Insigniam Quarterly Summer 2014 - Building a Competitive Cultural Edge

VO L U M E 2 , I S S U E 1 | S u m m e r 2 014

IMPROVING QUALITY OF LIFESodexo CEO Michel Landel transformed the global service

provider into a company on a

mission.

Suite Success How Ritz-Carlton’s white

glove service gives rivals

a black eye.

SPECIAL SECTION

Women as a Competitive EdgeYour most impactful

asset is also your most

underutilized.

WHEN CULTURE BECOMES THE ADVANTAGETHE POWER OF SODEXO’SHUMAN-CENTERED ENTERPRISE

INS-Spring2014-cover.indd 1 5/15/14 2:58 PM

Competitive edge is outperforming your competition in being responsive to customers, generating

innovation, having remarkable quality, or retaining a distinctive workforce. Operational effi ciency is

about surviving. Competitive edge is about thriving.— NATHAN OWEN ROSENBERG

FOUNDING PARTNER, INSIGNIAM

Insigniam-Spring2014-IFC.indd 1 5/16/14 11:04 AM

LETTER

GGenerally speaking, what gives one company a competitive edge over

another? Is it a unique operational effi ciency? Perhaps it’s an exclusive stra-

tegic or tactical approach to bolstering the company’s bottom line. Better

yet, maybe it’s a large-scale investment in corporate culture and leadership

development.

What if it’s no one thing, but a combination of many separate variables that, when

segmented appropriately, allows some entities to outperform others? With that in

mind, Insigniam Quarterly presents you with our “competitive edge” issue.

To get an acute understanding of how leading companies distinguish themselves,

we went to the sources — Ritz-Carlton, Beechcraft, Cisco, Zappos, and BGI Tech —

to investigate the myriad ways these standouts outperform their fi ercest competitors.

In our cover story, IQ publisher Gordon Price Locke speaks to Michel Landel,

CEO of Sodexo — the world’s 18th largest employer — regarding Landel’s ardent

commitment to diversity and inclusion on a grand scale, and how he’s consistently

leveraged his life experience as a “world citizen” to position the global services

company as a bastion of success.

During the course of our research on competitive advantage, it became alarmingly

clear that amongst the endless sea of contenders fi ghting for the same dollar, euro,

and yen, the vast majority are not utilizing their most impactful and transformational

resource to unlock breakthrough results: women in executive leadership positions.

A quick glance at Fortune 500 and FTSE 100 companies reveals startling truths

as to the lack of female representation in the C-suite. In the U.S., for instance, just

3 percent of Fortune 500 companies have women at the reins, and in the U.K., just

four women helm FTSE 100 fi rms.

In our special section, beginning on page 40, we’ll examine the barriers impeding

female advancement into the C-suite, as well as the scientifi cally proven benefi ts

that women bring to the offi ce of chief executive. Furthermore, we’ll explore what

men — long the gatekeepers of corporate succession planning — can do to cultivate

corporate environments conducive to the advancement of executive women, from

men who have done exactly that.

And for those of you in a position to infl uence your boards or executive committees,

take a page from Henry Ford, who once said, “Competition is the keen cutting edge

of business.” With that in mind, allow this issue to serve as a bellwether for what is

possible when all of your competitive weapons are unleashed on your competitors.

SUMMER 2014 INSIGNIAM QUARTERLY 1

Shideh Sedgh Bina

Founding Partner, Insigniam

UNLOCKING COMPETITIVE ADVANTAGE

INS_Spring2014_Letter.indd 1 5/15/14 10:18 AM

Competitive edge is outperforming your competition in being responsive to customers, generating

innovation, having remarkable quality, or retaining a distinctive workforce. Operational effi ciency is

about surviving. Competitive edge is about thriving.— NATHAN OWEN ROSENBERG

FOUNDING PARTNER, INSIGNIAM

Insigniam-Spring2014-IFC.indd 1 5/16/14 11:04 AM

SUMMER 20142 INSIGNIAM QUARTERLY

20ZAPPING BOSSESTom Peck

Zappos’ adoption of Holacracy is a bold move.

Will it pay off?36

SUITE SUCCESSChris Warren

For Ritz-Carlton, white glove service isn’t just a

plus, it’s essential to their bottom line.

40WOMEN — YOUR MOST VALUABLE COMPETITIVE ADVANTAGE Shideh Sedgh Bina, Insigniam

Experts: Your most impactful asset is also

your most underutilized.

52REINVENT YOUR BUSINESS MODEL TO GAIN A NEW EDGE IN THE MARKETLiz Willding

Whether it’s Citigroup or Nintendo, it’s all about

serving customer needs.

FEATURES

CULTURE ASA COMPETITIVE EDGEFor Sodexo CEO Michel

Landel, cultivating the

world’s 18th largest

employer to deliver on

its brand promise —

improving the quality of

life services — isn’t just a

job, it’s personal.

COVER STORY28

TABLE OF CONTENTS

INS Summer2014 TOC.indd 2 5/13/14 11:04 AM


EDITOR-IN-CHIEF Shideh Sedgh Bina

[email protected]

EXECUTIVE EDITOR Nathan O. Rosenberg

[email protected]

CHIEF FINANCIAL OFFICER Ralph Gotto

DIRECTOR OF WORLDWIDE Karen Turner

CLIENT SERVICES [email protected]

DIRECTOR OF SPECIAL PROJECTS Alexes Fath

PUBLISHER Gordon Price Locke

[email protected]

EDITORIAL DIRECTOR Amy Robinson

[email protected]

MANAGING EDITOR Jonathan Ball

[email protected]

CREATIVE DIRECTOR Kyle Phelps

[email protected]

ASSISTANT ART DIRECTOR Emily Slack

PRODUCTION MANAGER Pedro Armstrong

GRAPHICS PRODUCTION Michael Samples

IMAGING SPECIALIST John Gay

ACCOUNT SERVICE MANAGER Jas Robertson

EDITORIAL QUERIES

750 N. Saint Paul Street

Suite 2100

Dallas, Texas 75201

www.dcustom.com

214.523.0300

For advertising information, contact Jas Robertson at

214.937.9811 or [email protected]

Insigniam Quarterly is published by D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. Copyright 2014 by Insigniam. All rights reserved. Letters to the editors may be sent to Insigniam Quarterly c/o D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit www.insigniamquarterly.com.

QUART E R LY

VOLUME 2, ISSUE 1 | SUMMER 2014

“Gender balance refl ects values that are important in

running a great company. It allows for the respect of

differences, new perspectives, creativity, and innovation.”

— MICHEL LANDEL, CEO, SODEXO GROUP

THE TICKERQuantifying competitive advantage.

BLOOD, SWEAT & TEARSBill Boisture, CEO, Beechcraft

How a renewed market focus has made the aircraft

manufacturer’s profi ts soar.

INFOGRAPHICBig obstacles for middle managers.

IQ BOOSTKaterin Le Folcalvez, Insigniam

The importance of being a leader.

DECODING THE DNA OF A WINNER How BGI Tech blends science and culture for break-

through results.

CISCO: EMBEDDED INNOVATIONHow does a 25-year-old company ignite the spirit of

innovation? Boldly.

ARM YOUR ARSENALGuillaume Pajeot, Insigniam

Turn your assets into competitive weapons.

0408

2660

12

16

56

DEPARTMENTS

On the coverSodexo CEO Michel Landel,

world citizen and champion

of inclusion.

VO L U M E 2 , I S S U E 1 | S u m m e r 2 014

IMPROVING THE QUALITY OF LIFESodexo CEO Michel Landel transformed the global service provider into an enterprise on a

mission.

Suite Success How Ritz-Carlton’s white

glove service gives rivals

a black eye.

SPECIAL SECTION

Women as a Competitive EdgeYour most impactful

asset is also your most

underutilized.

EQUALITY THAT KNOWSNO EQUALRECKONING WITH SODEXO’SCULTURAL ADVANTAGE

Insigniam and its publisher, D Custom, distribute this editorial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insigniam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or provided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose.

MINI-FEATURES



20ZAPPING BOSSESTom Peck

Zappos’ adoption of Holacracy is a bold move.

Will it pay off?36

SUITE SUCCESSChris Warren

For Ritz-Carlton, white glove service isn’t just a

plus, it’s essential to their bottom line.

40WOMEN — YOUR MOST VALUABLE COMPETITIVE ADVANTAGE Shideh Sedgh Bina, Insigniam



52REINVENT YOUR BUSINESS MODEL TO GAIN A NEW EDGE IN THE MARKETLiz Willding

Whether it’s Citigroup or Nintendo, it’s all about

serving customer needs.

FEATURES

CULTURE ASA COMPETITIVE EDGEFor Sodexo CEO Michel

Landel, cultivating the

world’s 18th largest

employer to deliver on

its brand promise —

improving the quality of

life services — isn’t just a

job, it’s personal.

COVER STORY28

TABLE OF CONTENTS


BY THE NUMBERS


A CULTURE OF UNCONDITIONAL LOVE

Following the collapse of Argentina’s economy in 2001, Claudio Fernandez-

Araoz was ready to tell his employer, executive search fi rm Egon Zehnder, to close

up shop in his home country.

The nation’s GDP fell 30 percent and its currency had been devalued by 300 percent.

Fernandez-Araoz predicted big losses in the coming year and would focus the coming 12

months on evaluating whether it made sense for the recruiting business to stay in the country.

That’s when his partners surprised him. His only job, he was told, was to go back to the

Buenos Aires offi ce and tell each member of the staff that they had the “full and unconditional

support” of the fi rm, Fernandez-Araoz writes in a guest blog for the Harvard Business Review.

That was when he felt the power of Egon Zehnder’s culture of unconditional love.

“Any fi rm that wants to not only hire the best talent but also pull them together into strong

and lasting teams can’t do so without fostering a compelling and inspiring culture. That’s how

you overcome challenges and keep your mission going in your absence,” he writes.

Building such a strong culture starts with careful hiring, recruiting only the strongest

candidates, evaluating those candidates carefully, and not hiring anyone “who was not dying

to work in a highly professional, ethical, collaborative fi rm,” says Fernandez-Araoz.

Founder Egon Zehnder and his successor, CEO Damien O’Brien, meet and approve

every consultant hired into the business to this day, Fernandez-Araoz writes.

After hiring comes compassionate coaching, in which leaders must excel at listening and

developing strong relationships with colleagues. Superb listening by leaders helps employees

feel valued and inspires them to develop new healthy habits and competencies, writes

Fernandez-Araoz in his book It’s Not the How or the What but the Who: Succeed by Surrounding

Yourself with the Best.

300%Amount Argentina’s

currency was devalued in the collapse of its

economy in 2001

12 MONTHSAmount of time

Egon Zehnder spent evaluating whether it made sense to stay

in Argentina after the economic collapse


GDP decreased in the economic collapse of 2001

THE TICKER

INS-0414-Ticker_v2.indd 4 5/13/14 11:38 AM

SUMMER 2014

In a recent TED Talk, University of Pennsylvania associate professor and

MacArthur Fellow Angela Lee Duckworth discussed two prevailing traits she

believes are most pertinent to predicting success: grit and self-control.

“Grit is sticking with your future — day in, day out, not just for the week, not

just for the month, but for years — and working really hard to make that future a

reality,” says Duckworth, speaking to an audience at the BAM Harvey Theater of

New York’s Brooklyn Academy of Music. “Grit is living life like it’s a marathon, not

a sprint.”

In her research, Duckworth cites the correlation between the two, noting that self-

control “refers to the voluntary regulation of behavioral, emotional, and attentional

impulses,” whereas grit “equips individuals to pursue especially challenging aims

over years and even decades.”

The methodology Duckworth used to develop her thesis — inventive to say the

least — included testing her hypothesis on military school cadets and grade school

spelling bee contestants.

“My research team and I went to West Point Military Academy,” says Duckworth

during her TED Talk. “We tried to predict which cadets would stay in military

training and which would drop out. We went to the National Spelling Bee and tried

to predict which children would advance furthest in competition. We partnered with

private companies, asking, which of these salespeople [will] earn the most money? In

all those very diff erent contexts, one characteristic emerged as a signifi cant predictor

of success. And it wasn’t social intelligence. It wasn’t good looks, physical health, and

it wasn’t IQ. It was grit.”

TRUE GRIT: HOW FORTITUDE PAYS OFF IN SPADES

Sample of American adults, which found that grit is associated with higher levels of

subjective well-being as well as higher earnings

THE CARE AND FEEDING OF A STRONG CULTURE

The number of results “fear of failure” yields

on Amazon, according to Forbes

INSIGNIAM QUARTERLY 5

Experts on corporate culture

offer solutions, but universally

emphasize the hard work

required to continuously

cultivate a strong culture

that will create competitive

advantages.

As marketing and lead

management software

company HubSpot grew its

employee head count 800

percent over three years,

the company faced many

growing pains that a maturing

startup must address. Product

manager Karen Rubin writes

for the Harvard Business

Review that its executives

faced those challenges by

emphasizing communication

and measurement.

The communications

aspect was a two-way street,

starting with vigorous listening,

followed by efforts to get the

management team to present a

unifi ed story in communicating

back to employees.

HubSpot followed that up

by taking steps to regularly

and consistently measure

employee happiness in order

to spot speed bumps for the

fast-growing company before

they grew into immovable

obstacles.

BY THE NUMBERS

p

Ready to fi nd out where you fall on Duckworth’s “Grit Scale?”

Take a sample survey at upenn.app.box.com/12itemgrit

10,00028,879


BY THE NUMBERS


A CULTURE OF UNCONDITIONAL LOVE

Following the collapse of Argentina’s economy in 2001, Claudio Fernandez-

Araoz was ready to tell his employer, executive search fi rm Egon Zehnder, to close

up shop in his home country.

The nation’s GDP fell 30 percent and its currency had been devalued by 300 percent.

Fernandez-Araoz predicted big losses in the coming year and would focus the coming 12

months on evaluating whether it made sense for the recruiting business to stay in the country.

That’s when his partners surprised him. His only job, he was told, was to go back to the

Buenos Aires offi ce and tell each member of the staff that they had the “full and unconditional

support” of the fi rm, Fernandez-Araoz writes in a guest blog for the Harvard Business Review.

That was when he felt the power of Egon Zehnder’s culture of unconditional love.

“Any fi rm that wants to not only hire the best talent but also pull them together into strong

and lasting teams can’t do so without fostering a compelling and inspiring culture. That’s how

you overcome challenges and keep your mission going in your absence,” he writes.

Building such a strong culture starts with careful hiring, recruiting only the strongest

candidates, evaluating those candidates carefully, and not hiring anyone “who was not dying

to work in a highly professional, ethical, collaborative fi rm,” says Fernandez-Araoz.

Founder Egon Zehnder and his successor, CEO Damien O’Brien, meet and approve

every consultant hired into the business to this day, Fernandez-Araoz writes.

After hiring comes compassionate coaching, in which leaders must excel at listening and

developing strong relationships with colleagues. Superb listening by leaders helps employees

feel valued and inspires them to develop new healthy habits and competencies, writes

Fernandez-Araoz in his book It’s Not the How or the What but the Who: Succeed by Surrounding

Yourself with the Best.


currency was devalued in the collapse of its

economy in 2001

12 MONTHSAmount of time

Egon Zehnder spent evaluating whether it made sense to stay

in Argentina after the economic collapse


GDP decreased in the economic collapse of 2001

THE TICKER



As companies in a competitive global marketplace fi nd themselves battling hard

for customers and fi nding narrower and

narrower margins, authors W. Chan Kim and

Renée Mauborgne advocate charting a new

course.

Instead of fi ghting head to head, Kim and

Mauborgne say companies should look for the

“blue ocean” of uncontested market spaces,

instead of fi ghting it out in the known “red

ocean.”

Identifying and capitalizing on a new market

space with growth potential provides companies

with diff erentiation and growth at a low cost.

More succinctly, creating an uncontested

market space makes the competition irrelevant.

While innovation is typically perceived

as an experimental process, authors Kim and

Mauborgne off er a method to systematize

“blue ocean innovation.”

They have built a four-step framework to

fi nd the blue ocean for your business, built

around four questions:

5 What factors should be raised above the

industry’s standard?

5 Which factors that the industry has

competed on should be eliminated?

5 Which factors should be reduced well

below the industry standard?

5 What factors that have never been off ered

in the industry should be created?

The Bloomberg business news service off ers

a classic example of blue ocean strategy by

selling to traders and analysts who must make

rapid decisions with new information, rather

than on selling terminals to IT managers in

charge of purchasing.

By focusing on the users rather than

managers, Bloomberg was able to make its

terminals essential to customers who demanded

that IT managers buy the product.

A DIFFERENT TAKE ON COMPETITION Authors Kim and

Mauborgne offer a method to systematize “blue ocean innovation.” They have built their framework around four questions:

What factors should be raised above the industry’s standard?

Which factors that the industry has competed on should be eliminated?

Which factors should be reduced well below the industry standard?

What factors that have never been offered in the industry should be created?

BLUE OCEAN INNOVATION

1

2

3

4

THE TICKER


3XFind out why companies like HP, Fossil, Texas Farm Bureau Insurance Company, Teradata, Omni Hotels & Resorts, Lennox Industries, Inc., and Dell have turned to us for content marketing strategy and brand communications programs.

Learn how you can join them in transforming your marketing at dcustom.com/contentstrategy.

If you want to generate more revenue, maybe you need a new plan.

CONTENT MARKETING PRODUCES THREE TIMES THE LEADS PER DOLLAR THAN TRADITIONAL MARKETING AND ADVERTISING.

The Committee for Economic Development, a nonpartisan, economic think tank, believes fostering the growth of women on corporate boards is not just common sense, it’s a competitive advantage. Join CED in urging corporations to make women a higher priority in recruitment for board positions.

If you are interested in becoming a CED Trustee please contact Mindy Berry, [email protected].

www.ced.org

Women on BoardsA Competitive Advantage



As companies in a competitive global marketplace fi nd themselves battling hard

for customers and fi nding narrower and

narrower margins, authors W. Chan Kim and

Renée Mauborgne advocate charting a new

course.

Instead of fi ghting head to head, Kim and

Mauborgne say companies should look for the

“blue ocean” of uncontested market spaces,

instead of fi ghting it out in the known “red

ocean.”

Identifying and capitalizing on a new market

space with growth potential provides companies

with diff erentiation and growth at a low cost.

More succinctly, creating an uncontested

market space makes the competition irrelevant.

While innovation is typically perceived

as an experimental process, authors Kim and

Mauborgne off er a method to systematize

“blue ocean innovation.”

They have built a four-step framework to

fi nd the blue ocean for your business, built

around four questions:

5 What factors should be raised above the

industry’s standard?

5 Which factors that the industry has

competed on should be eliminated?

5 Which factors should be reduced well

below the industry standard?

5 What factors that have never been off ered

in the industry should be created?

The Bloomberg business news service off ers

a classic example of blue ocean strategy by

selling to traders and analysts who must make

rapid decisions with new information, rather

than on selling terminals to IT managers in

charge of purchasing.

By focusing on the users rather than

managers, Bloomberg was able to make its

terminals essential to customers who demanded

that IT managers buy the product.

A DIFFERENT TAKE ON COMPETITION Authors Kim and

Mauborgne offer a method to systematize “blue ocean innovation.” They have built their framework around four questions:

What factors should be raised above the industry’s standard?

Which factors that the industry has competed on should be eliminated?

Which factors should be reduced well below the industry standard?

What factors that have never been offered in the industry should be created?

BLUE OCEAN INNOVATION

1

2

3

4

THE TICKER



BEECHCRAFT CEO BILL BOISTURE ON BUMPY SKIES AND SOARING HIGH

In the rising aircraft market of 2007, Hawker

Beechcraft looked like a good, synergistic investment for

Goldman Sachs and OneX when they bought the company,

which featured both business jets and turboprop planes along

with a service business. So the investment partners each in-

vested $500 million in the company and took on $2.2 billion

in debt.

However, the investors con-

summated the deal just before the

economy started faltering in 2008.

As the economy stumbled and fell

sharply, the size of the company’s

market fell an estimated 40 per-

cent, leaving the highly lever-

aged company with a heavy load

of debt.

Fuel prices were on the rise as

well, but in the scheme of things,

that was only a minor issue, according to Bill Boisture, CEO

of what recently became Beechcraft Corp. “The main thing

was a lack of confi dence. Our customers were wondering

where the bottom was,” says Boisture.

