sure their organisation has a transformation strategy that empowers it to keep pace with technological, economic and social change. But what does this strategy look like in 2018?

According to Rahima, the solution begins in the C-Suite, where there must be the right technical expertise, drive and entrepreneurial spirit to “move the needle” and stay ahead of the disruptor.

“In the 1920s, an S&P500 company would have 67 years before it could expect to be disrupted. Today, you’ve got 15 years at most,” she warns.

The challenge for anyone pushing an innovation agenda at board level is showing benefits without having “pure numbers” to hand as evidence of the opportunities. “CEOs must play an active part leading this agenda and bringing new ideas to the board, as you are always going to meet a lot of resistance,” she says.

Aim for successful failureTransformation is a whole-business affair. It means building an environment where all employees are encouraged to be creative and where it is okay to strive, and to fail. “You also need to provide the right incentives and recognition so employees want to contribute,” Rahima says.

Indeed, it is often this fear of risk and failure at board level that holds businesses back, she believes. “But risk can be managed by taking a portfolio approach – look at projects that are low risk and those that are potentially higher risk, and take a balanced view.” Underpin this with a data-driven strategy, and you’ll progress the right projects for your business.

Stand out from the crowdYou must take a future view, but don’t get caught up in the hype. “Consider which technologies are actually going to add value to your business and for your customers,” she explains. Businesses must be bold and only adopt new technologies that will drive real change, rather than change for change’s sake.

Build loyalty through CSRIt is vital to see the big picture today. Corporate responsibility brings a competitive advantage, she believes. “It brings meaning to everything you do – people want to join your organisation, it creates pride in the business, and it encourages loyalty with customers and employees.”

Read more insights from Rahima here

Today’s business decision-makers are faced with preparing their organisations so they can thrive at this time of great uncertainty.

As one CEO attendee said: “Disruption feels pretty much like the new norm; we have to accept that things are going to continue changing, and that they are probably going to continue changing at a faster rate.”

Create an innovative cultureIt was agreed that businesses cannot afford to be complacent. “If you’re doing well and you’re relevant, there’s somebody else that’s working on a plan at the moment that’s 10 times better than yours, operating at a fraction of the cost of yours,” warns a participant.

Various strategies for improving an internal culture were mooted, including setting an annual innovation budget and allowing employees to bid for funding to take ideas forward. Another technique cited was the creation of mini-cultures which funnel new ideas into a centralised ‘innovation cell’ for maturation.

But innovation is dependent upon the availability of key skills and talent within an organisation, and the challenges of attracting, developing and incentivising new talent can no longer be overcome purely through increased salaries and promotions.

Instead, executives must ensure employees are invested in the values and objectives of the company, as well as establishing a corporate culture which actively embraces criticism and new ideas. They must also prioritise lifelong learning for workers rather than relying upon a traditional university degree, so their people can, as one person put it, “learn to adopt new technology and to adapt to change”.

Reinvent through collaborationThe rules are changing, and quickly, so businesses must adapt their models so they can make better use of technology, drive efficiencies and increase speed to market, while building stronger relationships with customers.

How to thrive:take the road less travelledBuild an internal culture of innovation and form strong external partnerships – these are just two paths to true business transformation, according to leading business minds that attended a series of Executive Exchanges private dinners held across the UK by KPMG, in conjunction with the Financial Times.

Six ingredients for business transformation:

1. Give employees the freedom to innovate

2. Use social purpose to motivate and nurture talent

3. Improve and streamline customer communications

4. Encourage diversity and inclusivity

5. Source skills through external collaborations and partnerships

6. Choose the right technologies to compete with disruptors

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Some are tackling this need for speed by picking up knowledge and skills through acquisition of fast-moving start-ups and complementary companies. As one participant noted: “If we tried to spend a billion euros on becoming a digital expert, we probably still wouldn’t be as good as a start-up in India.”

However, merging two businesses and their cultures is never straightforward. “If it takes two or three years to get the merger done, we may well find that the opportunity we had is now gone,” another attendee said.

Drive change, manage riskEven with top-down support and funding, it was pointed out that “nine out of 10 ideas are useless in terms of commercial reality, and cost a lot of money, and only one out of 10 will become a big new business”.

And there is a need to keep up with rapid technological change, while maintaining global compliance with regulations, which means continually analysing global regulatory and manufacturing trends. This requires the type of forward-looking and risk-ready mind-set which has lost traction in larger organisations since the 2008 financial crisis.

This pervasive fear of failure has resulted in a dearth of investment in innovation across a range of industries, delegates felt – along with a heightened aversion to risk across both senior executives and lower-tier employees fearful of damaging their career prospects.

Hear more from the thought leaders featured above or

download the full FT Series report here

In November 2017, the Financial Times invited 36 thought leaders – a cross-sector group of CEOs, academics and executive directors – to look at drivers of business transformation at a series of KPMG dinners in Birmingham, Edinburgh and Reading.

