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IN DEPTH: IBM • GE Healthcare • McKinsey • Oshkosh NORTH AMERICA

www.ceo-na.com July/August 2017

INTERVIEW WITH:

REBECCA JACOBY Senior Vice President of Operations, CISCO

“There is an underlying need of speed. In addition to the traditional definition of scale, including efficiency and value, the new elements are speed and adaptability”

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IN DEPTH Technology

Speed as a

Measure

Scale

Fast information delivery and adaptability are increasingly becoming a measurement of scale for San Jose-based Cisco, as the networking giant looks to simplify processes to improve product performance and customer success. Text by Chief Executive Officer Staff

speed and adaptability are increasingly becoming key measurements of manufacturing and business scale for technology companies such networking giant Cisco, as customer success-centered processes demand faster than ever business decisions, says the company’s Senior Vice President of Operations Rebecca Jacoby.

The company, a veteran of the Fortune 500 list with US$49 billion in revenues during fiscal year 2016, is facing the unstoppable technological change of the last decades with a focus on maximizing the value of its partnerships as an integral part of the value chain and delivering the right information at the right time, she adds. As the market changes with the advent of revolutionary technologies such as cloud and mobile cloud computing and storage, Jacoby says that scale and a firm grasp of the complexities 32 J U L I O - A G O S T O 2 0 1 7

of a supply chain have become more important than ever. “The rise of the cloud has put pressure on Cisco to expand beyond its legacy networking gear business, which still brings in billions of dollars each quarter,” says the Fortune 500 entry on the company. “Everything has to do with scale, so the core thing that we need to deliver on is scale,” says Jacoby, a Cisco insider with over 22 years of experience in the company, mostly on the supply chain side of the business. “The reality is that there are capabilities that need to be improved or adapted to operate in a customer success model.” Also, in the current interconnected business environment, “there is an underlying need of speed. In addition to the traditional definition of scale, including efficiency and value, the new elements are speed and adaptability,” she adds.

NAME: Rebecca Jacoby COMPANY: Cisco Systems POSITION: SVP of Operations HQ: California, USA ANNUAL SALES: FY16 US$49.2 billion EMPLOYEES: +71,000 WWW.CEO-NA.COM 33

IN DEPTH

Jacoby is amazed by the pace of technological change in the last decades, from the advent of user friendly user interfaces such as Windows to e-commerce, and their influence in the business environment. “With e-commerce it was the first time that it was really obvious that technology changes were driving business model changes, and by business model I mean the fundamental operational processes that you need to run a business, not just commercial or HR processes but development and innovation cycles. Customer care and engagement models and those types of things were drastically changed by e-commerce.”

“How do we focus on customer success and how do we use digital technology and data and do that better than anyone else? For me that is the North Star of what the opportunity is for us and for me”

FAST AND USEFUL

Getting the right information to the right people at the right time “in the fastest possible motion … is the ultimate thing that you want to do fast if you want to get value to your customers as quickly as humanly possible.” But speed is only a part of the equation. People –including partners, employees and customers– need to be able to incorporate that influx of data and information naturally into their own activities. “You can use technology to a certain extent, but this is change and people are notoriously uncomfortable with change, so you have to blend it into their normal flow of business. That is super high-value and at our scale it has to be done digitally.” The reach of that information sharing model goes even inward, she mentions, from customer support staff taking service calls from clients, for example, and in turn providing development engineers with actionable data on how to improve Cisco’s product and service offerings. 34 J U L Y - A U G U S T 2 0 1 7

“You can use technology to a certain extent, but this is change and people are notoriously uncomfortable with change, so you have to blend it into their normal flow of business” “The corollary to speed is that Operations needs to use technology and other methodologies in order to be very flexible and adaptable,” she adds. A HISTORY IN SUPPLY CHAIN

Jacoby, a Bruce Springsteen fan that has confessed to organize family holidays around “The Boss” touring schedule, has held several positions in the company since joining in 1995, when she had already started developing a name for herself in Silicon Valley operations. Her expertise has centered mostly around operations, manufacturing and supply chain as well as IT, which eventually lead to her induction as the company’s Chief Information Officer (CIO), a role which earned her a “Superstar” CIO recognition by Forbes in 2012 and an

induction to the CIO Magazine Hall of Fame in 2015. Chuck Robbins, the company’s CEO, invited her to take on a broader operational role as a senior VP a year and a half ago, Jacoby says. The role includes the improvement of operational performance, the development of profitable growth strategies and has oversight over supply chain, IT, customer and partner services and procurement.

But the evolution has not stop. Big Data and the Internet of Things (IoT) for example, are also changing the interaction with partners, customers and final users in ways not imagined before. “I think the network plays a really critical role on that, as well as some other technologies like security and collaboration technologies. The opportunities for us come from being a very large company with a very broad set of solutions, and the trick is going to be to simplify and still create a competitive advantage through this idea of customer success. How do we focus on customer success and how do we use digital technology and data and do that better than anyone else? For me that is the North Star of what the opportunity is for us and for me.”