With fi nancial markets still trending downward, Boisture

and team worked hard to reshape the company. “In 2009,

we reduced our head count by 2,500 people and shut down

BY PHIL BRITT

How a streamlined process and renewed market focus has made the aircraft manufacturer’s pro ts soar.

BLOOD, SWEAT & TEARS

INS_Spring2014_BloodSweatTears.indd 8 5/13/14 10:56 AM

SUMMER 2014 INSIGNIAM QUARTERLY 9INSIGNIAM QUARTERLY 9

some product lines in business jet manufacturing that were

losing money. We made the decision that we had to restruc-

ture the company. We had to cut the costs, [further] reduce the

head count, and eliminate the nonproductive product lines,”

says Boisture.

Hawker Beechcraft had a much stronger turboprop mar-

ket, according to Boisture, and a weaker jet market. Ad-

ditionally, the turboprop market tends to be more sta-

ble in terms of products and customer

preferences.

Looking back, Boisture says the company

likely would have been able to avoid bank-

ruptcy altogether if it had not been in the jet

business, though “it would have been tight.”

But as the company was structured at

the time, there was no way to stay in busi-

ness, even with all of the changes, without

going into bankruptcy, which it did in

May of 2012.

PREARRANGED BANKRUPTCY

FILING

Beechcraft chose a prearranged Chapter

11 fi ling under which the major creditors

would become the owners post-bankrupt-

cy. Companies tend to be able to enter and

exit prearranged bankruptcies much more

smoothly and quickly than if they enter

bankruptcies without arrangements for un-

secured and secured creditors, which then

have to be worked out in court.

The most important decision was the

strategic one of whether the small-jet

market or the turboprop airplane mar-

ket would be the best for the company’s survival and sub-

sequent growth. With the economy still iff y, the deci-

sion was made to stay with the turboprop, trainer aircraft,

and after-market support businesses and drop out of the

new- jet development and manufacturing business.

Beechcraft had another advantage in focusing on the

turboprop/piston engine side of the business in the venerable

Beechcraft name, a brand known and respected in the indus-

try for more than 82 years.

The company’s reorganization plan showed the bankruptcy

court that Beechcraft was a viable business and would be able

to handle its post-bankruptcy debt, according to Boisture. The

bankruptcy enabled the company to restructure its balance

sheet, but it also meant that some major suppliers weren’t paid

and important settlements had to be reached.

Numerous bidders arose for the business, Boisture relates. The

highest off er appeared to be one from an entity in China. But

90 days of negotiations without reaching an agreeable business

deal further drained the company’s already stressed resources.

So company executives decided that the best path for the

enterprise and its shareholders would be to proceed out of

bankruptcy as quickly as the court process would allow.

There were several challenges in being

able to come back to viability and positive

fi nancials once the company entered bank-

ruptcy. Boisture cites good communica-

tion as a critical factor in resolving some of

those challenges.

“We made it everyone’s job to restore

confi dence,” Boisture says.

That meant restoring confi dence

among suppliers, customers, and em-

ployees. Suppliers had lost money when

Beechcraft entered bankruptcy, but re-

establishing relationships with those same

suppliers was essential, Boisture says. “In

aviation, your strategic suppliers are very

connected to you. You design around their

equipment; the cost of switching suppliers

is very high.”

So the company met with its suppli-

ers and shared its plans, including show-

ing why the company would be success-

ful going forward — and Beechcraft had

the wherewithal to pay suppliers for future

orders. The company also established a re-

volving line of credit, but has never drawn

on it, Boisture says. Beechcraft offi cials

also made it clear that the suppliers would be critical for the

company’s future.

“They want you to succeed,” Boisture says.

Just as critical was meeting with ongoing customers, like

the U.S. military, to ensure that the company would continue

to deliver and service its product.

RETAINING KEY EMPLOYEES

Though the company had shed more than 4,000

workers (2,500 in 2009, and another 1,500 in the 2012

bankruptcy), it was also essential to the business to keep the

key managers and remaining skilled employees necessary to

meet the needs of new and existing customers.

Transparency with employees was imperative. Prior to and

“IN AVIATION, YOUR STRATEGIC SUPPLIERS ARE VERY CONNECTED TO YOU. YOU DESIGN AROUND THEIR EQUIPMENT; THE COST OF SWITCHING SUPPLIERS IS VERY HIGH.”

– BILL BOISTURE,BEECHCRAFT CEO



BEECHCRAFT CEO BILL BOISTURE ON BUMPY SKIES AND SOARING HIGH

In the rising aircraft market of 2007, Hawker

Beechcraft looked like a good, synergistic investment for

Goldman Sachs and OneX when they bought the company,

which featured both business jets and turboprop planes along

with a service business. So the investment partners each in-

vested $500 million in the company and took on $2.2 billion

in debt.

However, the investors con-

summated the deal just before the

economy started faltering in 2008.

As the economy stumbled and fell

sharply, the size of the company’s

market fell an estimated 40 per-

cent, leaving the highly lever-

aged company with a heavy load

of debt.

Fuel prices were on the rise as

well, but in the scheme of things,

that was only a minor issue, according to Bill Boisture, CEO

of what recently became Beechcraft Corp. “The main thing

was a lack of confi dence. Our customers were wondering

where the bottom was,” says Boisture.

With fi nancial markets still trending downward, Boisture

and team worked hard to reshape the company. “In 2009,

we reduced our head count by 2,500 people and shut down

BY PHIL BRITT

How a streamlined process and renewed market focus has made the aircraft manufacturer’s pro ts soar.





during the bankruptcy, the company used a combination of

large and small meetings to keep employees updated on the

company’s progress. The fi rst meetings were with key leaders,

Boisture says. “We wanted them to buy in fi rst, then talk to

the people in their groups.”

Beechcraft revamped its compensation plan so that all em-

ployees’ compensation was tied to the company’s annual per-

formance.

“If we reach our performance goals, then everyone in the

company receives extra recognition in their paychecks,” Bois-

ture relates. There are two bonus levels. By reaching the fi rst,

each employee receives an extra week’s pay. If the company

reaches the second level, each employee receives an additional

two weeks of pay.

Furthermore, following the lead of many other companies,

Beechcraft also restructured its remaining pension plan from a

defi ned benefi t plan to a defi ned contribution plan.

LEAN PRINCIPLES

“It was important to recognize all of the customer-

facing portions of the company, and that all of the people

in the fl ow of events were focused and reinforced in the

right way,” Boisture says. So Beechcraft retooled its plant to

improve effi ciency of the machinery and the personnel.

The company reconfi gured its factory to be more effi cient

while also making it a showplace in which the workers

would have pride.

TIMELINE

2007Goldman Sachs

and OneX purchase

Hawker Beechcraft. They each

invest $500 million in the

company and take on $2.2

billion in debt. 2008The private aircraft market constricts by an estimated 40 percent, and in turn,leaves the enterprisewith a heavy load of debt.

2009 Beechcraft

reduces head count by 2,500

people and shuts down

some product lines in

business jet manufacturing.

2012Beechcraft declares bankruptcy in May, shedding another 1,500 employees.

2014Textron

fi nalizes deal to purchase

Beechcraft for $1.4 billion.



In making the transition, Beechcraft relied on “lean

principles,” which the Lean Enterprise Institute defi nes as

maximizing customer value while minimizing waste —

“creating more value for customers with fewer resources.”

With Beechcraft, that meant making sure that the recon-

fi gured plant had all of the tools and instructions within

close reach for every worker, many of whom previously had

to walk across the plant for those materials — wasting time

and money. “The idea is that each product that comes off

the line costs slightly less to produce than the one before,”

Boisture explains.

As a result of all of the moves Beechcraft made, the compa-

ny emerged from bankruptcy in mid-February much leaner,

and 30 percent smaller than it had been before.

“We have a great brand, and superior products and services

worldwide,” Boisture says. “We are a very healthy and viable

entity.”

In addition to crediting Beechcraft’s implementation of

lean principles, Insigniam founding partner Nathan Owen

Rosenberg applauds Boisture’s leadership, calling him a

“living legend in the business aviation industry.”

“Bill recruited and shaped the strongest leadership team

in the industry,” says Rosenberg. “At the helm, he met

challenges that most executives will not experience in

their career. I watched him inspire thousands of employees

at town hall meetings, sharing his logic to win them over

to his way of thinking.”

LOOKING AHEAD

The tough decisions that Beechcraft management made

in reducing the workforce, changing the compensation

plan, eliminating the jet business, and working to re-instill

confi dence in the remaining workers, management, and

suppliers has all paid off . Providence, R.I.-based Textron,

Inc. (NYSE: TXT), the manufacturer of Cessna aircraft,

agreed to buy Beechcraft for $1.4 billion at the end of last

year, a deal that was fi nalized in March. According to Tex-

tron, Cessna and Beechcraft together produced about $4.6

billion in revenues during 2013.

Boisture sees the acquisition not as an end, but as “an

important step forward in the evolution of Beechcraft’s

business.”

Beechcraft’s focus on its turboprop

business has created a profi table future for this

once-struggling enterprise.




during the bankruptcy, the company used a combination of

large and small meetings to keep employees updated on the

company’s progress. The fi rst meetings were with key leaders,

Boisture says. “We wanted them to buy in fi rst, then talk to

the people in their groups.”

Beechcraft revamped its compensation plan so that all em-

ployees’ compensation was tied to the company’s annual per-

formance.

“If we reach our performance goals, then everyone in the

company receives extra recognition in their paychecks,” Bois-

ture relates. There are two bonus levels. By reaching the fi rst,

each employee receives an extra week’s pay. If the company

reaches the second level, each employee receives an additional

two weeks of pay.

Furthermore, following the lead of many other companies,

Beechcraft also restructured its remaining pension plan from a

defi ned benefi t plan to a defi ned contribution plan.

LEAN PRINCIPLES

“It was important to recognize all of the customer-

facing portions of the company, and that all of the people

in the fl ow of events were focused and reinforced in the

right way,” Boisture says. So Beechcraft retooled its plant to

improve effi ciency of the machinery and the personnel.

The company reconfi gured its factory to be more effi cient

while also making it a showplace in which the workers

would have pride.

TIMELINE

2007Goldman Sachs

and OneX purchase

Hawker Beechcraft. They each

invest $500 million in the

company and take on $2.2

billion in debt. 2008The private aircraft market constricts by an estimated 40 percent, and in turn,leaves the enterprisewith a heavy load of debt.

2009 Beechcraft

reduces head count by 2,500

people and shuts down

some product lines in

business jet manufacturing.

2012Beechcraft declares bankruptcy in May, shedding another 1,500 employees.

2014Textron

fi nalizes deal to purchase

Beechcraft for $1.4 billion.


SUMMER 2014

In a refurbished shoe factory in the southern Chinese

city of Shenzhen, a nonprofi t called BGI Group has what

might possibly be the most capacity on earth for sequencing

genomes, meaning the process of reading and deciphering

the genetic information in the DNA of living things.

But at its founding in 1999, BGI — an organization that

now has just shy of 5,000 employees worldwide — was

scraping together donations of time and money to complete

China’s 1 percent of the Human Genome Project, the famed

international eff ort to map genes in the sum total of human

DNA.

All startups go through shaky periods, and this was one

of the shakiest in the short history of BGI, then called the

Beijing Genomics Institute.

“Trying to complete even 1 percent of the human genome

without external support from government and charity

foundations sounds ridiculous and mad,” says Yingrui Li,

the 27-year-old CEO and managing

director of BGI Tech, the organization’s

genomics sequencing arm. “Yet it was

done.”

To deal with the issues, BGI’s

founders used techniques that, while

common in free-market societies such as the United States,

aren’t as easy to fi nd in China’s still-emerging blend of

capitalism and communism.

Take fi nancing. BGI’s founders raised a bit less than $10

million to get the enterprise off the ground, according to

Forbes. But rather than going to the government or state-run

banks, BGI executives sought out friends, family, and even

their employees.

“It is what we currently call crowdsourced funding,” Li

says. “All employees were proud to be unpaid for over a

year, and they donated their own pocket money to get the

project done.”

And just like many startups across the ocean in Silicon

Valley, BGI ran on fumes while it undertook the Human

Genome Project, putting the job at hand before profi t.

“This is, to the best of my knowledge, one of the fi rst

companies that was founded to burn money for the common

12 INSIGNIAM QUARTERLY

How BGI Tech — the world’s largest genomics organization — blends science and culture for breakthrough results.

DECODING THE DNA OF A WINNER

BY JEFF BOUNDS

CEO and managing director of BGI Tech,Yingrui Li

6

INS-Spring2014-BGIs.indd 12 5/16/14 11:06 AM



SUMMER 2014

In a refurbished shoe factory in the southern Chinese

city of Shenzhen, a nonprofi t called BGI Group has what

might possibly be the most capacity on earth for sequencing

genomes, meaning the process of reading and deciphering

the genetic information in the DNA of living things.

But at its founding in 1999, BGI — an organization that

now has just shy of 5,000 employees worldwide — was

scraping together donations of time and money to complete

China’s 1 percent of the Human Genome Project, the famed

international eff ort to map genes in the sum total of human

DNA.

All startups go through shaky periods, and this was one

of the shakiest in the short history of BGI, then called the

Beijing Genomics Institute.

“Trying to complete even 1 percent of the human genome

without external support from government and charity

foundations sounds ridiculous and mad,” says Yingrui Li,

the 27-year-old CEO and managing

director of BGI Tech, the organization’s

genomics sequencing arm. “Yet it was

done.”

To deal with the issues, BGI’s

founders used techniques that, while

common in free-market societies such as the United States,

aren’t as easy to fi nd in China’s still-emerging blend of

capitalism and communism.

Take fi nancing. BGI’s founders raised a bit less than $10

million to get the enterprise off the ground, according to

Forbes. But rather than going to the government or state-run

banks, BGI executives sought out friends, family, and even

their employees.

“It is what we currently call crowdsourced funding,” Li

says. “All employees were proud to be unpaid for over a

year, and they donated their own pocket money to get the

project done.”

And just like many startups across the ocean in Silicon

Valley, BGI ran on fumes while it undertook the Human

Genome Project, putting the job at hand before profi t.

“This is, to the best of my knowledge, one of the fi rst

companies that was founded to burn money for the common


How BGI Tech — the world’s largest genomics organization — blends science and culture for breakthrough results.

DECODING THE DNA OF A WINNER

BY JEFF BOUNDS

CEO and managing director of BGI Tech,Yingrui Li

6



good, instead of earning money,” Li says jokingly.

Today, BGI’s humble beginnings seem like eons ago,

especially for the sequencing unit that Li runs. Since moving

to Shenzhen from Beijing in 2007, BGI has acquired more

than 120 powerful machines to handle sequencing, each

machine separately worth an estimated $500,000 at the

time of their 2010 purchase, according to Newsweek. Those

machines, published accounts say, may give the company

more genomic sequencing muscle than the entirety of the

United States.

“It’s hard to think of who is second best,” says Dr. George

Church, a Harvard genetics professor who has been a

consultant to BGI Group since 2007.

EYES ON THE PRIZE

At the heart of everything BGI does, Li says, are its eff orts

to stay innovative. One example is in BGI Tech’s embrace

of young people not only for its workforce, but for its

management as well. Li just turned 28, and many of his

fellow senior managers are close to 30. The workers who

handle sequencing duties are generally in their 20s.

“It is much easier to get things done when you successfully

convey to these young scientists that this is going to be

cool,” Li says. “That works much better than using standard

corporate jargon and telling the troops you’re going to

promote them afterward,” he adds.

Another Silicon Valley-esque tactic BGI Tech uses is

embracing risk taking and tolerating failure.

“Being innovative and tolerating trial and error is one

of the most important factors for survival, if not the most

important,” Li says. “A lot of young people are being trained

at BGI. They are granted independence in [running]

In 2007, BGI relocated to Shenzhen from Beijing, strengthening their genomic sequencing muscle in the process.



diff erent projects with instructions

from people mostly at the same age or

a bit older. This can mean fun, naturally

open communication, and an easier

learning curve.”

Experts say a key trait of companies

with entrepreneurial cultures is a

willingness to let employees experiment

and try new things, even if their ventures

don’t work out.

“If there are huge penalties for failure,

[workers] won’t take on risks and won’t

be creative and innovative,” says Dr.

Rajiv Shah, program director for the

Systems Engineering and Management

Program at the University of Texas at

Dallas. “Companies that don’t focus on

individuals, that aren’t open to change,

tend to have problems.”

Shah advocates using a relatively

fl at management structure to keep a

company on the innovation edge.

“The frontline people, especially

knowledge-based employees, are the

ones with creative ideas,” he adds.

Indeed, part of BGI’s method for

staying creative is using that relatively

fl at management structure, Li says.

“We don’t like the idea of being a

typical company where titles mean

something,” Li says. “Being the CEO

more or less means you are the captain

of a soccer team and should take more responsibility simply

because everyone is counting on you. I feel more comfortable

this way, and I believe the atmosphere and the gifted nature

of the new generation creates a positive environment.”

In a similar vein, the bedrock of the company’s culture is

an egalitarian ideal. “Trust and tolerance are important,” Li

says. “You see people as equal.”

In keeping with a culture that eschews titles, BGI also has

an open work setting. “No one in BGI has an individual

offi ce,” Li says, which includes the company’s co-founder

and CEO, avowed mountain climber Wang Jian, who turns

60 this year.

Joan Xu, an Insigniam consultant based in Hong Kong,

notes that, “This innovative culture is extremely remarkable

for BGI and BGI Tech, in that it is brewed organically in

China and is distinctively diff erent from cultural norms,

which is to stay quiet, make money, and be compliant.”

“To date, every major move of the BGI Group has been

a breakthrough, from participating and completing the

Humane Genome Project to audaciously moving into the

capital market,” says Xu, who notes that BGI has also lead

regulatory reform to speed up the application of genome

information that impacts healthcare and disease prevention.

SHARPENING THE COMPETITIVE EDGE

To be sure, BGI Tech is an extraordinary growth mode,

and could be for some time. Harvard’s Church notes that

the price of genetic sequencing has come down dramatically

in the last nine years as the biological sciences have started

catching up with the revolution

in electronics.

“Most of us have never

experienced this level of price

change,” Church says of the sea

change engulfi ng genomics.

That, of course, means that

the falling price of genomics

sequencing services will

presumably make this off ering

from BGI more aff ordable to

industries and consumers alike

over time. And that should

make it faster, easier, and more

aff ordable to do things like fi nd

genes and understand how the

genome works as a whole.

All of which means the future could hold some fast growth

years for BGI Tech, which experts like Shah say can present

challenges to enterprises that want to keep a creative — and

competitive — edge.

For instance, companies that want to stay innovative need

to fi nd a balance between managing core products that are

big revenue generators while simultaneously encouraging

employees to look for the next big thing, according to Shah.

“You always have to have an engine of growth,” he says.

“You manage your mature products like a traditional business,

with more structure … but that shouldn’t stifl e continuing

research, development, and innovation.”

For his part, BGI Tech’s Li maintains that the enterprise is

squarely focused on remaining creative as time goes forward.

“Every year we look at some key aspect of the company,

such as organization, business scope, or planning,” Li says.

“Then we try to break structures to identify potential new

opportunities.”

“THE FRONTLINE PEOPLE, ESPECIALLY KNOWLEDGE-BASED EMPLOYEES, ARE THE ONES WITH CREATIVE IDEAS.” – DR. RAJIV SHAH, PROGRAM DIRECTOR, SYSTEMS ENGINEERING, THE UNIVERSITY OF TEXAS AT DALLAS



good, instead of earning money,” Li says jokingly.

Today, BGI’s humble beginnings seem like eons ago,

especially for the sequencing unit that Li runs. Since moving

to Shenzhen from Beijing in 2007, BGI has acquired more

than 120 powerful machines to handle sequencing, each

machine separately worth an estimated $500,000 at the

time of their 2010 purchase, according to Newsweek. Those

machines, published accounts say, may give the company

more genomic sequencing muscle than the entirety of the

United States.

“It’s hard to think of who is second best,” says Dr. George

Church, a Harvard genetics professor who has been a

consultant to BGI Group since 2007.

EYES ON THE PRIZE

At the heart of everything BGI does, Li says, are its eff orts

to stay innovative. One example is in BGI Tech’s embrace

of young people not only for its workforce, but for its

management as well. Li just turned 28, and many of his

fellow senior managers are close to 30. The workers who

handle sequencing duties are generally in their 20s.