Left to right, top row: Paul Kehoe, Prof Sir Anton Muscatelli, Prof Sir Peter Gregson. Middle row: Victoria Garrad, Gordon Dewar, Melanie Stack. Bottom row: Ahmed Farooq, David Thompson, Gerard Loty.

In case you missed it, here are highlights from our CxO Evolution series of interviews

A recurring theme emerged when we spoke to three leading business minds about the issues being tackled in their boardrooms – an understanding and commitment to innovation at C-Suite level is not a luxury, but a necessity.

“I cannot think of a business today that is going to survive if it doesn’t innovate,” says Will. Fellow CEOs Tim and Martin agree – but each has something unique to say about innovation and how it has helped their companies.

Let talent lead transformationWhy is innovation so important – and how can leaders make use of it? Martin attributes much of his company’s growth in the UK and North America to its personnel. “Stagecoach has always been good at encouraging our people to be innovative.”

Having gathered an experienced team from a range of fields, Tim also understands the benefits of an innovative workplace. He continuously challenges his people to consider how Vue International can use assets more efficiently and more effectively, and encourages his executive team to spend time in cinemas so they do not lose their grasp of who their customers are, what they like, and what excites or annoys them.

Innovation isn’t always new; it can be incremental, asserts Will: “However, the business plan that goes with it can change in scale and pace.” That said, he firmly believes that “research and data are the lifeblood of organisations in this digital age –

As part of the CxO Evolution series of interviews, C-Suite leaders Tim Richards, Martin Griffiths and Will Whitehorn discuss their individual approaches to driving innovation.

Evolution in the boardroom

THE CHALLENGER: Martin Griffiths, CEO, Stagecoach Group“You always have risks in business; it’s about taking calculated risks.”

THE VISIONARY: Will Whitehorn, Founding Shareholder, Purplebricks.com; Former President of Virgin Galactic“Incorporate innovative ideas into the culture of the people who work around them.”

THE TESTER: Tim Richards, Founder and CEO, Vue International“Innovate, trial and test to see what resonates with your customers.”

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and if you can’t learn to interpret that properly, you will not be an efficient innovator.”

Tim agrees, saying the transition to digital allowed his company’s industry to take a quantum leap forward. “Invest in new technology – but also manage the risk of having that responsibility,” Martin adds.

Risk is necessaryTim says that ‘getting it wrong’ sometimes comes with the territory. “You can’t know what audiences want before they do,” he says. But if you don’t innovate, you may miss providing them with something they “seriously like”.

That’s why Tim tirelessly considers new ideas, matching against audience needs. “You have to constantly innovate, test, trial and find new ways of doing business. That’s the backbone of everything we do.”

Martin agrees, noting that failure is not necessarily a bad thing, “as long as we learn from it and do the right thing next time”.

Will continues by saying that companies cannot wait for trends; they have to seek them out. “The Henry Ford truism – that if he had asked customers what they wanted, they would have asked for a faster horse – is right.”

Change becomes the normSize matters, with the innovation experience differing considerably between small and large companies. As you grow, “you have to adapt and change,” says Tim.

Will points out that both established companies and younger disruptors benefit from innovation – but in different ways, because “disruptive businesses use innovations to radically alter markets”. Large companies, he says, must stay ahead of the game through implementation, while a distinctive vision can help smaller companies to make an impact.

There are also many ways that innovation remains the same, regardless of company size. For Martin, it comes back to how companies can encourage their employees to push boundaries. “We need to give our people the opportunity to experiment,” he says. “We must empower our people and allow them to innovate.”

So, for C-Suite decision-makers who are looking to drive transformation in 2018, the message is this: opportunity lies not only in implementing an innovative culture, but in sourcing talent that can challenge the norm and put new ideas on the table.

Look out for more CxO insights and interviews at here

“If you don’t innovate, you may miss providing customers with something they seriously like.”

“The Henry Ford truism – that if he had asked customers what they wanted, they would have asked for a faster horse – is right.”

Sparkling performanceEven a business as adept at bottling success as Coca-Cola Enterprises* can refresh its approach to performance reporting.

KPMG in the UK led an ambitious programme to set up a new centre of expertise in Sofia, Bulgaria, which now delivers far more effective analytics and insights to the business with greater efficiency. Better insights bring renewed sparkle to business performance, accompanied by a cost saving running into the millions.

We know how to get things done.

*Now part of Coca-Cola European Partners

For more information regarding membership benefits and to register, please contact Fiona Illingworth on KPMGExecutiveExchanges@kpmg.co.uk or 0161 246 4124

kpmg.com/uk/executiveexchangesprogramme

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo are registered trademarks or trademarks of KPMG International.

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KPMG’s 2018 CEO Outlook reportOver 1,300 CEOs share how they generate real results from transformation

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