On the subject of leadership, the phrase “transformational change” arises frequently in conversation with the executive. She says evolving with the company as it grew into one of the largest globally in its business took a lot of looking into things and processes and how they could perform better. “We really made an effort strategically to use our own technology and the internet for our supply chain and e-commerce in a time when there were no standards, no rules, no companies doing what we wanted them to do. I ended up having the planning role when we were driving those changes in the fundamental way we were doing business in the supply change. I also somehow ended up having added to my responsibilities the teams that applied IPF (Intelligent Plant Framework) into our manufacturing,” she explains. “It turned out to be a tipping career point for me.”

“There is an underlying need of speed. In addition to the traditional definition of scale, including efficiency and value, the new elements are speed and adaptability” WWW.CEO-NA.COM 35

IN DEPTH Technology

Adding

to the value technology

mix

Jim Kavanaugh, CEO of World Wide Technology The Saint Louis, Missouri-based technology integrator had to endure difficult times, but persevered to now provide advanced design, configuration, logistics and deployment capabilities to Fortune 500 enterprises from around the world, leveraging a powerful network of business and technology partners across industries ranging from healthcare to oil and gas. Text by Chief Executive Officer Staff

for Jim Kavanaugh, CEO of privately-held World Wide Technology (WWT), to imagine the role of a leader taking the reins of an organization already in place, instead of keeping in mind what he and his company have had to endure and live through since its establishment in 1990. it is very difficult

“When I go back to the early days, probably the first five years of WWT, some of the main things were the big learning opportunities, and the relentless focus on needing to close business to stay in business,” Kavanaugh says. “In the first 3 to 5 years there were challenges that you wouldn’t normally think go with running a business. It’s a little different than thinking about the innovation, and growth and leadership programs.” 36 J U L Y - A U G U S T 2 0 1 7

The experiences obtained in those years, from finding the right people for the right positions to maintaining a rigorous financial management to achieving the correct attitudes toward the business could serve as the basis for a book on the dos’ and don’ts of being an entrepreneur. “Those are some of the things that we’ve done a good job of figuring, learning through the years and continuing to create what I’d consider a learning leadership organization, that we continue to keep our eyes and ears open, looking at that practices of companies around the world from how they manage financially, how they manage innovation, who they manage people and culture,” he adds. Also, it was no small feat for an executive then in his mid-twenties to convince the likes of Cisco, for ex-

NAME: Jim Kavanaugh COMPANY: World Wide Technology POSITION: CEO HQ: Saint Louis, USA ANNUAL SALES: FY16 US$9.4 billion EMPLOYEES: + 4,000 WWW.CEO-NA.COM 37

IN DEPTH

“EMC, now Dell EMC, and WWT have enjoyed a great partnership over the years… Jim has created a fantastic culture at WWT that reflects his personal passion and drive for innovation. This is evident with WWT’s Advanced Technology Center, which is a great example of how we are working together to disrupt the market with solutions and services that enable our customers to transform their businesses for the future” — Chris Riley, President, Americas Enterprise Sales and Customer Operations at Dell EMC.

ample, of the soundness of WWT’s business plan and of the benefits of partnering up, Kavanaugh explains. “It is something that I continue to do today.” ADDING VALUE TO TECHNOLOGY

WWT has come a long way since its humble beginnings. The company now employs thousands of engineers across the globe to help clients deploy the best technology solutions by helping them determine exactly what they need and then helping create it with the help of its vast, premium network of tech partners, which include large names such as Cisco, Intel, Dell EMC and Hewlett Packard.

building our ATC, this ecosystem of labs that we built around all the different technology products, platforms and solutions that we build, from cloud, cyber security architectures, hyper-converged application development solutions, voice video and collaboration.”

That environment also helps with another pillar of the technology paradigm the world is living in, as constant change means there has never been a bigger need for constant learning, he says. “People need to understand that coming out of school, whether you got a four-year degree or your Masters or PhD, in this world, in this space, you’ve got to focus on relentless learning every day, because the world of technology is continuing to change.”

That cloud-based infrastructure, created around 8 years ago to move up on the value proposition to customers, has been “incredibly well received” by customers and partners alike. Also has also helped the company better train its own personnel and make it easier to build and reshape systems and solutions in what the executive calls a “sandbox environment.”

A UNIFYING SET OF VALUES

Growing from a small systems integrator on the banks of the Mississippi River to a global technology company has demanded not just to convince suppliers of the convenience of doing business with WWT, but also the creation of a set of internal values and even a shared business language, Kavanaugh says. “Everybody speaks the same language, whether you’re in China or you’re in St. Louis, they understand the behaviors they’re expected to respect, and teamwork, and the mantra of doing whatever it takes to get the job done for our customers and our partners.”

Those capabilities are key to WWT’s differentiation as a value-added partner instead of a simple technology supplier, Kavanaugh says. “There are times when you can be doing business with an organization, but there is a very small added value there and you end up at risk of being displaced by the customer, which can decide to do it by itself. So the focus was: how do we add more value? And that’s one thing that we looked at as we were 38 J U L Y - A U G U S T 2 0 1 7

Fotografías:

Three Integration Technology Centers (ITCs) in Saint Louis, Amsterdam and Singapore bring the business closer to customers in the Americas, Europe and Asia. Beyond that, the company’s 24/7 Advanced Technology Center (ATC) has created a collaborative ecosystem for all stages involved in standing up IT architecture, from design to demonstration, to implementation to training.