“It is much easier to get things done when you successfully

convey to these young scientists that this is going to be

cool,” Li says. “That works much better than using standard

corporate jargon and telling the troops you’re going to

promote them afterward,” he adds.

Another Silicon Valley-esque tactic BGI Tech uses is

embracing risk taking and tolerating failure.

“Being innovative and tolerating trial and error is one

of the most important factors for survival, if not the most

important,” Li says. “A lot of young people are being trained

at BGI. They are granted independence in [running]

In 2007, BGI relocated to Shenzhen from Beijing, strengthening their genomic sequencing muscle in the process.



It’s difficult enough for a company the size of Cisco Systems Inc. to be innovative when times are good. With

about $38 billion in revenue in the 2013 fi scal year, the

maker of networking technology has approximately 66,600

employees worldwide and has faced the inherent challenges of

remaining cutting edge that any large business faces: avoiding

corporate bureaucracy, nurturing ideas that challenge the status

quo within its walls, and all the rest.

But what happens when the world is

seemingly coming to an end, and spending

on networking gear falls off a cliff ? How

can a company remain innovative through

that fi restorm?

In its 25-year history, Cisco has faced

this challenge not once, but twice. The fi rst

started in 2000, when the technology and

telecommunication bubbles of the 1990s

burst. The second came with the economic

implosion starting in 2008.

“The natural propensity is to batten down the hatches and

cut back on budgets,” said Rick Hutley, Vice President of

Innovation and Internet of Everything Solutions at Cisco’s

consulting arm, Cisco Consulting Services.

Cisco, Hutley adds, “has a culture and a track history of the

opposite of that.”

Indeed, Cisco puts its money where its collective mouth

CISCO: EMBEDDED INNOVATION

BY JEFF BOUNDS

How does a 25-year-old company ignite the spirit of innovation? Boldly.

INS-Spring2014-cisco.indd 16 5/13/14 11:11 AM


is on that score. Take one of the best gauges of innovation

that Cisco does on bleeding-edge technology: research-and-

development spending.

In its 2007 fi scal year, R&D spending was $4.6 billion. By

August 2008, when Cisco wrapped up its fi scal year, annual

R&D spending rose by about $700 million to $5.3 billion.

Even the following year, when the company’s total revenue

declined by more than $3 billion, Cisco held the line on R&D

spending, keeping it roughly fl at at $5.2 billion. (In the 2013

fi scal year, R&D spending totaled $5.9 billion.)

Hutley acknowledges that Cisco, like all companies, faced

pressure from all corners to cut back money and resources on

new projects and focus on the here and now.

How did it balance the twin pressures to shrink spending

and keep innovation moving forward? “We looked at our

customers,” Hutley says. “What is it that our customers need

most from us?”

Market demand ultimately dictated what products Cisco

should spend money on and which ones needed trimming or

wholesale cuts altogether, according to Hutley.

At the same time, Cisco focused its attention on innovation,

he says.

When Cisco took hard looks during the Great Recession

at given product lines, the products that showed the most

promise with customers wound up being the areas in which

the company focused R&D eff ort and spending.

In addition, the company uses one of its greatest strengths

— the ability to buy cutting-edge startups and successfully

integrate them into the Cisco mother ship — as a competitive

weapon during recessions.

“It’s a great time to pick up bargains and accelerate products,”

Hutley says.

Indeed, Cisco has done at least 165 acquisitions in its history,

Hutley notes.

“Cisco is known for being the gold standard in Silicon

Valley for doing acquisitions,” says Charles O’Reilly, the Frank



It’s difficult enough for a company the size of Cisco Systems Inc. to be innovative when times are good. With

about $38 billion in revenue in the 2013 fi scal year, the

maker of networking technology has approximately 66,600

employees worldwide and has faced the inherent challenges of

remaining cutting edge that any large business faces: avoiding

corporate bureaucracy, nurturing ideas that challenge the status

quo within its walls, and all the rest.

But what happens when the world is

seemingly coming to an end, and spending

on networking gear falls off a cliff ? How

can a company remain innovative through

that fi restorm?

In its 25-year history, Cisco has faced

this challenge not once, but twice. The fi rst

started in 2000, when the technology and

telecommunication bubbles of the 1990s

burst. The second came with the economic

implosion starting in 2008.

“The natural propensity is to batten down the hatches and

cut back on budgets,” said Rick Hutley, Vice President of

Innovation and Internet of Everything Solutions at Cisco’s

consulting arm, Cisco Consulting Services.

Cisco, Hutley adds, “has a culture and a track history of the

opposite of that.”

Indeed, Cisco puts its money where its collective mouth

CISCO: EMBEDDED INNOVATION

BY JEFF BOUNDS

How does a 25-year-old company ignite the spirit of innovation? Boldly.



E. Buck Professor of Management at the Stanford Graduate

School of Business.

QUESTION AUTHORITY

Hutley says Cisco’s commitment to innovation begins with

its corporate culture. “Every business unit, every individual

has the freedom to think,” he says. “It starts at the top. It’s not

necessarily easy to establish. We encourage people to think,

to challenge. That permeates throughout the company.”

That spirit persists even if it means stepping on other people’s

toes. Take the question of how Cisco tackled the emergence

of what’s known as “software-defi ned networking” roughly

three years ago.

Known as SDN for short, software-defi ned networking

involves using a central software program to control networks,

rather than software embedded in hardware of the type that

Cisco sells, such as routers. Before this notion took hold,

software based in the hardware was the mechanism for

controlling the network.

That may sound arcane, but in Cisco’s world, it represented

a sea change. That’s because the operator of a data network

could, using software-defi ned networking, employ anybody’s

hardware in the network — not just Cisco’s.

“There were folks within Cisco that were threatened by

that,” Hutley acknowledges. “There were others who were

strong advocates. They were saying, ‘This is where the world

is going.’ We encourage that level of debate.”

Cisco embraced the question of software-defined

networking. It had informal teams coalesce around their

various viewpoints on the subject within the business and

CISCO: BY THE NUMBERS

KEN WOLTER / SHUTTERSTOCK.COM

$38 BILLIONIN REVENUE FOR THE 2013 FISCAL YEAR

66,600 EMPLOYEESWORLDWIDE

$250,000AMOUNT CISCO GIVES OUT FOR ITS “I-PRIZE,” AN AWARD FOR PEOPLE OUTSIDE THE ORGANIZATION WHO DELIVER THE BEST IDEA FOR A FUTURE CISCO BUSINESS ENDEAVOR

25 YEARSIN BUSINESS

165NUMBER OF ACQUISITIONS CISCO HAS DONE IN ITS HISTORY



allowed them to argue their respective sides.

Later, it began to formalize the process, going so far as to

become involved in industry bodies that were setting technical

standards for running software-defi ned networks.

LETTING IDEAS SURFACE

The internal Cisco debate about software-defined

networking is just one example of how the company

encourages employee debate and free thinking, even at the

risk of cannibalizing its own products and services.

For instance, Cisco has a web portal that employees can

use to post ideas. Anybody in the company can post, and

anybody can comment on that idea. Senior executives watch

the debates that ensue. “It’s when we see a spike that it becomes

interesting,” Hutley says.

“Cisco also has what’s known as the Innovation Council, an

internal body made up of some of the most senior executives

in the company. A big part of the council’s job is to ensure that

good ideas are allowed to succeed even if they could threaten

Cisco’s existing products.”

“The business units are under pressure,” Hutley says. “They

will avoid any innovation that might damage or cannibalize the

products they put out. That’s only natural,” he adds.

“The Innovation Council knows that while such decisions

are hard, if you don’t do it, someone else will. The Council

therefore makes the tough decisions to ensure that all good

ideas, even those that appear to threaten the status quo, are

given due consideration.”

Cisco, like many companies, also knows that employees have to

have a little fun on the job. To help fuel competitiveness amongst

its workers, Cisco sponsors three-day contests company-wide to

see who can come up with the best ideas for products or services

Cisco might off er. In a similar vein, Cisco gives out the “I-Prize,”

a $250,000 award for people outside the company who come

up with the best idea for a future Cisco business endeavor.

A spirit of fun and playfulness is a key trait of companies that

are innovative, according to Jay Carson, assistant professor in

the Department of Management and Organizations at the Cox

School of Business at Southern Methodist University.“There’s

a positive energy in these companies. They’re trying things.”

Hutley notes that Cisco even goes so far as to seed employees

or a group of people who have good ideas with a little money,

some business assistance, and a separate facility to go pursue the

next big thing. “We put those kinds of people in an environment

where they’ll thrive,” he says. “Once they’re done, we bring them

back into the fold, turn [the idea] into a marketable product, and

then we look for our next challenge.”

Headquartered in San Jose (above), Cisco now employs 14,000 associates in Santa Clara County and 66,600 worldwide. Chairman and CEO John T. Chambers (right) speaking at the Mobile World Congress in Barcelona, Spain.

CATWALKER / SHUTTERSTOCK.COM



E. Buck Professor of Management at the Stanford Graduate

School of Business.

QUESTION AUTHORITY

Hutley says Cisco’s commitment to innovation begins with

its corporate culture. “Every business unit, every individual

has the freedom to think,” he says. “It starts at the top. It’s not

necessarily easy to establish. We encourage people to think,

to challenge. That permeates throughout the company.”

That spirit persists even if it means stepping on other people’s

toes. Take the question of how Cisco tackled the emergence

of what’s known as “software-defi ned networking” roughly

three years ago.

Known as SDN for short, software-defi ned networking

involves using a central software program to control networks,

rather than software embedded in hardware of the type that

Cisco sells, such as routers. Before this notion took hold,

software based in the hardware was the mechanism for

controlling the network.

That may sound arcane, but in Cisco’s world, it represented

a sea change. That’s because the operator of a data network

could, using software-defi ned networking, employ anybody’s

hardware in the network — not just Cisco’s.

“There were folks within Cisco that were threatened by

that,” Hutley acknowledges. “There were others who were

strong advocates. They were saying, ‘This is where the world

is going.’ We encourage that level of debate.”

Cisco embraced the question of software-defined

networking. It had informal teams coalesce around their

various viewpoints on the subject within the business and

CISCO: BY THE NUMBERS

KEN WOLTER / SHUTTERSTOCK.COM

$38 BILLIONIN REVENUE FOR THE 2013 FISCAL YEAR

66,600 EMPLOYEESWORLDWIDE

$250,000AMOUNT CISCO GIVES OUT FOR ITS “I-PRIZE,” AN AWARD FOR PEOPLE OUTSIDE THE ORGANIZATION WHO DELIVER THE BEST IDEA FOR A FUTURE CISCO BUSINESS ENDEAVOR

25 YEARSIN BUSINESS

165NUMBER OF ACQUISITIONS CISCO HAS DONE IN ITS HISTORY


ZAPPOS’ ADOPTION OF HOLACRACY IS A BOLD MOVE. WILL IT PAY OFF?

by TOM PECK

ZAPPING BOSSES

20 INSIGNIAM QUARTERLY SUMMER 2014

INS-Spring2014-Zappos.indd 20 5/13/14 11:21 AM

INSIGNIAM QUARTERLY 21SUMMER 2014


ZAPPOS’ ADOPTION OF HOLACRACY IS A BOLD MOVE. WILL IT PAY OFF?

by TOM PECK

ZAPPING BOSSES




He’s placed his bets on Holacracy, which Forbes describes as,

“Essentially a set of inward-looking hierarchical mechanisms

that connect ‘circles’ [of staff ]. Each circle is required to be

run democratically and openly, with exhaustively detailed

procedures on how things like meetings are to be managed

and how decisions are to be made.”

Why would Hsieh introduce this disruptive strategy into

what most agree is a wildly successful online shoe and apparel

retailer? Don VandeWalle, Ph.D., chair of the Management

and Organizations department at Southern Methodist

University’s Cox School of Business, whose “Organizational

Behavior Theory” course includes a case study on Zappos,

thinks it may have been a calculated move by Hsieh to maintain

a sense of urgency in the company. “Bringing in something so

radical is a way to re-energize the organization and keep the

buzz going on internally,” says VandeWalle. “With $3 billion

in sales, the challenge when you’re that big becomes, how do

you keep it fresh? This is certainly a way to do it.”

Kelly Wolske, a member of the Zappos Insight circle and a

participant in the company’s Holacracy pilot group, says the

seed for a new organizational structure grew from employee

survey results. “As a company, we are growing quickly. By the

end of the year we expect to have nearly 2,000 employees,” says

Wolske. “On the survey, employees told us that as we grow they

are fearful that the organization will become too bureaucratic.

So, Tony [Hsieh] started looking around for ways that would

help us prevent that from happening. That’s when he met Brian

Robertson, the founder of Holacracy, and became interested

in its potential benefi ts for Zappos.”

HOLACRACY, THE LAND OF CIRCLES AND LINKSWhile not having a boss appeals to many people working in

the traditional hierarchy of Corporate America, experience has

shown that these individuals often fare poorly in a managerless

culture. According to Robertson, Holacracy changes an

organization’s structure, how decisions are made, and how

power is distributed. Everyone becomes a leader of their

roles and a follower of others’, processing tensions with real

authority and real responsibility, through dynamic governance

and transparent operations. The entire model is grounded in

the Holacracy Constitution, the rules-of-the-road for Zappos

and other organizations that have adopted the model.

The term Holacracy comes from the Greek word holon,

which means a whole that’s part of a greater whole. “Our org

chart looks like a Venn diagram,” explains Wolske. “The idea

of Holacracy at Zappos is that it separates the work that we do

from the people reporting structure. The Greater Company

Circle is the all-encompassing circle within which are nested

other circles. Circles are organized around the work that

needs to be accomplished. It brings in members who are best

suited to get the work done. Lead links in each circle assign

and remove people from roles and guide resource allocation,

strategy and direction, and purpose planning.

“The idea is that it will make Zappos more fl exible. We

want to be lean, but not emaciated, so we are holding on

to the best things about our startup culture from 15 years

ago and embracing new ideas like Holacracy to improve the

experience for all of our customers — external and internal.”

Wolske says that employees without manager titles have

found it more challenging to function within Holacracy.

HAS BUILT HIS SUCCESS ON TAKING RISKS. HIS GAMBLES ON INNOVATION AND OUTSIDE-THE-BOX THINKING ARE LEGENDARY. HSIEH, THE 40-SOMETHING HARVARD-EDUCATED CEO OF LAS VEGAS-BASED INTERNET SENSATION ZAPPOS, THINKS HIS LATEST WAGER, TO CREATE A MANAGERLESS ORGANIZATION, IS THE RIGHT MOVE FOR HIS 1,500 EMPLOYEES.

TONY HSIEH



Born in Illinois to Taiwanese parents and raised in the San Francisco Bay Area, Tony Hsieh graduated from Harvard University with a degree in computer science before joining Zappos as CEO in 2000.



He’s placed his bets on Holacracy, which Forbes describes as,

“Essentially a set of inward-looking hierarchical mechanisms

that connect ‘circles’ [of staff ]. Each circle is required to be

run democratically and openly, with exhaustively detailed

procedures on how things like meetings are to be managed

and how decisions are to be made.”

Why would Hsieh introduce this disruptive strategy into

what most agree is a wildly successful online shoe and apparel

retailer? Don VandeWalle, Ph.D., chair of the Management

and Organizations department at Southern Methodist

University’s Cox School of Business, whose “Organizational

Behavior Theory” course includes a case study on Zappos,

thinks it may have been a calculated move by Hsieh to maintain

a sense of urgency in the company. “Bringing in something so

radical is a way to re-energize the organization and keep the

buzz going on internally,” says VandeWalle. “With $3 billion

in sales, the challenge when you’re that big becomes, how do

you keep it fresh? This is certainly a way to do it.”

Kelly Wolske, a member of the Zappos Insight circle and a

participant in the company’s Holacracy pilot group, says the

seed for a new organizational structure grew from employee

survey results. “As a company, we are growing quickly. By the

end of the year we expect to have nearly 2,000 employees,” says

Wolske. “On the survey, employees told us that as we grow they

are fearful that the organization will become too bureaucratic.

So, Tony [Hsieh] started looking around for ways that would

help us prevent that from happening. That’s when he met Brian

Robertson, the founder of Holacracy, and became interested

in its potential benefi ts for Zappos.”

HOLACRACY, THE LAND OF CIRCLES AND LINKSWhile not having a boss appeals to many people working in

the traditional hierarchy of Corporate America, experience has

shown that these individuals often fare poorly in a managerless

culture. According to Robertson, Holacracy changes an

organization’s structure, how decisions are made, and how

power is distributed. Everyone becomes a leader of their

roles and a follower of others’, processing tensions with real

authority and real responsibility, through dynamic governance

and transparent operations. The entire model is grounded in

the Holacracy Constitution, the rules-of-the-road for Zappos

and other organizations that have adopted the model.

The term Holacracy comes from the Greek word holon,

which means a whole that’s part of a greater whole. “Our org

chart looks like a Venn diagram,” explains Wolske. “The idea

of Holacracy at Zappos is that it separates the work that we do

from the people reporting structure. The Greater Company

Circle is the all-encompassing circle within which are nested

other circles. Circles are organized around the work that

needs to be accomplished. It brings in members who are best

suited to get the work done. Lead links in each circle assign

and remove people from roles and guide resource allocation,

strategy and direction, and purpose planning.

“The idea is that it will make Zappos more fl exible. We

want to be lean, but not emaciated, so we are holding on

to the best things about our startup culture from 15 years

ago and embracing new ideas like Holacracy to improve the

experience for all of our customers — external and internal.”

Wolske says that employees without manager titles have

found it more challenging to function within Holacracy.

HAS BUILT HIS SUCCESS ON TAKING RISKS. HIS GAMBLES ON INNOVATION AND OUTSIDE-THE-BOX THINKING ARE LEGENDARY. HSIEH, THE 40-SOMETHING HARVARD-EDUCATED CEO OF LAS VEGAS-BASED INTERNET SENSATION ZAPPOS, THINKS HIS LATEST WAGER, TO CREATE A MANAGERLESS ORGANIZATION, IS THE RIGHT MOVE FOR HIS 1,500 EMPLOYEES.

TONY HSIEH



“I remember that in the beginning, everyone in our circle

would look to our lead link. The facilitator asked why we

were looking to her, and I realized that even though it was my

responsibility, and I had the authority to carry something out,

I was falling into old habits of looking to someone who had

formerly been a manager for ultimate guidance and approval.”

Zappos envisions 400 active circles operating within

the company by the time Holacracy has been rolled out

across the entire organization in late 2014. With a year of

experience working in the new structure, the pilot group has

gained key insights to help with the rollout and integration

of Holacracy into the Zappos culture. The company has

used the initial education and training to develop its own

curriculum. “At Zappos, we want to make sure we are

infusing our culture into everything we do, so we want

to make sure we are using the language in Holacracy

training that our employees understand,” says Wolske.

“For us, it is about being more adaptable and fl exible, which

in turn will allow us to be more competitive in the long run.”

EVERYTHING OLD IS NEW AGAINA company with no managers may seem like a revolutionary

concept, and a modern development. In fact, the W.L. Gore

Company, known for Tefl on and GORE-TEX, pioneered

the organizational structure in the 1950s and is still using

it today. The Morning Star Company, the world’s largest

tomato processor, has developed a culture in which all team

Zappos’ readiness to embrace Holacracy is embedded in its culture, which emphasizes empowerment and ownership, providing great customer service to everyone inside and outside the organization, and building trust and lasting relationships. The Zappos family core values anchor its unique culture through the following tenants.

7 Deliver WOW through service

7 Embrace and drive change

7 Create fun and a little weirdness

7 Be adventurous, creative, and open-minded

7 Pursue growth and learning

7 Build open and honest relationships with communication

7 Build a positive team and family spirit

7 Do more with less

7 Be passionate and determined

7 Be humble

ZAPPOS CULTURE

To nurture employee engagement, Zappos team members participate in family events, Easter egg hunts, and summer picnics.




members are self-managed and conduct their activities with

fellow team members, as well as key stakeholders, without

direction from others. These large organizations are joined

in the journey toward “bossless” cultures by smaller fi rms

like Twitter co-founder Evan Williams’ company Medium, a

blogging platform.

While Holacracy provides a framework for a freer

organization, every company that adopts it must tailor it to its

own needs. “Brian [Robertson] says Holacracy is culturally

neutral, it is the organization’s operating system, its DOS,”

says Wolske. “It’s up to the organization to add its own apps.”