The executive takes pride in the fact that WWT has managed to outperform itself, doubling its bottom and top line every five years to achieve its current, over US$9.3 billion top line. That, he mentions, has a lot to do with taking the right

WWT has managed to outperform itself, doubling its bottom and top line every five years

risks without overexposing the operation, and warns about the risks of losing sight of the longterm goals vis-à-vis immediate success. “There’s a lot of organizations that will have a successful quarter, or a year, and then do some things that drive the organization under. Some owners just get infatuated with the money that they’re making at that point so they lose sight of what got them to where they’re at that point in time, so they basically want to cash out, or they just don’t want to work as hard as they did in the past, or they just don’t know how to put the boxes in place to continue to grow.” Regarding the company’s future growth, Kavanaugh says he is looking into the continued strengthening of its supply chain infrastructure and its increasingly complex network of knowledge around tax and international law required to supply large global companies across different geographies. Another goal is to continue reinforcing the role and brand of WWT as a trusted advisor for its customers. “Instead of a customer going to Cisco, Dell EMC and Intel and asking them ‘hey, how’s your product here?’, we want them to come to us so we can show them, for example, five different firewalls and see how they work within their environment.” WWW.CEO-NA.COM 39

IN DEPTH Fintech

Bill Stephenson:

Sophisticated Simplicity DLL, a global provider of financial solutions, is using cutting-edge technology to simplify the customer experience and revolutionize the industry. Text by Stephen Woodman

Steve Jobs once commented: “Simple can be harder than complex.” His words have proven to be prophetic, particularly when looking at the heavily regulated banking and financial services industry, which is still mired in decades old legacy computer systems and paper-heavy loan documentation. Bill Stephenson, CEO and Chairman of the Board for DLL, a leading global vendor finance company, recognizes this challenge and is focused on bringing simplicity to the world of equipment leasing and finance.

Fotografías:

the legendary

40 J U L I O - A G O S T O 2 0 1 7

Technology, according to Stephenson, is the key to unlocking the secret of simplicity. “With the right technology and solutions, a financial transaction is something that can be done in minutes and with minimal burden placed on the salesperson or the customer,” Stephenson says. “Our goal is to provide our vendor partners and their customers with a completely paperless and digital solution that is easy to understand and use. That is the direction we are taking DLL and where we are investing as a company.”

The primary business of DLL is working closely with market leading equipment manufacturers and their distribution partners, such as independent dealers, providing financial products and solutions that help these ‘vendors’ sell more of their products to their end customers. With a portfolio in excess of US$30 billion and employing more than 4,000 people around the world, the company is a wholly owned subsidiary of Rabobank Group, the Dutch banking giant. “Right now we’re the only vendor finance leasing company with a consistent delivery model in more than 30 countries and that gives us a unique advantage. Our global footprint enables us to help international vendors in their key mature markets as well as new, emerging countries.” Yet this unique size also presents a special set of challenges. “Staying agile and flexible is very important. Being able to react quickly and anticipate market trends has always been in our DNA and the challenge is to continue that as we grow.” Rabobank began life more than 120

NAME: Bill Stephenson COMPANY: De Lage Landen International BV POSITION: CEO HQ: Eindhoven, The Netherlands ANNUAL SALES: FY16 +US$24 billion EMPLOYEES: +4,000 WWW.CEO-NA.COM 41

IN DEPTH

years ago as a specialized agricutural lender and its subsidiary continues this commitment to the food and farming sector. But DLL is also heavily involved in other industries, including construction, transportation, industrial, office technology, healthcare and clean technologies such as energy efficient LED lighting, as well as solar and wind projects. Stephenson’s diversity of experience reflects the company’s broad range of projects. Educated at Florida State University and Harvard Business School, Stephenson, an American, became the first non-Dutch national appointed as CEO of the company in 2014. After joining DLL more than 30 years ago, he has held several different leadership positions within the organization and brings a high degree of specialized knowledge to the role. Stephenson is a firm believer in that specialization is vital to business, allowing his company to understand individual customer’s situations and build successful relationships on the basis of that understanding.

“We put the customer at the center of everything we do. We hire people from within the industry and teach them finance. They have sold the equipment and can ‘talk shop’, which gives them immediate credibility. If you’re a forklift manufacturer and your financing representative used to work in the forklift industry, then you know they have insight into the challenges, obstacles and problems that you face each and every day.”

“DLL is more than just our financial partner. They are a solutions provider. As our business evolves, DLL continues to look for ways to help us help our customers, and that is what is very special about them. Bill Stephenson instills this ‘customer first’ relationship from the top down and it is one of the primary reasons they are so successful”

Stephenson is also passionate about reducing the distance between company leadership and clients. Three years ago DLL underwent a massive structural overhaul with the aim of “delayering” the organization. “There were up to 12 layers between the customer and the CEO and we reorganized to make that a maximum of six layers.”

— whit perryman, ceo at vermeer texas-louisiana

Stephenson is keen to foster “a culture of empowerment,” where every member of the organization is aware of their importance. “Everybody knows where they contribute and where they fit in. We do role and responsibility reviews, so from the mailroom to the CEO we know exactly what our role is in providing value to clients.” DLL members around the world volunteered a total of 9,496 hours of their time to philanthropic initiatives

This customer-centered approach is also key to Stephenson’s belief in simplification. As systems grow ever more complex, he is adamant that DLL can make the point-of-sale transaction a truly minimalist experience. “On larger financial transactions, the equipment sales representative closes the deal at the customer’s office, commutes back to their own office and submits all of the documentation to a finance manager. They sometimes wait more than one or two business days for a credit approval and other updates, before driving back out to the customer in order to get lease documents signed. It is far from efficient, for both the sales representative and customer. We want the entire process to be measured in seconds or minutes, not days.”

Fotografías:

Technology is central to making this goal a reality and DLL is determined to stay ahead of the game when it comes to innovation. “We’ve developed and patented a mobile app where an equipment sales representative can finalize the configuration of the equipment and accessories with a customer online and collect the preliminary data for a credit

42 J U L Y - A U G U S T 2 0 1 7

WWW.CEO-NA.COM 43

EQUIPMENT THAT STANDS UP. SUPPORT THAT STANDS OUT.

IN DEPTH

check. In many cases, our online credit scoring is instantaneous and the lease or loan documentation can be generated electronically. The customer may even execute the documents electronically, which means that some transactions can be completed in a matter of minutes.” In an effort to increase both efficiency and speed in bringing solutions to the market, DLL continues to evaluate technology delivered by a variety of external suppliers in addition to building certain proprietary applications and services in-house. “Our core business is not IT and application development. We are realizing more and more that we don’t need to build everything. Why should DLL build electronic documentation and signature capabilities, for example, when there are companies out there that specialize in providing these services and work to continually upgrade and maintain them?” In fact, Stephenson believes that competitors in the banking and financial services sector who stick to this strategy will be at “a distinct competitive disadvantage,” and “unable to respond to where DLL plans on driving the industry.” Technology is only one half of the equation, according to Stephenson. There also needs to be a focus on products and solutions that meet the evolving needs of customers. “Fundamental to our plan is a focus on product innovation as well, so that we provide our vendor partners with the products they 44 J U L Y - A U G U S T 2 0 1 7

DLL US Headquarters. Offices in more than 30 countries across the globe

need to win. For example, in many markets, as we continue to see a shift away from equipment ownership toward usage–based models, so DLL has introduced more flexible solution financing where customers can pay us by the hour for forklifts, pay on a ‘per scan’ basis for an MRI machine or ‘per copy’ basis for a copier.” The role of people cannot also be underestimated. Even with the most efficient digital processes there will always be transactions with special requirements that require human intervention and troubleshooting. Stephenson shared that DLL is also piloting a ‘virtual office’ concept that will enable staff to ‘plug in’ to provide live online support or field inbound service and inquiry calls. “This concept is a win-win for our employees and our customers. An employee looking for a more flexible work schedule or seeking to eliminate a long daily commute might now have the opportunity to customize their hours and work from home.” Bringing simplicity to the complex can be a long journey, but DLL is fully committed. “We will continue to focus on the business of our vendor partners, specializing in their markets. That has been the key to our success for over 40 years and will continue to be for decades to come.” Stephenson’s personal commitment is unwavering as well. “I like the second half of that Steve Jobs quote on simplicity even better… ‘once you get there, you can move mountains.’” www.vermeertexas.com

866-898-3763

Vermeer Texas-Louisiana has been employee-owned since 1995. Which means that every employee understands the value of delivering world-class customer service. To every customer. Every time.

IN DEPTH Technology

Supporting the Global Economy through

Transformation Technology: Martin Jetter, Senior Vice President of IBM Global Technology Services

In a rapidly changing technological landscape, Martin Jetter believes that people and willingness to adapt drive innovation. Text by Paul Imison + Photos by Fernando Paz

Fotografías:

as someone at the forefront of technology transformation, Senior Vice President of IBM Global Technology Services (GTS) Martin Jetter understands that the entire global economy relies on the quality of service that his company provides. GTS considers itself the company that designs, builds, and operates the IT infrastructure that the world’s economy depends on to do business, and Jetter is responsible for ensuring that things keep running smoothly.

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“Let me give you a very simple example,” he says. “When you pick up your smartphone, you don’t necessarily care where the server is located, about the security of the apps. You do not accept that it could go down, and geographically you don’t care if you are in New York, Berlin, or London. You need it to always be available. At GTS, we ensure that the critical infrastructures on Planet Earth work 24/7 and people can always depend on the very same service quality wherever they are.”