Zappos’ Holacracy training program is a good example. So is

a circle that has been formed to address some HR issues such

as who is responsible for payroll, how performance reviews

are conducted, how career planning is accomplished in a

company with no managers, and what metrics will be used

to evaluate the success of the new organizational model. “In

the traditional corporate world, everyone knows how these

things work,” says Wolske. “With Holacracy, it’s a blank slate.

We have the opportunity to develop something that’s amazing

for our employees. The challenge is that we have to build it

because it doesn’t exist. The answer to some questions is that

we don’t know yet, it’s very much a work in progress for us.”

IF ANY BUSINESS CAN SUCCEED WITH HOLACRACY, ZAPPOS CAN

Jay Carson, Ph.D., assistant professor of Management and

Organizations at SMU’s Cox School of Business, points out that

the Holacracy model isn’t for every organization. “I don’t think

a majority of organizations will go this way. Some new hires

from traditional structures fl ounder and don’t succeed in these

managerless environments. So, it’s not for everyone. But, for the

companies that do adopt a Holacracy approach, it seems to be a

big component of their ability to be innovative and successful.”

“If there is any company that can pull this off , it’s a

company like Zappos,” says VandeWalle. “If you look at the

intense, intentional employee selection process Zappos has, it’s

very clear who they think can succeed within a culture that

emphasizes weirdness, fun, accountability, and self-motivation.

Zappos’ strong socialization process enables their people to

make decisions and resolve problems without having to get

sign-off from a manager. That gives them an advantage in

adopting Holacracy.”

VandeWalle cautions other companies considering

managerless organizational structures to not do Holacracy-

lite. “Many companies have tried to emulate innovative

cultures like Zappos, Southwest Airlines, The Container Store,

and others,” explains VandeWalle. “Too often, they make the

fatal mistake of taking things they like that seem to be to the

company’s advantage, but they’re not willing to pay the price

that shows loyalty to the employees.”

As the largest company to venture down the Holacracy path,

the spotlight is shining on Zappos. Time will tell if Hsieh’s big

gamble will pay off .



“I remember that in the beginning, everyone in our circle

would look to our lead link. The facilitator asked why we

were looking to her, and I realized that even though it was my

responsibility, and I had the authority to carry something out,

I was falling into old habits of looking to someone who had

formerly been a manager for ultimate guidance and approval.”

Zappos envisions 400 active circles operating within

the company by the time Holacracy has been rolled out

across the entire organization in late 2014. With a year of

experience working in the new structure, the pilot group has

gained key insights to help with the rollout and integration

of Holacracy into the Zappos culture. The company has

used the initial education and training to develop its own

curriculum. “At Zappos, we want to make sure we are

infusing our culture into everything we do, so we want

to make sure we are using the language in Holacracy

training that our employees understand,” says Wolske.

“For us, it is about being more adaptable and fl exible, which

in turn will allow us to be more competitive in the long run.”

EVERYTHING OLD IS NEW AGAINA company with no managers may seem like a revolutionary

concept, and a modern development. In fact, the W.L. Gore

Company, known for Tefl on and GORE-TEX, pioneered

the organizational structure in the 1950s and is still using

it today. The Morning Star Company, the world’s largest

tomato processor, has developed a culture in which all team

Zappos’ readiness to embrace Holacracy is embedded in its culture, which emphasizes empowerment and ownership, providing great customer service to everyone inside and outside the organization, and building trust and lasting relationships. The Zappos family core values anchor its unique culture through the following tenants.

7 Deliver WOW through service

7 Embrace and drive change

7 Create fun and a little weirdness

7 Be adventurous, creative, and open-minded

7 Pursue growth and learning

7 Build open and honest relationships with communication

7 Build a positive team and family spirit

7 Do more with less

7 Be passionate and determined

7 Be humble

ZAPPOS CULTURE

To nurture employee engagement, Zappos team members participate in family events, Easter egg hunts, and summer picnics.




BIG OBSTACLESFOR MIDDLE MANAGERSThis year, Insigniam published findings from a survey of middle managers in Global 1000 companies in the healthcare, pharmaceutical, chemical, manufacturing, fast-moving consumer goods, energy, and biotech industries.

OUR RESEARCH SHOWS MIDDLE MANAGERS FACE THREE MAIN CHALLENGES:

DECLINING ASPIRATIONS FOR BIG OPPORTUNITIES

1.A LACK OFDECISION-MAKING ABILITY

A DISCONNECT FROM EXECUTIVE LEADERSHIP

COMPANIES WITH ANNUAL REVENUES LESS THAN $1 BILLION

OF THE ORGANIZATIONS SURVEYED:SURVEY SAMPLE

30%>COMPANIES WITH REVENUES FROM $1 BILLION TO $50 BILLION=56%COMPANIES WITH ANNUAL REVENUES EXCEEDING $51 BILLION14%

>

2. 3.

INFOGRAPHIC

INS_Spring2014_Infographic.indd 26 5/13/14 2:27 PM


OF THOSE SURVEYED:THE BREAKDOWN

82%HAD AT LEAST ONE EDUCATIONAL OPPORTUNITY THIS YEAR

70%ARE FRUSTRATED BY THEIR IMMEDIATE SUPERVISOR

61%WOULD NOT BE HAPPY STAYING IN THEIR JOB FOR THE NEXT FIVE YEARS

60%PREFER TO MANAGE PEOPLE OVER PROCESSES

59%ARE FRUSTRATED BY CONSTANTLY SHIFTING PRIORITIES

25%SAY THEY WILL STAY WITH THEIR CURRENT COMPANY UNTIL THEY RECEIVE A BETTER OFFER

43%ARE SOMETIMES DEMOTIVATED BY SENIOR LEADERSHIP

43%ASPIRE TO REACH THE TOP EXECUTIVE LEVEL DURING THEIR CAREERS

44% ARE HIGHLY INSPIRED BY THEIR WORK

50%ARE HIGHLY MOTIVATED TO DO A GREAT JOB

50%SAY DECISION-MAKING IS TAKEN OUT OF THEIR HANDS

BELIEVE THEY WILL BE PROMOTED TO THE NEXT LEVEL AT THEIR CURRENT COMPANY

81%BELIEVE THEIR WORK MAKES A DIFFERENCE 15%

INS_Spring2014_Infographic.indd 27 5/13/14 10:59 AM


BIG OBSTACLESFOR MIDDLE MANAGERSThis year, Insigniam published findings from a survey of middle managers in Global 1000 companies in the healthcare, pharmaceutical, chemical, manufacturing, fast-moving consumer goods, energy, and biotech industries.

OUR RESEARCH SHOWS MIDDLE MANAGERS FACE THREE MAIN CHALLENGES:

DECLINING ASPIRATIONS FOR BIG OPPORTUNITIES

1.A LACK OFDECISION-MAKING ABILITY

A DISCONNECT FROM EXECUTIVE LEADERSHIP

COMPANIES WITH ANNUAL REVENUES LESS THAN $1 BILLION

OF THE ORGANIZATIONS SURVEYED:SURVEY SAMPLE

30%>COMPANIES WITH REVENUES FROM $1 BILLION TO $50 BILLION=56%COMPANIES WITH ANNUAL REVENUES EXCEEDING $51 BILLION14%

>

2. 3.

INFOGRAPHIC

INS_Spring2014_Infographic.indd 26 5/13/14 2:27 PM


INS-Spring2014-CoverFeature.indd 28 5/13/14 2:39 PM


CULTURE AS A COMPETITIVE EDGE

BY GORDON PRICE LOCKE

For Sodexo CEO Michel Landel, leading the world’s 18th largest employer to deliver on its

brand promise — improving quality oflife — isn’t just a job, it’s personal.





reat brands and highly respected companies around the worldall have something in common — a good soul. In “How to Defi nea Brand’s Soul,” AdWeek asks what the difference is between abrand with soul and one that is soulless. The answer: “brandswith a soul share a passion and motivation with their consumers,and they have a clear reason for being.”



In the case of the Sodexo Group, a

multinational food services and facilities

management corporation based in Paris —

which is the world’s 18th largest employer

with €18.4 billion in consolidated revenue, and

whose 428,000 employees serve 75 million

consumers with over 100 services daily — the

soul of the brand is vibrant and diverse; one

that is fi lled with pride and passion for both

employees and customers, and is dedicated to

enriching the world by relying on people to

touch the lives

of others.

What’s

truly unique is how acutely the soul of Sodexo

is embodied and personifi ed by none other

than the company’s CEO, Michel Landel. Born

in 1951 to a French father and Russian mother,

Landel’s very identity is built on diverse

multiculturalism — much like Sodexo’s,

whose 33,300 corporate sites are located in

80 countries — and led him, quite naturally,

of the total workforce is composed

of women

TOTAL EMPLOYEES

of the board members are women

54%

of the international executive team are

women

43%

of middle managers are women

43%

38%

428,000

SODEXO: DIVERSITYBY THE NUMBERS

A world citizenwho embodiesthe company’s global views, Landel joined Sodexo in 1984 and became CEO in 2005.



reat brands and highly respected companies around the worldall have something in common — a good soul. In “How to Defi nea Brand’s Soul,” AdWeek asks what the difference is between abrand with soul and one that is soulless. The answer: “brandswith a soul share a passion and motivation with their consumers,and they have a clear reason for being.”



to an international career. Landel’s education, various career

posts around the world, travels, and personal philosophy all

point to the epitome of a leader with a diverse worldview

— or more accurately — a true world citizen.

Having fi rst joined Sodexo in 1984 to head the company’s

eff orts in Eastern and Northern Africa, Landel subsequently

established the brand’s North American footprint over a

17-year period. Today, Sodexo employs 120,000 people

in the U.S., generating approximately 37 percent of the

company’s global revenues. Since taking the helm as CEO

in 2005, Landel launched the company on its next wave of

transformation — one that includes substantial investments

in service diversifi cation, gender equality, corporate culture,

and diversity, as well.

AVOIDING COMMODITIZATION WITH GROWTHIn service-based industries, one of the most frightening

scenarios is becoming a victim of your own success, thereby

allowing your competitors to commoditize your core

off ering and commandeer your competitive edge.

Sodexo has shown consistent growth since 2007, and

according to an April report by Reuters, saw profi ts rise 11.4

percent in the fi rst half of fi scal 2014. In fact, a Standard &

Poors recent report on the company stated, in summary,

that Sodexo has higher-than-average stability and visibility

of revenues and cash fl ow on the average duration of its

contracts and customer renewal rates — proof positive

that their expansion of services and emphasis on culture

and diversity is paying dividends. Further, the report said

Sodexo’s management and governance are strong (based

upon S&P 500 criteria), underpinned by management’s

consistent track record in growing the business, attention

to all stakeholders’ interests in the company, and successful,

medium-term planning.

When running a global operation, says Landel,

“Operational excellence isn’t enough, the diff erence [success

versus failure] happens at a higher level for stakeholders to

make a company like ours work — it is a journey, you

can’t decide to wake up one day and make your culture a

competitive edge — it takes time, it has to be the fabric of

the company, not on a list of initiatives. Frankly, I believe

that competitive edge comes from executing the mission of

making a diff erence in our customers’ lives.The conviction

is you can do this through people who believe in what

they do, and when you get the details right they can make

a meaningful diff erence.”

In other words, it delivers a noncommoditized brand

experience.The success of Sodexo’s strategy is in how they

manage clients, partners, suppliers, and each other.

“Our strategy evolved when the company transitioned

beyond being a single-service provider in food services,”

says Landel, who notes clients began to ask Sodexo to

provide other management services — including technical

maintenance, energy management, and hospital support

services — which has led to its growth.

“This helped decommoditize the slate of services we

provide,” he says. “For example, in regards to hospitals, we

facilitate the transportation of linens, as well as provide

patient reception and discharge services.”

“All of these contribute to the patient and staff experience

at the hospital, in addition to the food services and a variety of

other off erings we provide,” says Landel. Thus, in the example

of hospital services, Sodexo can serve as a partner to the C-suite,

tactically and strategically, improving hospital operations.

The same is true with Sodexo’s services for colleges and

universities, and many other sectors. From patients and

doctors to students and professors, Sodexo gets to the core

of many of the things that may be taken for granted when

viewed singularly, but in aggregate improve quality of life.

HEART AND SOUL AS A GROWTH STRATEGYSpeaking from his Paris offi ce, Landel emphasizes the critical

importance of a human-centered culture, which relates to how

employees connect with Sodexo’s mission and its purpose.

To make that point most clearly, Landel says companies that

have a balance in diversity typically outperform competitors

and are more innovative. “Gender balance refl ects values

that are important in running a great company. It allows for

the respect of diff erences, new perspectives, creativity, and

innovation. Companies that are diverse are more effi cient and

innovative than those that are not,” says Landel.

Diversity as a hallmark is something in which Sodexo

“It’s a journey, you can’t decide to

wake up one day and make your

culture a competitive edge.”

— Michel Landel, Sodexo CEO


THE BETTER TOMORROW PLAN

EMPLOYEES

CLIE

NTS

CON

SUM

ERS

IN

STITUTIONS SUPPLIERS

NUTRITION,

WE ARE

WE ENGAGE

ENVIRONMENT

AS A

N EM

PLOYER

HEALTH & WELLNESS LOCAL COM

MUN

ITIE

S

WE ENGAGE

WE DO

In 2009, Sodexo adopted the “Better Tomorrow Plan” to address essential market issues, including diversity and inclusion.

SSSSSSSUMMSUMMMMSUMMMMMMMMSSS MMSSSSSSUMMMMSSSSS MMSSUMMU MSSSSSSSUMMMSS MSSSSUMSUMMSSSSSSSSSUMSSSSUMMMUMMSSSSSSSSSSS EEEEEREEEREERRR 2R 2R 222R 2EEEEER 2ER 2RRER 2ERR 2R 2R 2EER 2R 2R 22EERRER 22222ER 2222222ER 22R 2R 2222E 220000010101014014440 40140 4014000000140140140011010014014010101401011440010 4 INSINSINSNSNNSNINNSSNSSNSISIIININSNNNSNNSINSNNNSNSNSSSIINSINSIINNNSNNNNNSSSNSINSINSINSNNNNNNSNSSSSSINSISINSNNNNSSSISIINSNNSNSNSISSINNNNNNSINNNSSINSINNSINSSISIINSI SSSINSIIIIINSIIIII SSIIGGGGGGGGGGGGGGGGGGNGNGNGNIAGNIGNGNGNGNIGNIANIANIAGNIANIANIANIANIAANIAGGGGGGGGGGNGNIAGNIAGNIAGNIAGNIGNGNNIANIANIAGGGGGGNGNIGNIGNGNGNIGGGGGGGNINGNINIIGNIGGNIAGGGGNIGGGNIAGNIAGNIAG IAGGN AGGGNNNGGGNNNNGGGNNGGGGGGGGGNIAM QM QM MM M QM QMMMM QQQQQM QUQUQQQQQQQUQUQUQUQUUQUUQUUUUUQUQUQUQUMMMMMMMMM QQQQQQQQUQQQQUUUM QMMMMMMMM QQQQQQQQQQUQUQUQUUUUQUMMMMM QM QM QQQM QQQUQUQUQUM QUQUMMM Q QQQ QQQUQQUQUUMM QQQQUUUM QQQQUUUQUM QUM QQQQUUUUUQQUUM QQQQQQUUUQM QQQQQQQM QQQQUUUUUM QQQUUUM QM QQUQUMMM QQQQQQQUQUMMM QQQQUUMMMMM M QQQQUQQQQUUMM QQUMM QUUQQ AAAAAAAAARTEARTEARTEARTEARTEARARTEARTEARTEARTEARTRTETERTEARTEARTEARTEARTTEEEEEAAAAAAARTERTTTTTTETEARTEEEEEEAAAAAA TETTTTEARTRTEEEEEEAAAAA EEEEEEEEAAAA TETTEEEEEEEEAAA TETEEEEEAAAA EEEAAAA EEEAAA EEAAA EAAAAAAAAAAAAAAAA EAAAAAAAAAA RRLYRLY RLY RLYRLYRLYRLYRRLYRLRLY RLYRLY RLYRLYRLYRLYRLY RRLYRLYRLRRLY RLYLYRRRLYRLYRLYRRLRLYRLYRLYRLRLYRLYRLYRRRLYRLYRLYRRLYYRRLYRLLYRRR YRRLYRRRRRRRRRRLYRLYRRRRRRRRRLYRR 33333333333333333333333333333333333333333333333333333333

INS-Spring2014-CoverFeature.indd 33 5/16/14 11:39 AM


to an international career. Landel’s education, various career

posts around the world, travels, and personal philosophy all

point to the epitome of a leader with a diverse worldview

— or more accurately — a true world citizen.

Having fi rst joined Sodexo in 1984 to head the company’s

eff orts in Eastern and Northern Africa, Landel subsequently

established the brand’s North American footprint over a

17-year period. Today, Sodexo employs 120,000 people

in the U.S., generating approximately 37 percent of the

company’s global revenues. Since taking the helm as CEO

in 2005, Landel launched the company on its next wave of

transformation — one that includes substantial investments

in service diversifi cation, gender equality, corporate culture,

and diversity, as well.

AVOIDING COMMODITIZATION WITH GROWTHIn service-based industries, one of the most frightening

scenarios is becoming a victim of your own success, thereby

allowing your competitors to commoditize your core

off ering and commandeer your competitive edge.

Sodexo has shown consistent growth since 2007, and

according to an April report by Reuters, saw profi ts rise 11.4

percent in the fi rst half of fi scal 2014. In fact, a Standard &

Poors recent report on the company stated, in summary,

that Sodexo has higher-than-average stability and visibility

of revenues and cash fl ow on the average duration of its

contracts and customer renewal rates — proof positive

that their expansion of services and emphasis on culture

and diversity is paying dividends. Further, the report said

Sodexo’s management and governance are strong (based

upon S&P 500 criteria), underpinned by management’s

consistent track record in growing the business, attention

to all stakeholders’ interests in the company, and successful,

medium-term planning.

When running a global operation, says Landel,

“Operational excellence isn’t enough, the diff erence [success

versus failure] happens at a higher level for stakeholders to

make a company like ours work — it is a journey, you

can’t decide to wake up one day and make your culture a

competitive edge — it takes time, it has to be the fabric of

the company, not on a list of initiatives. Frankly, I believe

that competitive edge comes from executing the mission of

making a diff erence in our customers’ lives.The conviction

is you can do this through people who believe in what

they do, and when you get the details right they can make

a meaningful diff erence.”

In other words, it delivers a noncommoditized brand

experience.The success of Sodexo’s strategy is in how they

manage clients, partners, suppliers, and each other.

“Our strategy evolved when the company transitioned

beyond being a single-service provider in food services,”

says Landel, who notes clients began to ask Sodexo to

provide other management services — including technical

maintenance, energy management, and hospital support

services — which has led to its growth.

“This helped decommoditize the slate of services we

provide,” he says. “For example, in regards to hospitals, we

facilitate the transportation of linens, as well as provide

patient reception and discharge services.”

“All of these contribute to the patient and staff experience

at the hospital, in addition to the food services and a variety of

other off erings we provide,” says Landel. Thus, in the example

of hospital services, Sodexo can serve as a partner to the C-suite,

tactically and strategically, improving hospital operations.

The same is true with Sodexo’s services for colleges and

universities, and many other sectors. From patients and

doctors to students and professors, Sodexo gets to the core

of many of the things that may be taken for granted when

viewed singularly, but in aggregate improve quality of life.

HEART AND SOUL AS A GROWTH STRATEGYSpeaking from his Paris offi ce, Landel emphasizes the critical

importance of a human-centered culture, which relates to how

employees connect with Sodexo’s mission and its purpose.

To make that point most clearly, Landel says companies that

have a balance in diversity typically outperform competitors

and are more innovative. “Gender balance refl ects values

that are important in running a great company. It allows for

the respect of diff erences, new perspectives, creativity, and

innovation. Companies that are diverse are more effi cient and

innovative than those that are not,” says Landel.

Diversity as a hallmark is something in which Sodexo

“It’s a journey, you can’t decide to

wake up one day and make your

culture a competitive edge.”

— Michel Landel, Sodexo CEO



truly excels. For fi scal year 2013, of its 428,000 employees,

54 percent of the total workforce is composed of women.