In the case of business clients, it is a huge responsibility. Operating in no fewer than 170 countries, 120 of GTS’ largest clients represent a staggering 77% of foreign exchange transactions. According to IBM’s estimate, their services support clients that are collectively responsible for 22% of worldwide insurance premiums, 86% of daily credit card transactions and 50% of hypermarket sales worldwide, and their presence is rapidly increasing in the realm of mobile connections and the automobile and airline industries. NAME:

Yet the nature of the industry is such that the company has had to constantly evolve and innovate, most recently shifting from a Systems Integrator to a Service Integrator model and forming a number of key global partnerships. This willingness to adapt, along with its renowned leadership and operational excellence, has enabled GTS to maintain its extraordinary commercial success, yet Jetter insists that amid

Martin Jetter COMPANY:

International Business Machines POSITION:

SVP HQ:

New York, USA ANNUAL SALES:

FY16 US$79.9 billion EMPLOYEES:

380,000

WWW.CEO-NA.COM 47

IN DEPTH

Deutschland as an application engineer in 1986. He became manager of the industrial sector of IBM Central Europe in 1999 and was later Country General Manager of both IBM Germany and IBM Japan. Jetter took over as SVP of GTS in January 2015, receiving notice of the promotion on his birthday. “I was in a press interview in Tokyo and my Japanese secretary came and passed me a pocket card to give me the news. Quite frankly, it turned out to be an incredible opportunity to contribute to the IBM company, to take the single biggest segment of IBM to the next level of performance.” Since Jetter took over, GTS has seen ten consecutive quarters of backlog growth and in the fourth quarter of last year alone signed sixteen new contracts each exceeding $100 million in value. “We have about 10% market share and we have twice the size of our nearest competitor, so this is big-scale business,” Jetter says.

the incredibly complex technology, at the heart of GTS’ success is people. “I’m a very strong believer that people make the change, people make the difference,” he says. “So when you transform, you have to have a very clear view of what you’re going to do, you have to incorporate your people and do it in a way in which people understand where you are heading.” Among the experiences that have shaped his leadership style, Jetter cites his background in education and engineering as key to his ability to recognize and solve problems. “From an educational background, I’m an engineer, so I learned how to work out structural problems in a clear way very early on,” he explains. “Later, my career was very much influenced by the fact that I was asked if I was willing to go abroad.” Born in Germany, Jetter graduated from the University of Stuttgart with a Master’s degree in Mechanical Engineering and started to work for IBM 48 J U L Y - A U G U S T 2 0 1 7

Martin Jetter Born in Germany, is a computer engineer and businessman. He studied at University of Stuttgart and received a Master’s degree in mechanical engineering from the same university

To address their clients’ needs, GTS is currently making two major transformative shifts in the industry – building and running hybrid cloud infrastructure and moving from Systems Integrator to Services Integrator. Put simply, as companies increasingly rely on cloud or hybrid cloud technology, their support needs become more complex. GTS offers unique services to detect, identify and repair apps and servers before they fail using innovative cognitive systems like IBM Watson. “In the old days, it was a ‘break-fix’ business,” says Jetter. “Until the technician arrived with the spare parts, nothing could be done. In the new world we still do that, but now, using advanced analytics, we’re able to take that data and establish patterns, or indicators, to accurately predict when something is going to go wrong. We’re now able to arrive at a client saying, ‘we know the machine is going to fail, so we’re going to fix it before it does’ and the client doesn’t see one minute of downtime.” “As the world moves more and more into a hybrid cloud environment, you need to be able to do this because the infrastructures are getting more complex rather than simplified,” he adds. “We are not biased towards a single cloud model. We can build

and run a private cloud, we can build a public cloud and anything in between. We were very clear from the beginning that the hybrid cloud will be the environment most often used.” This has enabled GTS to form key global alliances that has seen them pull away from the pack as market leader in information technology services. “Some of our competitors came to us and basically handed over their infrastructures to us so that we manage them and transform them,” Jetter explains. “For example, we have taken over the entire hosting network of AT&T. We had this very famous example of a company by the name of Evry which was a competitor to IBM in Norway, which came to us supported by a private equity company and we have completely transformed the infrastructure, built a hybrid cloud environment and out of a fairly competitive relationship a partnership has emerged.” Furthermore, as world-class companies operate with a variety of hardware and software, GTS has

“We’re now able to arrive at a client saying, ‘we know the machine is going to fail, so we’re going to fix it before it does’ and the client doesn’t see one minute of downtime” moved to be a one-stop shop for firms seeking technology services. To this end, last year IBM GTS merged its Strategic Outsourcing and Integrated Technology Service units, creating a new unit called Infrastructure Services to support all the infrastructure needs of its clients. In addition, their maintenance services are moving forward with multi-vendor support services. “We are supporting about 30,000 products, software and hardware, many of which are not from IBM,” says Jetter. “So for example, if you are a retail store point of sale, if you have printers from company A, networking gears from company B, you have screens from C, PCs from D, we tell the client, ‘you know what?, call one number.’” WWW.CEO-NA.COM 49

IN DEPTH

It doesn’t matter what lengths you go to, if your plans don’t truly coordinate...

Act as one. When you’re undertaking large-scale, mission-critical projects like digital transformation, you need to have total confidence that all parties involved communicate well. But much more than that – you need them to understand the same strategy and share the same vision, right from the very start. IBM and Citrix have a long-standing track record of collaborating successfully to deliver game-changing solutions across such areas as enterprise mobility, cloud, virtualization, security and networking. We keep our joint focus sharp and on target, working together from project conception right through to final outcomes, to drive innovation and ensure that whatever the task at hand, you benefit from our joined-up thinking. www.as-one-alliance.com

“Our companies share a joint approach and technology roadmaps, access to technologies for end-to-end testing and a strong track record with mutual clients. Together, we provide the right services and technology to assess and plan, design, implement and manage a more cost-effective, centralized and virtualized desktop environment.” Don Fitzpatrick, General Manager, IBM Global Networking Alliances

IN DEPTH

“We are going from a general-purpose, idea-oriented service provider environment to a more industry-aligned environment,” Jetter says.