Additionally, 43 percent of the international executive team

are women, along with 43 percent of middle managers,

and 38 percent of the board members. By comparison, The

Guardian noted in October 2013 that women perform 66

percent of the world’s work, produce 50 percent of the

food, and control approximately $28 trillion in consumer

spending. However, among Fortune 500 companies, women

hold just 3 percent of CEO positions and only 15 percent

of board seats.

The question for Sodexo, which is already devoted to

diversity as a conduit for growth and competitive edge, is

how to get more than 400,000 employees to connect with its

mission and purpose of improving quality of life — something

Landel and his leadership team are very passionate about.

In speaking to three core areas of focus, or imperatives, that

are the foundation of why Sodexo is so successful, Landel

cites engagement of the teams, a deep feeling of social or

community responsibility, and diversity.

“It is critical that we ensure employees are engaged and they

understand why they are doing what they do and that they

make a diff erence,” he says. “When you are a multinational

services company, it is critical that our leaders, middle managers,

and all associates feel a sense of purpose to improve quality of

life for our consumers.”

Landel punctuates this point with the true essence of how

Sodexo is connected at a local level:“We create jobs, we create

wealth, and we create economic, social, and environmental

development of the communities we serve.”

THE HUMAN DIMENSIONA commitment to enriching the lives of the company’s

employees, clients, and stakeholders is key to Sodexo’s

corporate culture.

“Inspiring CEOs work to build an enduring company,” says

Katerin Le Folcalvez, an Insigniam partner who has worked

closely with the Sodexo brand. “Michel Landel is building

Sodexo to be an eff ective social elevator for its thousands of

dedicated employees around the globe.”

In 2009, Sodexo adopted a continuous improvement

approach to guide their corporate actions, entitled the“Better

Tomorrow Plan.” (See page 33.) The plan’s goal is to address

the issues the company identifi es as being essential to their

market and stakeholders, and is composed of such tenets as

business integrity, human rights, diversity and inclusion, and

In our interview with Michel Landel,

IQ delved deeper into his thoughts

on the challenges in selecting the

right leadership talent, and running a

company where leaders must set an

example for each other and employees

by being world citizens. The goal was

to learn more about the attributes

Landel seeks out and the expectations

he has for the executives who are

accountable for a mission-driven

competitive edge at one of the world’s

largest employers. Landel shared nine

insights that are essential to being a

successful leader at Sodexo.

7 Know how to adapt on a global and

local level

7 Accept and expect to be challenged

7 Possess a certain humility

7 Respect other’s opinions

7 Have a collective interest as

your fi rst objective (before personal

objectives)

7 Like interaction with other people

7 Lead by example

7 Be consistent

7 Love what you do

What do you look for in your leaders that other executives can learn from in building globally savvy teams?



corporate governance.

“We are in a people-driven business, and that often means

providing employment and opportunities for advancement

to people who are often not given this elsewhere,” Landel

says, noting that in many parts of the world, Sodexo serves

as a catalyst for developing local workforces and careers,

even when an employee’s education and work experience

is limited.

To quantify just how much Sodexo believes in this tenet, the

company invests 10 percent of its gross margin on training —

often developing employees who could be overlooked if not

given these opportunities with the service provider.

Beyond acting as a “social elevator,” Landel’s commitment to

ensuring Sodexo’s position as an enduring company

often means leveraging the corporate footprint

to accomplish signifi cant goals. For instance, the

company has been a signatory of the United Nations

Global Compact since 2003, and according to offi cial

statements, “meets the 24 criteria of the four core

elements of the UN Global Compact: labour rights,

human rights, anti-corruption, and environment.”

Furthermore, in the mid-1990s, while running

Sodexo’s U.S. business eff orts, Landel spearheaded a global

initiative known as “Stop Hunger”after taking stock of the

enormous waste present in the food service industry, and the

fact that 10 million children in the U.S. alone were suff ering

from malnutrition.

“Our sense of purpose is to provide a better quality of

life for our customers and their customers,” says Landel.“In

order to grow and compete on a global scale we have to

be committed to the people and regions we serve, and our

leadership, employees, mission, and values have to refl ect that.”

Landel’s “Stop Hunger” initiative is now in more than 40

countries thanks to the same engaged employees who are

the critical part of Sodexo’s business model.

LEADERS AS CITIZENS OF THE WORLDDiversity in thinking moves beyond gender and into

internationalization of leadership in the company. Landel

explained internationalization as being able to combine a

world perspective with local relevance or connectedness. One

of the most diffi cult challenges is to fi nd and develop people as

leaders and help them understand a more global point of view.

“It takes people who are willing to adapt and change and

understand cultural diff erences and it takes organizations

that are open and acceptable of new leaders from diff erent

parts of the world,” notes Landel. “Simply mixing in

diff erent leaders from diff erent parts of the world does not

make you a global company.”

Landel also shares that “diversity in thought” can only

be applied if the managers in place know how to relate to

the people that work for them. This is likely why Sodexo

employs a chief diversity offi cer and even has behavioral

scientists on staff , among other unique positions, to keep

a strategic and tactical eye on Sodexo’s human capital as

well as trends in the workplace that impact the company.

When pressed on his biggest lesson learned — one that

he would share with other leaders — he notes it has been

vetting and choosing the right members for his executive

committee based upon the strategic path the company is

on, and what that requires in a leader.

“When I meet with executive candidates, it is assumed

they have the necessary skills, but the most important piece

is not what you know, but how you behave, how you interact

with people,” says Landel. Detecting this is often hard even

in a complex, layered interviewing process, he adds.

“The process of hiring is delicate and diffi cult, and even

with key fi lters in place, we sometimes make mistakes,”

Landel says.

His advice, and lesson learned, were one in the same: “I

have hired talented people in the past without testing them

in another executive role fi rst that were not a good match

and made the decision I would not do that again. The risk

is simply too great.”

In closing, Landel says on the topics of growth, culture

as a competitive edge, and gender equality that,“This is a

journey and it is proving to be a good strategy.We realized

early on that the engine of making it happen are engaged

people.”

According to a report by Reuters,

Sodexo saw profi ts rise 11.4 percent

in the fi rst half of fi scal 2014.



truly excels. For fi scal year 2013, of its 428,000 employees,

54 percent of the total workforce is composed of women.

Additionally, 43 percent of the international executive team

are women, along with 43 percent of middle managers,

and 38 percent of the board members. By comparison, The

Guardian noted in October 2013 that women perform 66

percent of the world’s work, produce 50 percent of the

food, and control approximately $28 trillion in consumer

spending. However, among Fortune 500 companies, women

hold just 3 percent of CEO positions and only 15 percent

of board seats.

The question for Sodexo, which is already devoted to

diversity as a conduit for growth and competitive edge, is

how to get more than 400,000 employees to connect with its

mission and purpose of improving quality of life — something

Landel and his leadership team are very passionate about.

In speaking to three core areas of focus, or imperatives, that

are the foundation of why Sodexo is so successful, Landel

cites engagement of the teams, a deep feeling of social or

community responsibility, and diversity.

“It is critical that we ensure employees are engaged and they

understand why they are doing what they do and that they

make a diff erence,” he says. “When you are a multinational

services company, it is critical that our leaders, middle managers,

and all associates feel a sense of purpose to improve quality of

life for our consumers.”

Landel punctuates this point with the true essence of how

Sodexo is connected at a local level:“We create jobs, we create

wealth, and we create economic, social, and environmental

development of the communities we serve.”

THE HUMAN DIMENSIONA commitment to enriching the lives of the company’s

employees, clients, and stakeholders is key to Sodexo’s

corporate culture.

“Inspiring CEOs work to build an enduring company,” says

Katerin Le Folcalvez, an Insigniam partner who has worked

closely with the Sodexo brand. “Michel Landel is building

Sodexo to be an eff ective social elevator for its thousands of

dedicated employees around the globe.”

In 2009, Sodexo adopted a continuous improvement

approach to guide their corporate actions, entitled the“Better

Tomorrow Plan.” (See page 33.) The plan’s goal is to address

the issues the company identifi es as being essential to their

market and stakeholders, and is composed of such tenets as

business integrity, human rights, diversity and inclusion, and

In our interview with Michel Landel,

IQ delved deeper into his thoughts

on the challenges in selecting the

right leadership talent, and running a

company where leaders must set an

example for each other and employees

by being world citizens. The goal was

to learn more about the attributes

Landel seeks out and the expectations

he has for the executives who are

accountable for a mission-driven

competitive edge at one of the world’s

largest employers. Landel shared nine

insights that are essential to being a

successful leader at Sodexo.

7 Know how to adapt on a global and

local level

7 Accept and expect to be challenged

7 Possess a certain humility

7 Respect other’s opinions

7 Have a collective interest as

your fi rst objective (before personal

objectives)

7 Like interaction with other people

7 Lead by example

7 Be consistent

7 Love what you do

What do you look for in your leaders that other executives can learn from in building globally savvy teams?


INS-Spring2014-Ritz.indd 36 5/16/14 8:41 AM


SUITESUCCESS

FOR RITZ-CARLTON, WHITE GLOVE SERVICE ISN’T JUST

A PLUS, IT ’S ESSENTIAL TO THEIR BOTTOM LINE.

When Steve Jobs was in the throes of conceiving how the now iconic Apple Stores

would look and function, he opted to go beyond the computer industry for inspiration.

Determined to deliver the sort of unrivaled customer experience that makes consumers

loyal advocates of a brand, Jobs and his executive team quizzed people at the company’s Cupertino,

Calif., headquarters about the very best service they’d received. Over and over again, the same answer

popped up: Ritz-Carlton hotels.

As it’s recounted in Steve Jobs, Walter Isaacson’s biography of the Apple founder, the company

quickly decided to send those it had tapped to be Apple Store managers to be trained at the Ritz-

Carlton Leadership Center, which is now run by company vice president Diana Oreck. The result

went beyond the basic tenets of Ritz-Carlton customer service, which dictate that employees are

to fulfi ll “even the unexpressed wishes and needs of their guests.” In fact, one idea that emerged

from the training sessions was to pattern Apple Store’s so-called Genius Bars after Ritz-Carlton

concierge stands.

Clearly, when one of the most incisive and visionary minds in the history of business decides to

follow your lead on customer service, you’re doing something right. But don’t just accept Apple’s

word that treating customers the way Ritz-Carlton does is a savvy strategic decision. Just look at what

the approach has meant for the hotel chain itself, especially when it comes to fostering guest loyalty.

by C H R I S WA R R E N

INS-Spring2014-Ritz.indd 37 5/13/14 11:12 AMINS-Spring2014-Ritz.indd 36 5/16/14 8:41 AM


Indeed, for the past four years Ritz-Carlton has earned

the top spot in the luxury category of J.D. Power’s North

America Guest Satisfaction Index Study. Additionally,

last year the Luxury Institute awarded Ritz its Platinum Seal

of Customer Approval certifi cation, which is bestowed on

companies when at least 86 percent of their customers are

willing to recommend the brand to their peers. Ritz-Carlton

is also the only hospitality company to garner two prestigious

Malcolm Baldrige National Quality Awards, which recognizes

exceptional customer service among its

various metrics. It was the hotel’s second

Baldrige win that spawned the creation of

the Ritz-Carlton Leadership Center, which

opened in 2000 and has since provided

training to executives in a wide variety of

industries, including healthcare, automotive,

and wealth management.

However nice, great customer service isn’t

about winning awards. It’s ultimately about

revenue and profi ts, though Oreck insists the

two are interrelated. Although Ritz-Carlton

won’t reveal how much it spends to achieve

such high levels of customer service, Allison

Sitch, the company’s vice president of global

public relations, says the goal is to create “fully

engaged” guests. Nor is that phrase just a

term of art. According to Sitch, Ritz-Carlton

has Gallup survey its guests each month to

determine whether they are fully engaged, as

opposed to just somewhat engaged. To meet

the fully engaged defi nition, guests must

give Ritz-Carlton the highest grade possible when answering

questions about:

7 How likely they are to stay at a Ritz-Carlton again

7 The likelihood they will recommend Ritz-Carlton to others

7 Their level of satisfaction with their entire experience at

Ritz-Carlton

WHETHER THEY CAN IMAGINE A WORLD WITH-

OUT RITZ-CARLTON

“Our threshold for success is if a guest is likely to talk about

their wonderful experience to friends and recommend us,”

says Sitch. “We know that 100 percent of our fully engaged

guests do that.” There are tangible results to creating extremely

satisfi ed guests. Indeed, Sitch says fully engaged guests — and

half of all of customers surveyed fall into that category —

book an average of 6 percent more of their nightly luxury

hotel stays at a Ritz-Carlton property than those who rank

as engaged guests. Or, as Oreck puts it, “when customers are

satisfi ed, they spend more money.”

There’s a wider implication to Ritz-Carlton’s strategy — as

part of the Marriott portfolio — of stressing great service in order

to boost guest satisfaction and revenue. In Marriott’s 2013 annual

earnings report, the company fl atly states the importance of great

service to its overall recipe for success. “Our brands remain strong

as a result of skilled management teams, dedicated associates,

superior customer service with an emphasis on guest and

associate satisfaction, signifi cant distribution,

our Marriott Rewards and The Ritz-Carlton

Rewards loyalty programs, a multichannel

reservations system, and desirable property

amenities.” If Ritz-Carlton were to fall short

with its service as a competitive advantage

strategy, Marriott would feel the pain on its

balance sheet.

Judging by Marriott’s 2013 results, Ritz-

Carlton is doing just fi ne. As a company,

Marriott’s revenue per available room

(RevPAR), the basic industry metric for

success, increased 4.6 percent in 2013 and its

average daily rates were up by over 3 percent.

For its part, Ritz-Carlton North America’s

RevPAR was up nearly 9 percent in 2013

and, at $323.83, its average daily room rate

was up 6.6 percent.

A COMMITMENT TO THE

EXTRAORDINARY

As current president and chief operations

offi cer of Ritz-Carlton, Herve Humler often fi nds himself in the

sky, en route to visit one of the 86 properties the company operates

around the world. This gives Humler the chance to read some of

the hundreds of letters guests write to him about their experiences

at a Ritz-Carlton. In an interview with Global Traveler, Humler

revealed the details of a memorable epistle. “In Dubai, for example,

a Ritz waiter overheard a gentleman musing with his wife, who

was in a wheelchair, that it was a shame he couldn’t get her down

to the beach,” Humler said. “The waiter told engineering, and the

next afternoon there was a wooden walkway down the beach

to a tent that was set up for their dinner. This attention to detail

is not unusual at a Ritz-Carlton, but it is unique in the industry.”

It’s also a good example — and there are many others — of

how employees at Ritz-Carlton strive every day to do something

that customers will remember for the rest of their lives. It’s a goal

that Humler wants all employees to share.“ You have to create the

memories, you have to create the wow,” Humler said in a separate

9

RITZ-CARLTON2013 RESULTS

6.6PERCENT

The amount the average daily

room rate increased

PERCENTThe amount that

revenue per available room increased



interview. “We call that the ‘wow story.’ You have to

touch on the emotional element with the customer

and do something they will always remember.”

The way Humler sees it, the customer service

component of the business is actually the hardest.

While it’s always essential to build beautiful hotels in

the most desirable locations, the interactions between

employees and customers is what will determine

whether guests return. “Anyone can build a beautiful

property, but it’s how you bring it to life that makes the

diff erence,” Humler told Global Traveler. “Our culture

is built on trust and empowerment of employees,

allowing them to act on their own initiative to create

special memories for our guests.”

TRUSTING EMPLOYEES TO DELIGHT

GUESTS

As Humler makes clear, Ritz-Carlton employees are

key. But cultivating the sort of people who will go to

incredible lengths to “wow” customers requires a big

commitment. On average, Ritz-Carlton employees

receive between 280 and 350 hours of training per

year. This includes courses on everything from basic

etiquette to problem resolution to the importance

of what’s known as anticipatory service — referred to in the

company as having “radar on, antenna up.”

While training is essential, so too is the need for employees to

recognize that they are empowered. To that end, every employee

at Ritz-Carlton is permitted to spend as much as $2,000 a day

per guest to, as Oreck calls it, “delight or make it right” without

seeking a supervisor’s approval. That’s why a wooden walkway

appeared on a Dubai beach overnight.

While there are occasions when employees use the allotted

$2,000, Oreck says the money is more about sending a message to

Ritz-Carlton employees that they matter. “It is symbolic,” she says.

“It’s that we trust our ladies and gentlemen to do the right thing.”

MUSCLE MEMORY AND A SENSE OF PURPOSE

Like a lot of companies, Ritz-Carlton’s dedication to

customer service is detailed in its foundational documents —

known collectively as the Gold Standards — which include the

company’s motto, “We are ladies and gentlemen serving ladies

and gentlemen.”

But nice-sounding words can easily be forgotten. To

understand how they animate the company culture, take a close

look at how each of the 35,000 Ritz-Carlton employees starts

their day. Whether it’s the general manager or a housekeeper

at a hotel or the chief fi nancial offi cer at their corporate

headquarters, all Ritz-Carlton employees begin their shift with

what’s known as the daily lineup. Organized by department and

led either by a supervisor or one of the employees, the daily

lineup lasts between 10 and 15 minutes and is an opportunity

for colleagues to plan the day and share stories about both their

successes and challenges.

But it’s more than just knowing the Gold Standards cold.

Oreck says that the requirement to start each work shift with

a daily lineup is an unmistakable reminder about how great

service is mission critical at Ritz-Carlton. “Let me put it into

perspective,” she says. “Next time you are traveling on a plane,

what if the pilot said, ‘OK, I’ve decided not to do the pre-fl ight

checklist.’ The daily lineup is that important to us.”

The daily lineup is also a time to remind employees about

something even more essential: why they come to work.

Most of us need to feel that the tasks we perform each day

— some of which can be repetitive and monotonous —

serve a bigger purpose. At Ritz-Carlton, the purpose of each

job is a frequent topic of conversation. “The housekeeper’s

function is to clean rooms and toilets each day, but the

purpose is to create a home away from home,” says Oreck.

“Are you a bricklayer or are you building a cathedral for

God? That’s a very diff erent lens. Building a cathedral for

God gets me out of bed.”

RITZ-CARLTON HOTEL, DOHA



Indeed, for the past four years Ritz-Carlton has earned

the top spot in the luxury category of J.D. Power’s North

America Guest Satisfaction Index Study. Additionally,

last year the Luxury Institute awarded Ritz its Platinum Seal

of Customer Approval certifi cation, which is bestowed on

companies when at least 86 percent of their customers are

willing to recommend the brand to their peers. Ritz-Carlton

is also the only hospitality company to garner two prestigious

Malcolm Baldrige National Quality Awards, which recognizes

exceptional customer service among its

various metrics. It was the hotel’s second

Baldrige win that spawned the creation of

the Ritz-Carlton Leadership Center, which

opened in 2000 and has since provided

training to executives in a wide variety of

industries, including healthcare, automotive,

and wealth management.

However nice, great customer service isn’t

about winning awards. It’s ultimately about

revenue and profi ts, though Oreck insists the

two are interrelated. Although Ritz-Carlton

won’t reveal how much it spends to achieve

such high levels of customer service, Allison

Sitch, the company’s vice president of global

public relations, says the goal is to create “fully

engaged” guests. Nor is that phrase just a

term of art. According to Sitch, Ritz-Carlton

has Gallup survey its guests each month to

determine whether they are fully engaged, as

opposed to just somewhat engaged. To meet

the fully engaged defi nition, guests must

give Ritz-Carlton the highest grade possible when answering

questions about:

7 How likely they are to stay at a Ritz-Carlton again

7 The likelihood they will recommend Ritz-Carlton to others

7 Their level of satisfaction with their entire experience at

Ritz-Carlton

WHETHER THEY CAN IMAGINE A WORLD WITH-

OUT RITZ-CARLTON

“Our threshold for success is if a guest is likely to talk about

their wonderful experience to friends and recommend us,”

says Sitch. “We know that 100 percent of our fully engaged

guests do that.” There are tangible results to creating extremely

satisfi ed guests. Indeed, Sitch says fully engaged guests — and

half of all of customers surveyed fall into that category —

book an average of 6 percent more of their nightly luxury

hotel stays at a Ritz-Carlton property than those who rank

as engaged guests. Or, as Oreck puts it, “when customers are

satisfi ed, they spend more money.”