EASY. EFFICIENT. VERSATILE.

A handful of key global alliances are essential to IBM GTS’ success, including longstanding and productive partnerships with AT&T, Cisco and Citrix. Jetter describes gts’ relationship with at&t as one of the tech industry’s “most powerful one-two punches.” GTS’ also works closely with Cisco to develop collaborative, innovative support solutions and are currently working to expand GTS’ Watson AI support technology to Cisco devices. Meanwhile ibm and Citrix have enjoyed more than twenty years of close partnership with the former a Strategic Partner in the Citrix Global Alliance Partner program and a Citrix Global Systems Integrator. On GTS’ partner program, Jetter says: “We have long-lasting relationships with our partners. I would say the largest one in volume and importance is our networking partnership with AT&T. When you embark on an eight or nine-to-ten-year partnership with a client, you don’t want to be switching out partners every day.”

VersaStackTM combines the innovation of Cisco UCS Integrated Infrastructure with IBM storage

“We have a preferred list of partners because we know their quality and their value systems are very compatible with ours, primarily in customer service which is the number one priority,” he adds. “We are trying to align quality standards.” To get a sense of the size, scope and significance of gts’ services, consider that the company operates more than 530 petabytes of storage and over 2,000 mainframes worldwide, 300 IBM data centers in nearly 70 countries, manages over 200,000 network devices and offers more than 30,000 IBM and non-IBM products, along with 535 parts centers. ibm Cloud and Security became the separate Integrated Business Units (IBUs) in 2015, but continue to partner closely with the company to deliver client services. Recent client agreements by gts include US’ educational technology company Blackboard, Japanese steel company JFE Steel, India’s leading hospital chain Max Healthcare and Emirates Airlines, with whom gts signed a ten-year, US$300 million technology services accord in June of 2016. Last November, the company acquired Sanovi Technologies, an Indian company that provides hybrid cloud recovery, 52 J U L Y - A U G U S T 2 0 1 7

solutions powered by Spectrum Virtualize to deliver extraordinary levels of performance and efficiency. VersaStack provides faster deployment and less risk for enterprise applications from the data center to remote locations.

“When you pick up your smartphone, you don’t necessarily care where the server is located, about the security of the apps. You do not accept that it could go down, and geographically you don’t care if you are in New York, Berlin, or London. You need it to always be available”

Learn more at: cisco.com/go/versastack or ibm.com/versastack © 2015 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo and VersaStack are trademarks or registered trademarks of Cisco. IBM, the IBM logo, and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide.

IN DEPTH

“We are not biased towards a single cloud model. We can build and run a private cloud, we can build a public cloud and anything in between” cloud migration and business continuity software for enterprise data centers and cloud infrastructure. Yet Jetter still sees further success ahead. “The Watson technology is still a young technology. We have by no means completely leveraged the potential of a cognitive technology services platform,” he says. “We keep our service level agreements and we exceed a level of 99.7%. That is very high. Frankly, none of our competitors are disclosing their rate.” Again, Jetter attributes this success to a focus on growing skills and talent in an agile atmosphere. “Transforming the mindset of the people is very, very important,” he says, pointing out that he has increased the training budget at GTS by 20 percent each year since he took charge. “You need to augment the capabilities of your practitioners by train54 J U L Y - A U G U S T 2 0 1 7

ing them and preparing them for future challenges and giving them tools which allow them to deal with this ever-increasingly complex environment.” “Take cyber-security, and how in the last five or ten years it has risen among priorities. You have to invest on one hand in people, and on the other hand in tools.” Summing up the reasons for GTS’ success, Jetters highlights three major aspects. “First, when you speak with the analyst community they will tell you that outsourcing is dead,” he says. “I think we have demonstrated as being a market leader that this is still a viable business and our offerings are improved. We integrate everything. Second, we transformed GTS’ capabilities to provide service integration as well as systems integration, not only achieving IT outcomes but also business ones. Third, given our global presence and the challenges our clients are facing, through this transformation I do believe that we have become an even more important partner to our clients and future clients around the world.”

IN DEPTH Healthcare

John Flannery:

Digital

Healing With its determination to “double down on winners” GE Healthcare is paving the way for the digital future of medicine. Text by Stephen Woodman

is something of a rarity in the medical sector – a leader from the world of finance. But the President and CEO of GE Healthcare (GEHC), General Electric’s $18 billion healthcare operation, believes his outsider perspective makes it easier to pick up on potential areas of improvement. john flannery

“People ask what was it was like to come into healthcare when I am not from the industry,” Flannery says. “Especially given the changes in healthcare right now, it’s actually quite helpful to come in and say we’ve got to allocate our capital better, we need focus on the customer, we need to deliver outcomes. So I think there’s quite a strong nexus between my financial service experience and how I look at the healthcare business.” Flannery took on his new role at GEHC in 2014. His broad resume includes 22 years working for General Electric in its financial service business, several years of which he spent in Argentina and Japan. Following this, 56 J U L Y - A U G U S T 2 0 1 7

Flannery spent more than three years running General Electric’s operations in India. This global exposure has given him the necessary expertise in emerging markets. GEHC already has 70 factories producing healthcare equipment in 22 countries. Yet the company has huge opportunities for growth in a medical industry that is estimated to represent a US$7 trillion market. As people live longer in developed countries and the population of emerging markets is better able to afford treatment, the company’s expansion is virtually guaranteed. GEHC’s revenue in China alone nearly quadrupled to US$1.9 billion in the 10 years through 2015.

Shortly after this interview, Mr. Flannery was appointed as GE’s CEO effective on August 1, and as its CEO and Chairman starting January 2018, replacing Jeff Immelt.

NAME:

John Flannery

Flannery drew on his financial expertise to take a step back and analyze GEHC when he started his new job in 2014.

COMPANY:

“I had spent a lot of time just looking at companies. Trying to connect the macro issues that companies are facing with the strategies they are pursuing was like taking an exam a few

Chicago, USA

GE Healthcare POSITION: President & CEO HQ:

ANNUAL SALES: FY16 US$113.6 billion EMPLOYEES:

+50,000

WWW.CEO-NA.COM 57

IN DEPTH

VIOSWORKS

thousand times and just watching what went well and what didn’t work. So I think that has formed my thinking.” “In my previous role, fundamentally the product was money. We provided a financial service as opposed to the industrial part of the company which focused heavily on engineering, technology and the product itself.” Flannery draws a clear parallel between this previous experience and his current role in healthcare. “I’ve been able to take some of the thinking around outcome-based solutions and apply that to healthcare. Customers are using our equipment, they are using our technology, as a means to an end. The thought process can’t just be about our product. It really has to be about the outcome our customer needs and how we deliver that.” 58 J U L Y - A U G U S T 2 0 1 7

That’s the name of the technology you see. A new MRI software that GE Healthcare developed with Stanford University. It’s a never-beforepossible 4D movie of the heart that can be viewed from any angle. It captures and analyzes more raw data than any human doctor could intuitively interpret. MRI exam times are cut by two-thirds, and image processing that used to take hours is now done real-time.

Flannery has found the healthcare industry is increasingly open to an outcome-centered approach. “If we’re helping customers succeed, if we’re easy to do business with, if we’re quick and we’re responsive, that’s how we win business. That is probably the central thinking behind what we’ve been doing in healthcare for the last two years.” Putting the customer at the forefront also allows Flannery to simplify and prioritize. “Whether we are working with suppliers or working with internal teams, it all has to be grounded on, what does the customer need? If something can be improved and it matters to the customer experience and outcome, it goes right to the top of the stack. If it can’t be viewed as important in that context, we drop it.”

Flannery refers to this process as a “doubling down on winners” strategy. “It’s common to focus on all of the problems that you have in a business and put 98% of your attention and resources into those problems. Actually quite often, stepping on the gas on something that’s going well has a bigger pay-off than solving the problem.” The doubling-down tactic has led Flannery to identify three high-growth areas that he wants to allocate time and resources to. The first of these is GEHC’s Life Science Business, which produces technology for drug discovery and biological research. Worth around US$4 billion, growth for the Life Sciences brand was close to 10% in 2016. Mobility represents the second major area of expansion for the company. “There’s a tremendous move in the industry for health care in places other than hospitals - outpa-

tient clinics, regional clinics and ultimately home healthcare. We’ve got a US$5 billion business, called Clinical Care Solutions, which is very focused on this trend toward mobility and care outside of a traditional hospital setting.” The third area of focus for GEHC is emerging markets, for which Flannery has plenty of relevant experience. “During my time in India, I got to see the healthcare business. I was able to see how GEHC adapt to working in an Indian environ-

COMFORT RESHAPED GE Healthcare is transforming the patient experience in mammography with the introduction of the Senographe Pristina a next-generation system designed to help reduce discomfort, pain and anxiety of a mammogram

WWW.CEO-NA.COM 59

IN DEPTH

ment. And I thought to myself, this is great for India but we can definitely do this elsewhere.”

and the company is committed to employing machine learning systems in the medical industry.

GEHC created Sustainable Healthcare Solutions in 2015, a business focused on increasing access for the almost 6 billion people around the world without advanced medical care.

“Even today, one in three radiology reads are inaccurate. That creates substantial challenges and risks for patients. So we are investing heavily in technologies that could allow accuracy rates of +95% in the future… In the near future, you’ll be able to take a scan and almost instantaneously confirm or deny a hypothesis.”