There’s a wider implication to Ritz-Carlton’s strategy — as

part of the Marriott portfolio — of stressing great service in order

to boost guest satisfaction and revenue. In Marriott’s 2013 annual

earnings report, the company fl atly states the importance of great

service to its overall recipe for success. “Our brands remain strong

as a result of skilled management teams, dedicated associates,

superior customer service with an emphasis on guest and

associate satisfaction, signifi cant distribution,

our Marriott Rewards and The Ritz-Carlton

Rewards loyalty programs, a multichannel

reservations system, and desirable property

amenities.” If Ritz-Carlton were to fall short

with its service as a competitive advantage

strategy, Marriott would feel the pain on its

balance sheet.

Judging by Marriott’s 2013 results, Ritz-

Carlton is doing just fi ne. As a company,

Marriott’s revenue per available room

(RevPAR), the basic industry metric for

success, increased 4.6 percent in 2013 and its

average daily rates were up by over 3 percent.

For its part, Ritz-Carlton North America’s

RevPAR was up nearly 9 percent in 2013

and, at $323.83, its average daily room rate

was up 6.6 percent.

A COMMITMENT TO THE

EXTRAORDINARY

As current president and chief operations

offi cer of Ritz-Carlton, Herve Humler often fi nds himself in the

sky, en route to visit one of the 86 properties the company operates

around the world. This gives Humler the chance to read some of

the hundreds of letters guests write to him about their experiences

at a Ritz-Carlton. In an interview with Global Traveler, Humler

revealed the details of a memorable epistle. “In Dubai, for example,

a Ritz waiter overheard a gentleman musing with his wife, who

was in a wheelchair, that it was a shame he couldn’t get her down

to the beach,” Humler said. “The waiter told engineering, and the

next afternoon there was a wooden walkway down the beach

to a tent that was set up for their dinner. This attention to detail

is not unusual at a Ritz-Carlton, but it is unique in the industry.”

It’s also a good example — and there are many others — of

how employees at Ritz-Carlton strive every day to do something

that customers will remember for the rest of their lives. It’s a goal

that Humler wants all employees to share.“ You have to create the

memories, you have to create the wow,” Humler said in a separate

9

RITZ-CARLTON2013 RESULTS

6.6PERCENT

The amount the average daily

room rate increased

PERCENTThe amount that

revenue per available room increased



A quick scroll through the list of Fortune 500 and

FTSE 100 companies and for all their success, operational

effi ciencies, and strong corporate cultures, one variable is

glaringly absent: women occupying the chief executive offi ce.

At the time of this writing, just 5 percent of Fortune 500 chief

executives are female, and only four women currently serve as

chief executives of FTSE 100 companies. In January, when Mary

Barra took the helm of General Motors — currently listed as

No. 7 on the Fortune 500 list — she became one of just 24

female CEOs among 476 male counterparts.

As media outlets clamored to cover the Barra story, one of the

most impactful details was overlooked: GM

was leveraging an often-underutilized asset,

a woman, to unlock a competitive advantage.

THE SCIENCE BEHIND PERFORMANCE

Utilizing women in chief executive

positions doesn’t just make for good press;

it’s sound science.

In 2013, the Proceedings of the National

Academy of Sciences published a report,detailing the diff erences

in brain circuitry between men and women. After analyzing

nearly 1,000 brain scans, the academy concluded that, “male

brains are optimized for intrahemispheric — and female

brains for interhemispheric — communication.” This means,

“male brains are structured to facilitate connectivity between

perception and coordinated action, whereas female brains are

designed to facilitate communication between analytical and

intuitive processing modes.”

The academy’s fi ndings support assumptions in the

neuroscience community that women have a competitive



WOMEN — YOUR MOST VALUABLE COMPETITIVE ADVANTAGE

BY SHIDEH SEDGH BINA

SPEC

IAL SECTION

INS-Spring2014-Women.indd 40 5/16/14 11:08 AM


“FELLOW MALES, GET ONBOARD. THE CLOSER AMERICA BECOMES TO FULLY EMPLOYING THE TALENTS OF ALL ITS CITIZENS, THE GREATER ITS OUTPUT OF GOODS AND SERVICES WILL BE.” – WARREN BUFFETT

advantage regarding intuitive thought, memory,

and critical listening skills. Furthermore, the

science behind the underpinnings of the

human brain further reinforces how disruptive

leaders — and women, in particular — can

infl uence an organization’s ability to unlock

competitive edge.

THE POWER BEHIND INFLUENCEIf science concludes that the female brain

off ers innate advantages that can be utilized in

a corporate setting, then why are the Fortune

and FTSE numbers so slanted? Quite simply,

unseen and often misunderstood barriers exist

that categorically prevent women from being

considered for such opportunities, especially

when contrasted against their male counterparts.

In a piece titled, “In the Workplace, Leaders

Who Aren’t Always Followed,” The New York

Times cites a joint-study conducted by researchers

from the London Business School and University

College London, on the role of “friendship

networks” inside organizations — peer groups

with whom personal connections are shared —

and the brokers who exercise infl uence within

these networks, questioning if “women face bias

in the social realm in which they are purported

to excel.”

The study referenced by The Times, “Just

Like a Woman? Effects of Gender-Biased

Perceptions of Friendship Network Brokerage

on Attributions and Performance,” explores “two

diff erent studies (one organizational and one

comprising MBA teams), examining whether

the friendship networks around women tend to

be systematically misperceived and the eff ects of

these misperceptions on the women themselves

and their teammates.”

The fi ndings of the report indicate several

instances of gender-inequality. The Times notes

that researchers found that “people tended

to ignore the activities of female brokers, and

exaggerate how … men served as brokers.

Second, if women were recognized as brokers,

they were perceived more negatively than their

male counterparts.”

Quoting one of the report’s researchers,

Professor Raina Brands of the London

Business School, The Times writes that the

double standard could be a result of the fact

that “women who take on informal leadership

roles are going against the gender-based grain by

behaving assertively and decisively — qualities

more traditionally associated with men.”

“Normally, women are thought to excel in

the social realm — so you would think that

they would be seen as good work brokers,” says

the report. “Despite the widespread notion of

women as social specialists, perceptions of the

network position of women will be distorted

because of the expectation that brokerage is

man’s work.”

While Brands believes much of the

predisposition is “below the level of conscious

awareness,” she advocates that teams discuss the

issues openly to quell the bias that presently exists.

UNLOCKING THE COMPETITIVE ADVANTAGE

Suffi ce to say, the refusal to utilize women in

executive leaderships roles will be done so at the

peril of those who ignore both the scientifi c and

cultural advantages inherent to this approach.

For those familiar with Insigniam’s position

that transformational leadership is a critical

means for catalyzing results, the impact

of the female chief executive is seemingly

undeniable — and, furthermore, the need to

cultivate professional environments conducive

to the advancement of executive women is

critical — but why stop at our assessment?

In this special section, we’ve culled expert

opinions from leaders — former Campbell’s

CEO Doug Conant; TIAA-CREF Executive

Vice-President and Chief Human Resources

Offi cer, Otha T. “Skip” Spriggs III; and Dr.

Chris Bart, founder of The Directors College,

Ontario, Canada, and CEO of Corporate

Missions Inc. — who have done just that.

To quote someone who realizes the value of

women at the executive level, consider investing

legend Warren Buff ett, who in an essay published

by Fortune in May 2013, wrote, “Fellow males, get

onboard. The closer America becomes to fully

employing the talents of all its citizens, the greater

its output of goods and services will be.”

WOMEN BY THE NUMBERS

5%

24

PERCENT OF FORTUNE 500 CHIEF EXECUTIVES WHO ARE FEMALE

ONLY FOUR WOMEN CURRENTLY SERVE AS CHIEF EXECUTIVES OF

FTSE 100 COMPANIES

TOTAL NUMBER OF FEMALE CEOS OUT OF 500 MEMBERS OF THE

FORTUNE 500 LIST

INS-Spring2014-Women.indd 41 5/13/14 2:24 PM


A quick scroll through the list of Fortune 500 and

FTSE 100 companies and for all their success, operational

effi ciencies, and strong corporate cultures, one variable is

glaringly absent: women occupying the chief executive offi ce.

At the time of this writing, just 5 percent of Fortune 500 chief

executives are female, and only four women currently serve as

chief executives of FTSE 100 companies. In January, when Mary

Barra took the helm of General Motors — currently listed as

No. 7 on the Fortune 500 list — she became one of just 24

female CEOs among 476 male counterparts.

As media outlets clamored to cover the Barra story, one of the

most impactful details was overlooked: GM

was leveraging an often-underutilized asset,

a woman, to unlock a competitive advantage.

THE SCIENCE BEHIND PERFORMANCE

Utilizing women in chief executive

positions doesn’t just make for good press;

it’s sound science.

In 2013, the Proceedings of the National

Academy of Sciences published a report,detailing the diff erences

in brain circuitry between men and women. After analyzing

nearly 1,000 brain scans, the academy concluded that, “male

brains are optimized for intrahemispheric — and female

brains for interhemispheric — communication.” This means,

“male brains are structured to facilitate connectivity between

perception and coordinated action, whereas female brains are

designed to facilitate communication between analytical and

intuitive processing modes.”

The academy’s fi ndings support assumptions in the

neuroscience community that women have a competitive



WOMEN — YOUR MOST VALUABLE COMPETITIVE ADVANTAGE

BY SHIDEH SEDGH BINA

SPEC

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INS-Spring2014-Women.indd 40 5/16/14 11:08 AM


From a 2007 report by the nonprofi t Catalyst and sponsored by the Chubb Corporation:

BY THE NUMBERSCOMPILED BY GEOFF WILLIAMS

WOMEN ARE PROVEN TO GENERATE RETURNS

RETURN ON EQUITY: RETURN ON SALES: RETURN ON INVESTED CAPITAL:

On average, companies with the highest percentages of female board directors performed better than those with the least by 53 percent.

Firms with the highest percentages of female board directors outperformed those with the least by 42 percent.

Businesses with the highest percentages of female board directors outperformed those with the least by 66 percent.

53% 42% 66%

“SOMEWHERE OUT IN THIS

AUDIENCE MAY EVEN BE SOMEONE

WHO WILL ONE DAY FOLLOW IN MY

FOOTSTEPS AND PRESIDE OVER THE

WHITE HOUSE AS THE PRESIDENT’S

SPOUSE. I WISH HIM WELL!”— BARBARA BUSH, U.S. FIRST LADY, AT A WELLESLEY

COLLEGE COMMENCEMENT CEREMONY

SPEC

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INS_Spring2014_Topline.indd 42 5/16/14 11:12 AM


If U.S.-based women-owned businesses were their own

country, they would have the 5th largest GDP in the world, ahead of countries like France, the U.K.,

and Italy.

MILLION WOMEN

“IN POLITICS, IF YOU WANT ANYTHING

SAID, ASK A MAN. IF YOU WANT ANYTHING

DONE, ASK A WOMAN.”

MARGARET THATCHER

= 1 MILLION WOMEN

The number of female entrepreneurs

starting or running new businesses in 67

countries around the world, according to

Global Entrepreneurship Monitor.

98 MILL IONWOMEN ARE RUNNING

ESTABLISHED

BUSINESSES

“If Lehman Brothers had been Lehman Brothers and Sisters we probably wouldn’t have had our fi nancial meltdown.” – Dr. Betty Spence, President, National Association of Female Executives

$3 TRILLION

“I always did something I was a little not ready

to do. I think that’s how you grow. When there’s

that moment of ‘Wow, I’m not really sure I can

do this,’ and you push through those moments,

that’s when you have a breakthrough.”

– Marissa Mayer, CEO of Yahoo

Women aren’t allowed to work past that hour in

Kuwait. It’s just one of numerous challenges facing

female entrepreneurs in countries with restrictive

laws, according to a report by Ernst & Young.

126

7 P.M.



From a 2007 report by the nonprofi t Catalyst and sponsored by the Chubb Corporation:

BY THE NUMBERSCOMPILED BY GEOFF WILLIAMS

WOMEN ARE PROVEN TO GENERATE RETURNS

RETURN ON EQUITY: RETURN ON SALES: RETURN ON INVESTED CAPITAL:

On average, companies with the highest percentages of female board directors performed better than those with the least by 53 percent.

Firms with the highest percentages of female board directors outperformed those with the least by 42 percent.

Businesses with the highest percentages of female board directors outperformed those with the least by 66 percent.

53% 42% 66%

“SOMEWHERE OUT IN THIS

AUDIENCE MAY EVEN BE SOMEONE

WHO WILL ONE DAY FOLLOW IN MY

FOOTSTEPS AND PRESIDE OVER THE

WHITE HOUSE AS THE PRESIDENT’S

SPOUSE. I WISH HIM WELL!”— BARBARA BUSH, U.S. FIRST LADY, AT A WELLESLEY

COLLEGE COMMENCEMENT CEREMONY

SPEC

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BRINGING WOMEN TO THE TABLE

Take a look around the table at your next

board of directors meeting and ask yourself, “Do the vast

majority of board members represent similar life and work

experiences?” If the answer is yes, you’ve got a problem.

Even if you disregard its moral motivations, there is a

real business case for embracing gender diversity on your

board. According to a recent report by Catalyst, Fortune

500 companies with the highest representation of female

board directors attained signifi cantly

higher fi nancial performance, on average,

than those with the lowest. The report,

The Bottom Line: Corporate Performance and

Women’s Representation on Boards, looked at

three critical fi nancial measures — return

on equity, return on sales, and return on

invested capital — and compared the performance of

companies with the highest representation of women on

their boards to those with the lowest.

This isn’t the fi rst time the correlation between gender

diversity and fi nancial performance has been made. The

Catalyst results are backed up by a 2012 Credit Suisse report,

which analyzed the performance of 2,360 companies

globally for six years and found that organizations

BY STACEY CLOSSER

The business case for diversifying your board of directors.

SUMMER 2014

SPEC

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INS_Spring2014_Boardroom.indd 44 5/16/14 11:14 AM


with women on their management boards

represented a better investment.

“We also fi nd that companies with one or

more women on the board have delivered

higher average returns on equity, lower

gearing, better average growth, and higher

price/book value multiples over the course of

the last six years,” the report states.

While the reasons for this are varied and

can be subjective, Credit Suisse research

suggests that reduced volatility is one specifi c

consequence of greater board diversity,

enhancing stability in corporate performance

and share price returns.

And yet, concurrent with these fi ndings

runs the Catalyst headline, “Still no progress

after years of no progress.” In 2013, roughly 17

percent of corporate board seats belonged to

women, a statistic that has remained essentially

fl at for eight years. A striking 10 percent of

companies have no women serving on their

boards.

It might be tempting to point to a director’s

longevity as a reason why the rate of gender

diversity isn’t increasing at a faster rate, but it

appears the trend continues when seats open up.

“Even among the open board seats, over 80

percent of them went to men,” says Brande

Stellings, vice president of corporate board

services for Catalyst. “So even if we had more

seats, more turnover, we still need to address

the issue that women are not getting selected

at the rates that you’d expect them to.”

So what does that mean for your organization?

Based on research and trends, companies that are

not actively looking to diversify their boards will

lose on a variety of fronts.

“Diversity of thought, of any kind,

encourages better group discussions and

decision making,” says Malli Gero, co-founder

and executive director of 2020 Women on

Boards, a national campaign to increase the

percentage of women on boards to 20 percent

by 2020.

The European Union is considering rules

that would instill a 40 percent quota for

female directors by 2020, and several European

countries have already instituted quotas

including France, the Netherlands, Italy, and

Spain. Gero cautioned that the demand for

qualifi ed women in Europe will likely bring

executive searchers stateside, decreasing the

pool of qualifi ed female candidates for U.S.

companies.

Companies that act aggressively now will

not only garner the top talent but also reap the

fi nancial performance rewards more quickly.

Investors and shareholders are watching this

issue more closely as well and will make

investment decisions accordingly.

“This is pretty indisputable … having more

women on boards creates greater profi tability,

lower risk, better employee engagement, and

better long-term sustainable performance,”

says Carolyn Buck Luce, executive in

residence at the Center for Talent Innovation,

and Managing Partner of Hewlett Consulting

Partners.

THE PIPELINE MYTH

There are several myths that accompany

naysayers about gender diversity, the most

popular being that there aren’t enough

qualifi ed female candidates.

“We know now that the supply-side

pipeline is full to bursting with board-ready

women, many endorsed by their own CEOs

as qualifi ed candidates for outside corporate

boards,” wrote Betsy Berkhemer-Credaire

in her book, The Board Game — How Smart

Women Become Corporate Directors. She is the

president and co-founder of Berkhemer

Clayton Inc., a retained executive search

fi rm, and has been tasked with fi nding board

directors through the years.

“There is a proliferation of experience in the

last 20 years in all disciplines. We haven’t had

the numbers before like this,” says Berkhemer-

Credaire. “Every board can fi nd a qualifi ed

woman who will bring value to that board.”

She encourages companies to expand their

search to include business owners, women

from senior executive positions, academia, and

those retired from government service.

Her suggestion underscores the other board

myth that directors must be a sitting or retired

17%Percentage of

corporate board seats belonging to

women.

80%Percentage of

empty board seats that went to men.

20%The percentage

that 2020 Women on Boards seeks to

increase the number of women on boards

by 2020.



BRINGING WOMEN TO THE TABLE

Take a look around the table at your next

board of directors meeting and ask yourself, “Do the vast

majority of board members represent similar life and work

experiences?” If the answer is yes, you’ve got a problem.

Even if you disregard its moral motivations, there is a

real business case for embracing gender diversity on your

board. According to a recent report by Catalyst, Fortune

500 companies with the highest representation of female

board directors attained signifi cantly

higher fi nancial performance, on average,

than those with the lowest. The report,

The Bottom Line: Corporate Performance and

Women’s Representation on Boards, looked at

three critical fi nancial measures — return

on equity, return on sales, and return on

invested capital — and compared the performance of

companies with the highest representation of women on

their boards to those with the lowest.

This isn’t the fi rst time the correlation between gender

diversity and fi nancial performance has been made. The

Catalyst results are backed up by a 2012 Credit Suisse report,

which analyzed the performance of 2,360 companies

globally for six years and found that organizations

BY STACEY CLOSSER

The business case for diversifying your board of directors.

SUMMER 2014

SPEC

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CEO and have previous board experience. The reality is

that there are signifi cant business units that are being run

by women who are gaining skills that would qualify them

for boards even if they don’t have the title. This isn’t unique

to women directors — at least half of sitting directors don’t

have CEO experience.

“What we’re seeing — and it’s not just true of women,

but all directors — is that you’re missing a lot of talent if

you’re just looking at C-titles out there,” says Gero. “Most

nominating chairs and committees would be pleasantly

surprised to fi nd how many qualifi ed women there are with

amazing experience who don’t necessarily have C-titles.”

The ideal solution is to have a healthy internal pipeline of

female executives — an approach that requires long-term

planning, but one that can be advocated by investors who

can make recommendations regarding board appointments.

“Over the last year, investors have become increasingly

vocal and proactive on this issue. Many have set their own

policies for engagement with

the companies in which they

invest,” wrote Lord Davies of

Abersoch in the Women on

Boards 2013 report. The annual

report examines women’s

participation on boards in the

FTSE 100 and FTSE 250. For

2014, the voluntary, business-

led approach in the U.K. has

seen women’s representation

increase to 20.7 percent, up from 12.5 percent in 2011.

The dramatic rise is encouraging — if U.K. organizations

can fi nd female directors, there’s no reason American

companies can’t do the same.

FOLLOW THE MASTERS

Many companies that made diversity a priority have paved

From left, Lockheed Martin Executive Chairman Robert J. Stevens; Chairman, President, and CEO Marillyn Hewson; Executive Vice Presidents Larry Lawson and Orlando Carvalho stand near an F-35B at Marine Corp Air Station in Yuma, Ariz., after the squadron’s re-designation ceremony, Nov. 20, 2012.

SUMMER 2014

SPEC

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the way to success for those that followed.

Lockheed Martin was recently recognized by

Catalyst for its diversifi cation eff orts. In the

early 2000s, Lockheed Martin identifi ed its

need to attract, engage, and leverage a wider

range of talent and responded by making

diversity and inclusion an integral part of

its business strategy. The results have been

profound, most notably on the company’s

board of directors. Women’s representation on

the board of directors went from 13 percent

in 2004 to 33 percent in 2013.

Other companies that have turned it around

include The Coca-Cola Company, Burberry

Group, Diageo, and Kaiser Permanente.

“People should ask themselves — what’s

the risk?” asks Stellings. Time and again

research has shown that diversity adds value

to the bottom line, benefi ts

innovation, demonstrates social

responsibility, and enhances

employee engagement.

It becomes crystal clear when

Luce points out the makeup of

the global talent pool. “What

percentage are white men? Ten

percent,” says Luce. “It’s really

all about the demographics of

the current and future employee

base and the current and future

customer, shareholder, and

stakeholder. They are becoming

more and more the face of ‘she,’

so if you don’t have that face, it

lowers your chance of innovation,

market growth, managing risk,

and sustainability.”

Insigniam co-founding partner

Shideh Sedgh Bina agrees,

adding, “One day, future business

leaders will look back and see

that the lack of appropriate

balance of women on boards

and in the C-suite during this

era was a classic case of corporate myopia,

resulting in very costly missed opportunites.”

So perhaps the real question you should be

asking is, “What’s the risk of not diversifying

the board?”

A 2012 report from the Committee for

Economic Development in Washington,

D.C., puts it succinctly: “No business would

tolerate a similar lack of achievement with

respect to sales, revenues, earnings, or any of

the other metrics commonly used to measure

business success. … Gender representation

is a competitiveness issue. The achievement

of greater representation by women on

corporate boards must be seen as part of a

larger issue of talent development and met

with the same urgency and accountability as

any other competitive threat.”

BE BOLDOn average,

companies with the highest percentages

of female board directors outperformed

those with the least by up to 66 percent, regarding ROI on invested capital.

CONSIDERThere is

tremendous value in having your female executives sit on other companies’ boards. Also, build relationships with organizations that

prepare executives for board service such as the Women’s Director Development program

at Kellogg School of Management at Northwestern

University.

RESOURCESToss the status

quo and recognize that diversity is part of good governance.

Change selection criteria to better refl ect the real requirements

of the position and eliminate non-

essential, exclusionary requirements.

HOW TO EXPAND OPPORTUNITIES

FOR WOMEN ON BOARDS:

Source: Catalyst report, The Bottom Line: Corporate Performance

and Women’s Representation on Boards, sponsored by The Chubb

Corporation

01

02

03



CEO and have previous board experience. The reality is

that there are signifi cant business units that are being run

by women who are gaining skills that would qualify them

for boards even if they don’t have the title. This isn’t unique

to women directors — at least half of sitting directors don’t

have CEO experience.

“What we’re seeing — and it’s not just true of women,

but all directors — is that you’re missing a lot of talent if

you’re just looking at C-titles out there,” says Gero. “Most

nominating chairs and committees would be pleasantly

surprised to fi nd how many qualifi ed women there are with

amazing experience who don’t necessarily have C-titles.”

The ideal solution is to have a healthy internal pipeline of

female executives — an approach that requires long-term

planning, but one that can be advocated by investors who

can make recommendations regarding board appointments.

“Over the last year, investors have become increasingly

vocal and proactive on this issue. Many have set their own

policies for engagement with

the companies in which they

invest,” wrote Lord Davies of

Abersoch in the Women on

Boards 2013 report. The annual

report examines women’s

participation on boards in the

FTSE 100 and FTSE 250. For

2014, the voluntary, business-

led approach in the U.K. has

seen women’s representation

increase to 20.7 percent, up from 12.5 percent in 2011.

The dramatic rise is encouraging — if U.K. organizations

can fi nd female directors, there’s no reason American

companies can’t do the same.

FOLLOW THE MASTERS

Many companies that made diversity a priority have paved

From left, Lockheed Martin Executive Chairman Robert J. Stevens; Chairman, President, and CEO Marillyn Hewson; Executive Vice Presidents Larry Lawson and Orlando Carvalho stand near an F-35B at Marine Corp Air Station in Yuma, Ariz., after the squadron’s re-designation ceremony, Nov. 20, 2012.

SUMMER 2014

SPEC

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It began with a simple phrase, “We can do better.”

When Doug Conant — Chairman, Avon Products; Founder,

Conant Leadership; and Chairman of the Kellogg Executive

Leadership Institute — became CEO of the Campbell Soup

Company in January 2001, he was charged with reinvigorating

the culture of a 132-year-old company while steering

the organization to solid fi nancial footing, just one year

after it lost half of its market value.

Conant’s experience with Campbell’s formed the

business strategies he teaches and speaks about today

— get the right people in the right leadership positions

to create, execute, and evolve a winning strategy.

Research has established that the leaders you seek,

and the basis of your competitive edge, are women. There are

those that would argue that operational agility is the only real

competitive advantage, but Conant has found that it’s people,

and more specifi cally, a diverse and inclusive group of people.

Conant knew this when he took the reins at Campbell’s

How Campbell’s former CEO Doug Conant put female leadership on the front burner.

MIXING WOMEN INTO THE SOUP

BY STACEY CLOSSER

SPEC

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INS-Spring2014-SS_Campbells.indd 48 5/16/14 11:09 AM


— whose customer base was 80 percent women — that there

existed a mandate to defy tradition and he actively established

a business case for women, one that opened up a leadership

pipeline that more profoundly reflected the company’s

workforce and customer profi le.

Campbell’s was forced to rethink its strategy for fi nding

qualifi ed applicants because the old way didn’t naturally identify

diverse candidates. Other companies have discovered the same

trend but instead write it off , saying there aren’t enough qualifi ed

female candidates. “When you reject that notion, as I did, the

organization fi nds a way to address it,” says Conant.

Conant challenges those in leadership positions to think more

broadly, build processes, and tie expectations to targets. “Leading

from in front is fi ne, but you have to establish a process and

accountability that cuts across the entire organization,” he says.

The results are rooted in Conant’s own leadership history. As

he’s experienced, the more diverse leadership gets, the better a

company does in the marketplace.

As employees feel valued and recognized, as they see themselves

represented among the decision-makers, they become more

engaged. “Corporate employees feel like they’re taking a sip of

water from the fi re hydrant of life. They’re just swamped,” he says.

“If you’re not tuned into that, and where they feel the company

has some empathy, it’s highly unlikely they’ll be engaged in a

way to move the company forward.”

CHANGING THE PARADIGMIt takes eff ort to reject the paradigms of your generation,

which is exactly what it requires to move beyond the status

quo. As Conant recalls, it used to be men selling to men, dealing

with men, to get business done. Today, there are fi ve incredibly

diverse generations in the workforce, and the old hierarchies

are breaking down.

As Conant says, “People don’t usually derail because they

didn’t get the return on investment right, [it’s because] they

didn’t manage the room well; they didn’t communicate well.

Those intricacies are more necessary with greater diversity,

complexity, and the fast fl ow of information.”

Someone once asked him, “Doesn’t your daughter deserve the

same opportunities that you did as a man?” The simple question

sent Conant on a journey that he is still on today. “It got me

thinking and made it personal,” he says. “It gave me a whole new

level of energy for this. … I’m pleased [today] that I see a world

where there are enormous opportunities for women.” However,

Conant is quick to point out that businesses still have miles to go.

“There aren’t enough women in the C-suite, on boards, or

in leadership roles in government,” he says. “We can do better.”

“THERE AREN’T ENOUGH WOMEN IN THE C-SUITE, ON BOARDS, OR IN LEADERSHIP ROLES IN GOVERNMENT. WE CAN DO BETTER.”

– Doug Conant, Chairman, Avon Products, and Chairman of the Kellogg Executive Leadership Institute.For more information on Doug Conant, go to www.conantleadership.com.



It began with a simple phrase, “We can do better.”

When Doug Conant — Chairman, Avon Products; Founder,

Conant Leadership; and Chairman of the Kellogg Executive

Leadership Institute — became CEO of the Campbell Soup

Company in January 2001, he was charged with reinvigorating

the culture of a 132-year-old company while steering

the organization to solid fi nancial footing, just one year

after it lost half of its market value.

Conant’s experience with Campbell’s formed the

business strategies he teaches and speaks about today

— get the right people in the right leadership positions

to create, execute, and evolve a winning strategy.

Research has established that the leaders you seek,

and the basis of your competitive edge, are women. There are

those that would argue that operational agility is the only real

competitive advantage, but Conant has found that it’s people,

and more specifi cally, a diverse and inclusive group of people.

Conant knew this when he took the reins at Campbell’s

How Campbell’s former CEO Doug Conant put female leadership on the front burner.

MIXING WOMEN INTO THE SOUP

BY STACEY CLOSSER

SPEC

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From your vantage point, describe the current

environment of gender equality at the executive level.

While young professional women are entering the workforce

in numbers equal to men, by the time they reach the executive

suite, women still only represent around 24 percent of that level.

How have you observed situations in which women

outperform men in the areas of judgment, reasoning, or

cognitive ability?

Two years ago, I conducted a unique study in Canada on

the moral reasoning capabilities of directors. Moral reasoning

involves having the ability to broker a solution among

individuals who are party to a confl ict through collaboration,

social cooperation, and consensus building whereby everyone

considers the outcome to be fair. They may not like the outcome

because they selfi shly did not get everything they wanted but

they can agree that the fi nal decision is nonarbitrary or favoring

one stakeholder over another.

This ability is the “holy grail” of moral reasoning and

decision-making and it is most needed in the boardroom

where Canadian directors are legally required “to make

decisions in the best interests of [their] organizations

while taking into account the interests of various

stakeholders.” Does my research mean that men are not

capable of complex moral reasoning? Not at all. In fact,

complex moral reason was the highest-ranked reasoning

skill for both men and women. It’s just that women seem

to be signifi cantly better at it on average.

A staggeringly small percentage of Fortune 500

and FTSE 100 companies are led by female CEOs.

In your opinion, why is this the case and how can

it be changed?

Getting to the top in these companies is simply a

much longer road than in other corporations. And so,

depending on whether a Fortune 500 fi rm embraced

gender equality in the C-suite 20 years ago or not,

it’s going to aff ect the number and speed with which

women are moving into the highest echelons of

those companies.

Today, smart boards know that they have a choice: to

either be on the gender equality train or under its tracks.

The issues hindering this are probably still the classic

ones. Are younger or junior executive women being

mentored by senior executives in the way their male

counterparts are? Are women being given the same

“emerging leader” development opportunities as men?

And are boards insisting that their C-suite executives

[and recruiting fi rms] include women in their succession

planning activities and outside executive searches?

How would you encourage male “gatekeepers” to take

a more proactive stance toward the advancement of

women into C-level roles?

The key to the advancement of women in the workplace

lies in creating the same opportunities as those that currently

exist for men: mentoring, emerging leader development

programs, and succession planning — both at the C-suite

and board level.

Furthermore, I say to those currently at the board level, to

be bold and stop worrying about “being part of the gang.”

Don’t concern yourself with being excluded if you don’t

go along with your fellow directors. Sometimes the board’s

norms and customs need to be changed or ignored because

they are either outdated or just plain inappropriate.

BREAKING BARRIERSDr. Chris Bart, CEO of Corporate Missions Inc. and founder of The Directors College, addresses the “gatekeepers” who must take critical steps to advace women into the C-suite.

SPEC

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INS-Spring2014-SS_BartSpriggs.indd 50 5/16/14 11:10 AM


As a Fortune 100 company, how does TIAA-CREF

approach the issue of gender equality?

At TIAA-CREF, women represent 34 percent of our board,

40 percent of our executive management team, and 38 percent

of senior leadership roles within the company.

Beyond the numbers, we challenge senior executives — men

in particular — to take responsibility for developing, grooming,

and advocating for talented women within the company.

This means giving women the experiences necessary to

become eff ective board members. We recently expanded the

size of our executive management team from nine to 15, and

six of the 15 executive management team members are women

who are extremely accomplished business leaders.

How have you observed gender equality evolve over the

course of your career?

In the past, fi nding women or minorities sitting in executive

positions was tough because the C-suite was dominated

by white males. While that is changing, there is still a long

road ahead despite the increased numbers of women

moving into these ranks.

In my experience, I have found that leadership and

organizational culture play the most important role in

the inclusion of women as senior executives. For this to

happen, the CEO and other top leaders must build an

organizational commitment to promoting women in

leadership, backed by tangible action.

Companies need to have a value set that is lived every

day by the leadership on down. This means they should

focus on creating a nurturing, fl exible environment in

which all people — not just women — will thrive. To

do this, C-suite executives must have the courage to talk

not just about what diversity means to the business, but

to them personally.

What can men in executive level roles learn from

their female counterparts?

Research shows men can develop the ability to process

information in a more balanced way by working with

women, and therefore can make more stable decisions.

This relates partly to a more balanced approach to risk,

by way of emotional intelligence, and partly about acting

in line with values.

A balanced team with an equal number of men

and women helps it make better overall decisions. It’s

important to listen to every voice in the room. A more

balanced view from a mixed team is usually a good thing.

How can the lack of female inclusion and representation

at the executive level be overcome?

Successful companies of the future will be those that attract,

train, and grow diverse talent at all levels.

U.S.-based companies are at a competitive disadvantage

because they don’t have enough women executives.

This is not a problem that will fi x itself. Business leaders (both

men and women) should understand that they need to use all

available talent to succeed in today’s global competitive markets,

and such talent increasingly will come from women.

In countries, such as the U.K. and Australia, male business

leaders have taken a leading role in promoting better gender

balance, and the same should be done in the U.S.

The CED, for example, has challenged U.S. companies and

their leaders to examine their practices against the best-in-class;

they should ask what they will do to advance women, and they

should be transparent in setting targets and measuring results.

SHIFTING DYNAMICSOtha T. “Skip” Spriggs III, Executive Vice President, CHRO, TIAA-CREF, on overcoming the lack of executive female representation at the executive level.



From your vantage point, describe the current

environment of gender equality at the executive level.

While young professional women are entering the workforce

in numbers equal to men, by the time they reach the executive

suite, women still only represent around 24 percent of that level.

How have you observed situations in which women

outperform men in the areas of judgment, reasoning, or

cognitive ability?

Two years ago, I conducted a unique study in Canada on

the moral reasoning capabilities of directors. Moral reasoning

involves having the ability to broker a solution among

individuals who are party to a confl ict through collaboration,

social cooperation, and consensus building whereby everyone

considers the outcome to be fair. They may not like the outcome

because they selfi shly did not get everything they wanted but

they can agree that the fi nal decision is nonarbitrary or favoring

one stakeholder over another.

This ability is the “holy grail” of moral reasoning and

decision-making and it is most needed in the boardroom

where Canadian directors are legally required “to make

decisions in the best interests of [their] organizations

while taking into account the interests of various

stakeholders.” Does my research mean that men are not

capable of complex moral reasoning? Not at all. In fact,

complex moral reason was the highest-ranked reasoning

skill for both men and women. It’s just that women seem

to be signifi cantly better at it on average.

A staggeringly small percentage of Fortune 500

and FTSE 100 companies are led by female CEOs.

In your opinion, why is this the case and how can

it be changed?

Getting to the top in these companies is simply a

much longer road than in other corporations. And so,

depending on whether a Fortune 500 fi rm embraced

gender equality in the C-suite 20 years ago or not,

it’s going to aff ect the number and speed with which

women are moving into the highest echelons of

those companies.

Today, smart boards know that they have a choice: to

either be on the gender equality train or under its tracks.

The issues hindering this are probably still the classic

ones. Are younger or junior executive women being

mentored by senior executives in the way their male

counterparts are? Are women being given the same

“emerging leader” development opportunities as men?

And are boards insisting that their C-suite executives

[and recruiting fi rms] include women in their succession

planning activities and outside executive searches?

How would you encourage male “gatekeepers” to take

a more proactive stance toward the advancement of

women into C-level roles?

The key to the advancement of women in the workplace

lies in creating the same opportunities as those that currently

exist for men: mentoring, emerging leader development

programs, and succession planning — both at the C-suite

and board level.

Furthermore, I say to those currently at the board level, to

be bold and stop worrying about “being part of the gang.”

Don’t concern yourself with being excluded if you don’t

go along with your fellow directors. Sometimes the board’s

norms and customs need to be changed or ignored because

they are either outdated or just plain inappropriate.

BREAKING BARRIERSDr. Chris Bart, CEO of Corporate Missions Inc. and founder of The Directors College, addresses the “gatekeepers” who must take critical steps to advace women into the C-suite.

SPEC

IAL SECTION



REINVENT YOUR BUSINESS MODEL TO GAIN A NEW EDGE IN THE MARKETWhether it’s Citigroup or Nintendo, it’s all about serving customer needs.BY LIZ WILLDING

INS-Spring2014-businessmodels.indd 52 5/13/14 11:09 AM


According to the Harvard Business Review, Citigroup

went from being “the fi rst true global ‘fi nancial supermarket,’

and a business model to be envied, feared, and emulated” with

a 2006 market capitalization of $274 billion to being worth less

than $16 billion in 2009. Having lost $250 billion in value from

its peak, Citigroup was forced to accept billions in government

bailout funds to help reverse its downward spiral.

What happened? For starters, the economy sank into a

recession during the 2007-2008 time period, creating an

interbank credit crisis. Often called the worst global recession

since World War II, the fallout resulted in high levels of household

debt, trade imbalances, and a U.S. subprime mortgage crisis.

Sweeping legislative changes were also brought about by The

Credit Card Accountability Responsibility and Disclosure

Act of 2009 and The Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010, eff ectively changing the rules

of the game for the banking industry by impacting everything

from marketing, underwriting, pricing, billing, and disclosure

requirements.

At the International Strategy & Investment Group’s 2011

Conference, Vikram Pandit, Executive Chairman of TGG and

then Citigroup CEO, outlined three key steps Citi took to

reinvent itself in response to sweeping economic and legislative

changes. First, he explained that the company abandoned the



REINVENT YOUR BUSINESS MODEL TO GAIN A NEW EDGE IN THE MARKETWhether it’s Citigroup or Nintendo, it’s all about serving customer needs.BY LIZ WILLDING



“supermarket” model, opting to “get back to the basics of

banking — taking deposits, making loans, focusing on clients,

and supporting the real economy.” To raise cash, they divested a

multitude of “non-core” businesses and assets to become leaner.

Second, Pandit notes that a number of adjustments were made to

their business model to fi t with the new regulatory environment;

and, third, remaining businesses were realigned with identifi ed

drivers for global growth, “particularly the rise of the emerging

market consumer and the explosion in trade and capital fl ows

within emerging markets.”

At Citigroup’s 2013 annual meeting, current CEO Michael

Corbat commented on the company’s dramatic turnaround,

noting “our third full year of profi tability since the fi nancial

crisis,” with each core business showing positive momentum.

While he acknowledged that the “markets and a more favorable

credit environment provided some wind at our backs,” he also

emphasized the impact of improvements “through our own

eff orts,” which have resulted in continued gains in investment

banking and growth year-over-year in loans and deposits in

core businesses.

MAPPING THE FUTUREWhile Citigroup’s eff orts to reinvent its business model

were Herculean, Greg Trueblood, a California-based Insigniam

consultant, says that in most cases with“new business models

come small adjustments in how an organization does business.”

Trueblood cites Dell as a classic example of a company

introducing a totally new business model to create a true

market disruption. “Dell only built a computer after it received

a customer’s order,” versus stamping out thousands of standard

systems. “That one key diff erence in how they fulfi ll customer

orders opened huge revenue growth

in an otherwise crowded space.”

He cites video gaming as another

example. “Until the Nintendo

Wii came along, most video

game manufacturers competed

on processing power. As game

consoles became more powerful,

manufacturers made less and less

money on the consoles and more

on the games through licensing. It

evolved into a ‘give away the razor

but charge for the blades’ strategy,”

says Trueblood.

“Nintendo challenged this by

asking one relatively simple question:

‘How can we make money on

consoles?’ That question

spurred them to create a new

market of casual gamers [often,

large families] with lower-

powered, easy-to-use game

systems. That’s the whole

idea behind business model

innovation: small changes

leading to big results.”

Whether spurred due to

crises, as with Citigroup, or

meeting strategic growth

targets, like Nintendo,

Trueblood says the

fundamentals of business

model transformation are

essentially the same. “We use

a Business Model Map. It

outlines the major ingredients

of an organization’s business

model — including things like the manner in which it gets

paid by customers, the value proposition it off ers, the resources

the business relies on, etc.”

The Business Model Map is a visual representation of business

model innovation, Trueblood explains. “From these ingredients

we can graphically describe the company’s recipe for success,

and more importantly, fi nd ideas for a new formula.” However,

Trueblood off ers a word of caution: “When you make one small

change, such as how much a product costs or how customers

interact with it, it impacts the rest of the business model.”

In some cases, customer needs have yet-to-be-articulated.

In the case of the iPad, for

instance, Apple created a product

customers didn’t know they

needed until they experienced it.

The best way to identify

customer needs — real or

envisioned — is to form a

team consisting of people from

multiple business functions

to dedicate quality time to

brainstorming. The job of this

team is to identify potential gaps

the organization can exploit by

creating a new business model

that is value, customer, fi nance,

and resource driven.

Value-driven solutions create a



whole new value proposition, much like the Dell

example, based on consumer behaviors such as the

desire to customize. Customer-driven solutions

are all about fi lling a yet-to-be-addressed need,

often creating a new target audience such

as families (versus hard-core gamers) in the

Nintendo example. Finance-driven innovations

create new revenue streams, cost structures, and

pricing mechanisms; Apple iTunes serves as a

brilliant example. Resource-driven innovation

originates from an organization’s existing

infrastructure or partnerships to expand or

transform the business model, which is where

Citigroup would appropriately fall.

Because business models, and life, in general,

are rarely linear, it is possible to see overlaps

between the types of solutions, so it is best not

to get too hung up in categorization. The main thing is to cleanly fi nd the gaps to

create new and innovative ways to serve customer needs.

In his address to the Wharton students, Pandit refl ected on his early business

experiences and noted, “There are two things that matter above all: integrity and

quality. Was our work guided at all times by the best interest of the client? And, was

it fi rst class in every respect?” If so, he also emphasized the importance of sticking to

your plan. “We had to be resolute in staying the course. We were second guessed from

the outside — and sometimes from the inside — almost continuously. The temptation

to swerve from the plan at times was overwhelming.” However, once the “rough seas”

were behind them, Citigroup emerged as a “much leaner company, one completely

focused on serving clients,” restoring both its profi tability and credibility.

ONCE THE “ROUGH SEAS” WERE BEHIND THEM, CITIGROUP EMERGED AS A “MUCH LEANER COMPANY, ONE COMPLETELY FOCUSED ON SERVING CLIENTS,” RESTORING BOTH ITS PROFITABILITY AND CREDIBILITY.

Amount of value Citigroup lost after the Great Recession. After having to accept

government bailout funds, Citigroup turned to restructuring its business plan to

turn itself around.

CITIGROUP’S STEPS TO REINVENTION

A number of adjustments were made to the business model to fi t with the new regulatory environment.

2

The company abandoned the “supermarket” model, opting to “get back to the basics of banking — taking deposits, making loans, focusing on clients, and supporting the real economy.”

1

Remaining businesses were realigned with identifi ed drivers for global growth, “particularly the rise of the emerging market consumer and the explosion in trade and capital fl ows within emerging markets.”

3

$250BILLION



“supermarket” model, opting to “get back to the basics of

banking — taking deposits, making loans, focusing on clients,

and supporting the real economy.” To raise cash, they divested a

multitude of “non-core” businesses and assets to become leaner.

Second, Pandit notes that a number of adjustments were made to

their business model to fi t with the new regulatory environment;

and, third, remaining businesses were realigned with identifi ed

drivers for global growth, “particularly the rise of the emerging

market consumer and the explosion in trade and capital fl ows

within emerging markets.”

At Citigroup’s 2013 annual meeting, current CEO Michael

Corbat commented on the company’s dramatic turnaround,

noting “our third full year of profi tability since the fi nancial

crisis,” with each core business showing positive momentum.

While he acknowledged that the “markets and a more favorable

credit environment provided some wind at our backs,” he also

emphasized the impact of improvements “through our own

eff orts,” which have resulted in continued gains in investment

banking and growth year-over-year in loans and deposits in

core businesses.

MAPPING THE FUTUREWhile Citigroup’s eff orts to reinvent its business model

were Herculean, Greg Trueblood, a California-based Insigniam

consultant, says that in most cases with“new business models

come small adjustments in how an organization does business.”

Trueblood cites Dell as a classic example of a company

introducing a totally new business model to create a true

market disruption. “Dell only built a computer after it received

a customer’s order,” versus stamping out thousands of standard

systems. “That one key diff erence in how they fulfi ll customer

orders opened huge revenue growth

in an otherwise crowded space.”

He cites video gaming as another

example. “Until the Nintendo

Wii came along, most video

game manufacturers competed

on processing power. As game

consoles became more powerful,

manufacturers made less and less

money on the consoles and more

on the games through licensing. It

evolved into a ‘give away the razor

but charge for the blades’ strategy,”

says Trueblood.

“Nintendo challenged this by

asking one relatively simple question:

‘How can we make money on

consoles?’ That question

spurred them to create a new

market of casual gamers [often,

large families] with lower-

powered, easy-to-use game

systems. That’s the whole

idea behind business model

innovation: small changes

leading to big results.”

Whether spurred due to

crises, as with Citigroup, or

meeting strategic growth

targets, like Nintendo,

Trueblood says the

fundamentals of business

model transformation are

essentially the same. “We use

a Business Model Map. It

outlines the major ingredients

of an organization’s business

model — including things like the manner in which it gets

paid by customers, the value proposition it off ers, the resources

the business relies on, etc.”

The Business Model Map is a visual representation of business

model innovation, Trueblood explains. “From these ingredients

we can graphically describe the company’s recipe for success,

and more importantly, fi nd ideas for a new formula.” However,

Trueblood off ers a word of caution: “When you make one small

change, such as how much a product costs or how customers

interact with it, it impacts the rest of the business model.”

In some cases, customer needs have yet-to-be-articulated.

In the case of the iPad, for

instance, Apple created a product

customers didn’t know they

needed until they experienced it.

The best way to identify

customer needs — real or

envisioned — is to form a

team consisting of people from

multiple business functions

to dedicate quality time to

brainstorming. The job of this

team is to identify potential gaps

the organization can exploit by

creating a new business model

that is value, customer, fi nance,

and resource driven.

Value-driven solutions create a


SUMMER 2014

What if you pursued the art of strategy much

like the art of war, instead of approaching it as an arduous

exercise? Imagine the thrill of identifying competitive weapons

— unique assets that provide true value to the customer —

deftly aligning them against your competitors to knock them

off balance, clearing the way for a big score.

To do so requires going beyond simply analyzing the

strengths, weaknesses, opportunities, and threats of competitors

in a typical SWOT analysis, says Allan Cohen, a Boston-based

strategy and organizational alignment

consultant. While all enterprises have

assets, the real “art” is to identify those

that constitute a true competitive

weapon and own them.

Cohen asks, “Is it something

that can provide you a long-term

advantage? Can it either block people from getting in or

continue to enable you to raise the bar. Even if someone tries

to come into your space, can you beat them next year?”

Unfortunately, competitive weapons are rarely immortal,

explains Shideh Sedgh Bina, Insigniam co-founding partner

and editor-in-chief of Insigniam Quarterly. “It is important to

keep reevaluating them, and, as the competitive landscape and

market changes, to turn obvious, and not so obvious, assets into

new competitive weapons. Like any investment, these prized


Turn your assets into competitive weapons.ARM YOUR ARSENALBY GUILLAUME PAJEOT

INS-Spring2014-CompetitiveWeapons.indd 56 5/16/14 8:50 AM


assets must also be nurtured, whether they are products, services,

intellectual property, trade secrets, know-how, a unique brand

position, exclusivity, or even people.”

Apple off ers a good example of reinventing to react to change,

Cohen explains. “They are ahead but will they stay ahead? How

much of their success was because of Steve Jobs? There was not

enough insurance in the world to insure Steve Jobs. He knew

how to take strategic assets and overturn multiple, diff erent

markets. Apple was and is a personal computing company. They

didn’t invent it. They invented how to deliver it.”

So where do you start? Bina’s advice is to fi rst consider your

competitors, which, like your assets, may not be as obvious as

you think. For instance, competitors can, and often do, come

from businesses that aren’t selling a like product in your market.

“In consulting,” she explains, “you may lose a customer

because they decided to do a project themselves. They didn’t

choose anyone else, but you still lost

the business. In another case, your

customer may consider a similar

product. Perhaps you are a cake

caterer and the customer decides

to rule out cake for candy or fruit,

versus another cake product. The

bottom line is that customers do

what they want and don’t always

come back to the same category.”

In many ways, it is more about

“preventing competition,” than winning a head-to-head

competition. “There are very few industries that are purely

competitive,” says Cohen, noting that blocking and tackling

can be equally eff ective.

“The top soda providers are especially adept at keeping

COMPETITORS CAN, AND OFTEN DO, COME FROM BUSINESSES THAT AREN’T SELLING A LIKE PRODUCT IN YOUR MARKET.


SUMMER 2014

What if you pursued the art of strategy much

like the art of war, instead of approaching it as an arduous

exercise? Imagine the thrill of identifying competitive weapons

— unique assets that provide true value to the customer —

deftly aligning them against your competitors to knock them

off balance, clearing the way for a big score.

To do so requires going beyond simply analyzing the

strengths, weaknesses, opportunities, and threats of competitors

in a typical SWOT analysis, says Allan Cohen, a Boston-based

strategy and organizational alignment

consultant. While all enterprises have

assets, the real “art” is to identify those

that constitute a true competitive

weapon and own them.

Cohen asks, “Is it something

that can provide you a long-term

advantage? Can it either block people from getting in or

continue to enable you to raise the bar. Even if someone tries

to come into your space, can you beat them next year?”

Unfortunately, competitive weapons are rarely immortal,

explains Shideh Sedgh Bina, Insigniam co-founding partner

and editor-in-chief of Insigniam Quarterly. “It is important to

keep reevaluating them, and, as the competitive landscape and

market changes, to turn obvious, and not so obvious, assets into

new competitive weapons. Like any investment, these prized


Turn your assets into competitive weapons.ARM YOUR ARSENALBY GUILLAUME PAJEOT



competitors out of their space,” he notes. “Coca-Cola and

Pepsi buy shelf space to keep competing products out. They

don’t allow room for others.”

So, how can you zero in on those assets that can help you

win big against your competitors? It starts by asking a very

fundamental question: “What do I have that my competitors

don’t?” says Bina.

“Invariably you’ll end up with a list consisting of everything

other than the basics to stay in business. Take each asset and

rank it against its high value to the customer, as well as how

diffi cult it is to duplicate,” she explains. “Ultimately, your

weapons will emerge, and they may look very diff erent from

what you expect, especially if your market has undergone

major changes.”

Consider the case of a major healthcare system, which

came to the realization that some of their facilities, originally

considered their most prized strategic assets, were actually

weighing them down. Due to healthcare reform and the trend

toward greater outpatient care, amassing more and more beds

is now seen as a weakness rather than a strength.

“Taking a hard look at their competitive assets forced

this enterprise to rethink their value, examining what they

were going to do if all of these hospitals no longer provided

competitive value?” Bina says. “Some of their once-prized

locations landed on the ‘rethink’ side of the competitive

weapon matrix, with strategic discussions shifting to what to

do with the real estate. Suggestions ranged from turning one

facility into an ambulatory care center to divesting others.

“With this same organization, the good news is that less

tangible assets rose to the surface, including how to manage a

growing stable of best practices as a competitive weapon. They

found themselves asking, ‘Which were competitive weapons?

Which could be outsourced?’ Ultimately, embedded innovation

emerged as a key competitive weapon and led to rethinking its

value, as well as how to prioritize resources around it.”

In the food and consumer goods industry, which is dominated

by major players, Bina notes how another company realized

that there was great value in its “smallness.” Unlike the industry

giants, they turned their ability to be faster and more agile into

a competitive weapon, beating their competitors on time-to-

market, responsiveness to market shifts, and other variables.

Conversely, a large global food company used its local

autonomy to create products specifi c to the regions it served —

and won market share as a result. Another food company found

its point-of-sale expertise gave it dominance over competitors

that were lacking in this area.

In all of these cases, personalization in the context of each

business was an important consideration.

“Sometimes it also is possible to

take a perceived liability and leverage

it as a competitive weapon,” Bina

adds, citing another example of a

company in the food industry that,

although a dominant player in most

of its channels, was losing out in one

channel based on a diff erent, higher-

cost business model. By leveraging

its category management and

marketing know-how from its other

channels, and bundling to include

solution selling, it was able to bring

its pricing in line.

Ultimately, when identifying strategic assets, it is important to

start with a bold vision and ambition. Once you’ve identifi ed

your competitive weapons that support what you want to be,

it’s all about “placing the bet and making it work,” says Cohen.

“Strategy is just choice-making. Having intelligence helps, but

“SOMETIMES IT ALSO IS POSSIBLE TO TAKE A PERCEIVED LIABILITY AND LEVERAGE IT AS A COMPETITIVE WEAPON.” — SHIDEH SEDGH BINA, INSIGNIAM CO-FOUNDER



it is always informed risk-taking. Once you

place the bet, you have to commit and make

it work.”

One big question, he adds, is, “Do you

have the leverage to make it work? Yahoo,

for instance, is still struggling, even though

they have a huge installed base. They have

a lot of environments that people want to

hang out in, but they confuse everybody,

even the strategists. Who are they? Maybe

they are content publishers. It is hard to see

a big future.”

In this sense, Cohen stresses that, “Strategy is always in play.

It’s never fi nished. What does get fi nished are the operational

plans. Anytime a disruption happens in the market, it’s time to

have that strategy conversation again.”

And, “even a winning bet won’t last forever,” he adds,

although, in some instances, “it can last a lifetime. Look what

McDonald’s did. It was standardized, predictable, and low cost.

There was a high customer turnover. They started tanking

when they began off ering gourmet coff ee and people started

hanging around too long. It hurt their high turnover rate.”

Companies like Yahoo and McDonald’s would do well to

rethink their competitive weapons, asking, “Can the way I’ve

been competing succeed?” If not, a closer look at strategic

assets to identify new competitive weapons may be just what

the doctor ordered.

Companies such as Yahoo and McDonald’s should be reevaluating their strategic assets to identify new competitive weapons.



competitors out of their space,” he notes. “Coca-Cola and

Pepsi buy shelf space to keep competing products out. They

don’t allow room for others.”

So, how can you zero in on those assets that can help you

win big against your competitors? It starts by asking a very

fundamental question: “What do I have that my competitors

don’t?” says Bina.

“Invariably you’ll end up with a list consisting of everything

other than the basics to stay in business. Take each asset and

rank it against its high value to the customer, as well as how

diffi cult it is to duplicate,” she explains. “Ultimately, your

weapons will emerge, and they may look very diff erent from

what you expect, especially if your market has undergone

major changes.”

Consider the case of a major healthcare system, which

came to the realization that some of their facilities, originally

considered their most prized strategic assets, were actually

weighing them down. Due to healthcare reform and the trend

toward greater outpatient care, amassing more and more beds

is now seen as a weakness rather than a strength.

“Taking a hard look at their competitive assets forced

this enterprise to rethink their value, examining what they

were going to do if all of these hospitals no longer provided

competitive value?” Bina says. “Some of their once-prized

locations landed on the ‘rethink’ side of the competitive

weapon matrix, with strategic discussions shifting to what to

do with the real estate. Suggestions ranged from turning one

facility into an ambulatory care center to divesting others.

“With this same organization, the good news is that less

tangible assets rose to the surface, including how to manage a

growing stable of best practices as a competitive weapon. They

found themselves asking, ‘Which were competitive weapons?

Which could be outsourced?’ Ultimately, embedded innovation

emerged as a key competitive weapon and led to rethinking its

value, as well as how to prioritize resources around it.”

In the food and consumer goods industry, which is dominated

by major players, Bina notes how another company realized

that there was great value in its “smallness.” Unlike the industry

giants, they turned their ability to be faster and more agile into

a competitive weapon, beating their competitors on time-to-

market, responsiveness to market shifts, and other variables.

Conversely, a large global food company used its local

autonomy to create products specifi c to the regions it served —

and won market share as a result. Another food company found

its point-of-sale expertise gave it dominance over competitors

that were lacking in this area.

In all of these cases, personalization in the context of each

business was an important consideration.

“Sometimes it also is possible to

take a perceived liability and leverage

it as a competitive weapon,” Bina

adds, citing another example of a

company in the food industry that,

although a dominant player in most

of its channels, was losing out in one

channel based on a diff erent, higher-

cost business model. By leveraging

its category management and

marketing know-how from its other

channels, and bundling to include

solution selling, it was able to bring

its pricing in line.

Ultimately, when identifying strategic assets, it is important to

start with a bold vision and ambition. Once you’ve identifi ed

your competitive weapons that support what you want to be,

it’s all about “placing the bet and making it work,” says Cohen.

“Strategy is just choice-making. Having intelligence helps, but

“SOMETIMES IT ALSO IS POSSIBLE TO TAKE A PERCEIVED LIABILITY AND LEVERAGE IT AS A COMPETITIVE WEAPON.” — SHIDEH SEDGH BINA, INSIGNIAM CO-FOUNDER


IQ BOOST

BY KATERIN LE FOLCALVEZPARTNER, INSIGNIAM

COLLECTIVE COHESION — HOW TO LEVERAGE THE COLLECTIVE BRAINPOWER OF YOUR EXECUTIVES

There is a phenomenon in sociology

called collective intelligence, which occurs

when shared intelligence emerges from a

group of knowledgeable individuals. In other

words, raising your organization’s IQ is all

about getting more minds around the table,

because, pardon the cliché, but “two (or

more) heads are better than one,” which is

especially true when it comes to creating and

executing effective business strategies.

Ultimately, the role of the executive team

is simple: Cohesively create an atmosphere

for the strategy to be powerfully executed. To

build a high-performing executive team, the

fi rst challenge is to change the way executive

members view its importance, shifting the

viewpoint of the committee from something

that occurs outside of their daily work to

making it their primary job.

When leaders view their executive team as

their primary work group, or foundation, the

benefi ts can extend well beyond the specifi c

strategic problems they are addressing.

First, relying on a primary executive team

can create better collaboration across

regions. Second, it provides agility and better

utilization of talent across the organization.

And, ultimately, it sends a loud and clear

message to employees that their leaders are

unifi ed and aren’t asleep at the helm.

Katerin Le Folcalvez is an Insigniam

partner based in Paris. She specializes

in leadership development, corporate

governance, strategy design, and executive

alignment.


INS_Spring2014_IQBoost.indd 60 5/13/14 10:57 AM

More and more, enterprises are demanding signifi cant ROI on consulting projects. That’s understandable. Hiring a consulting fi rm is never cheap. So how does 50 times ROI sound? That’s what Insigniam delivers.

By marrying breakthrough performance and innovation, we have helped our clients document, in aggregate, more than 50 times ROI on management results that they consider critical and essential to the success of their enterprise.

DID YOUR LAST CONSULTANT DELIVER?50X

RETURN ON INVESTMENT

ng s

ARE YOU READY TO SEE RESULTS LIKE THIS? Then visit insigniam.com/client-roi for more information, or call +1 610 667 7822 to talk to one of our consultants.

Insigniam 0514 back cover pages.indd 1 5/13/14 11:07 AM

IQ BOOST

BY KATERIN LE FOLCALVEZPARTNER, INSIGNIAM

COLLECTIVE COHESION — HOW TO LEVERAGE THE COLLECTIVE BRAINPOWER OF YOUR EXECUTIVES

There is a phenomenon in sociology

called collective intelligence, which occurs

when shared intelligence emerges from a

group of knowledgeable individuals. In other

words, raising your organization’s IQ is all

about getting more minds around the table,

because, pardon the cliché, but “two (or

more) heads are better than one,” which is

especially true when it comes to creating and

executing effective business strategies.

Ultimately, the role of the executive team

is simple: Cohesively create an atmosphere

for the strategy to be powerfully executed. To

build a high-performing executive team, the

fi rst challenge is to change the way executive

members view its importance, shifting the

viewpoint of the committee from something

that occurs outside of their daily work to

making it their primary job.

When leaders view their executive team as

their primary work group, or foundation, the

benefi ts can extend well beyond the specifi c

strategic problems they are addressing.

First, relying on a primary executive team

can create better collaboration across

regions. Second, it provides agility and better

utilization of talent across the organization.

And, ultimately, it sends a loud and clear

message to employees that their leaders are

unifi ed and aren’t asleep at the helm.

Katerin Le Folcalvez is an Insigniam

partner based in Paris. She specializes

in leadership development, corporate

governance, strategy design, and executive

alignment.


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Insigniam Quarterly Summer 2014 - Building a Competitive Cultural Edge

Leadership & Management

Transcript of Insigniam Quarterly Summer 2014 - Building a Competitive Cultural Edge