“In many countries, we found there was tremendous demand for healthcare provision, but a very different environment. They had a real lack of infrastructure… A real lack of nurses, technicians, and funding.” Sustainable Healthcare Solutions responds to this lack by providing innovative business solutions and highly effective, low-cost technologies. In 2015, the company struck a major deal with the Kenyan government to modernize the radiology infrastructure in 98 hospitals. “We’re providing all of the equipment and a tremendous amount of training for it on the ground. We’ve also arranged for external financing so the government can pay on an installment basis.” Digital innovation is the cornerstone of GEHC’s long-term growth plan, 60 J U L Y - A U G U S T 2 0 1 7

Brazilian Health Expeditions is a non-profit organization made up of doctors, nurses and other volunteers who venture several times a year to the most remote reaches of the Amazon rainforest, providing free medical care to those who live there

This technology could revolutionize healthcare in the developing world by lowering treatment costs and reducing the need for on-site specialists. “We think the technology is going to be highly accurate and much more cost-effective, allowing the same kind of know-how to be distributed into emerging markets, where they don’t necessarily have highly-trained radiologists or even the same number of radiologists. Clinical machine learning is going to transform the effectiveness of radiology and clinical analysis.” GEHC has also leveraged technology to improve the operations of an entire hospital.

THE BEST LOW COST MACHINING OPTION

www.imesa.com.mx contact@imesa.com.mx

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“We built a command centre at John Hopkins in Baltimore this year that allows them to see the patient flow throughout the hospital... What the inflows are like, what the clinical conditions of the patients are like and what that will translate into in terms of flows for the next two or three days. That way they can predict what kind of labor they are going to need and what kind of bottlenecks they might have.”

Giving your ideas life

In the future Flannery would like to see a similar state-of-the-art system used across a network of hospitals. “That’s obviously one hospital, one city. When you start to apply that same type of productivity around the world it presents a tremendous opportunity.” GEHC’s move into digital is facilitated by the company’s strong business fundamentals, specifically Flannery’s focus on teams. “The caliber and the cohesiveness of the team dwarves any other factor or any other lever that you could ever pull as a leader of an organization. Cost, product development, new products, they are all derivative of a really strong team.” As well as seeking to build bonds within the company, Flannery is determined to maintain strong external relationships with GEHC’s suppliers, which number around 6,000.

“Whether we are working with suppliers or working with internal teams, it all has to be grounded on, what does the customer need? If something can be improved and it matters to customer experience and outcome, it goes right to the top of the stack”

62 J U L Y - A U G U S T 2 0 1 7

“We collaborate with all of our suppliers. We want them to help with product design and development. And we get a lot of great ideas from them.” Benchmark Electronics, the contract electronics manufacturer, has worked with GEHC as a key strategic partner. “Benchmark’s relationship with GEHC began more than 20 years ago,” says Jim Boigenzahn, Benchmark’s vice president of business development. “That relationship has evolved over time, and Benchmark is now considered a strategic partner for GEHC. Today Benchmark provides award winning design and manufacturing solutions to leading medical manufacturers around the world, and is proud to serve GEHC.”

At times, business language can obscure the significance of an industry, and Flannery is keen to remind his teams and partners of the meaning behind their work. “It’s a privilege to work in healthcare… There’s more to it than numbers, there’s more to it than supply chains. Healthcare is an incredibly personal industry. Everybody has had their own experiences, both personally and with family and friends.” Flannery is very much enjoying his transition into the healthcare industry and is keen for others to share this sense of purpose. “We have a concept that we’ve developed with all of our teams. We call it ‘improving lives in moments that matter.’ Ultimately, that’s why we get out of bed in the morning. We have a mission, we have to support our customers.”

IN DEPTH Healthcare

Two steps —increasing healthcare-sector productivity and improving healthcare-market functioning to better balance the supply of and demand for health services— would likely produce sufficient savings to lower medical cost inflation to the rate of GDP growth.

MEDICAL

RISK: AN INSURANCE

Text by Shubham Singhal and Erica Coe

RODUCTIVITY

If the healthcare industry had been able to achieve comparable productivity improvements, prices for consumers would often be much lower, while payors and providers would be able to maintain wages and margins. For example, if health insurance premiums had followed the same trajectory that wealth management advisory fees did between 2001 and 2014, the average annual premium for a family of four would have been US$6,155, instead of US$16,834, in 2014. In reality, very few areas in healthcare have seen costs decrease to any real degree. Innovation in healthcare has created a range of new treatments, services, and technologies, but often at high prices not always commensurate with the benefits delivered. In short, healthcare innovation has not led to the types of productivity improvements that ha-

IMPROVEMENTS

are the lifeblood of all industries, enabling them to deliver better products and services while reducing or carefully controlling prices. In the past few decades, for example, innovation enabled manufacturers to drop the average prices of laptop computers and cell phones by a substantial amount (Exhibit 1). In both cases, the sharp drops in price occurred despite dramatic technological advances that gave consumers significantly enhanced functionality.

REDEFINITION

IS NEEDED

Productivity improvements have also helped a wide range of other industries —from airlines to wealth management services— lower prices. Between 2001 and 2014, for example, the average fee for wealth management advisory services decreased 13%.

EXHIBIT 1 Many non-healthcare industries have been able to deliver “more for less” Historical year and average price (in current dollars)1

Current price1

Round-trip, economy class, Chicago - Los Angeles

1975: $835

$217

Cell phone

1988: $5,108

$649

Laptop computer

1991: $4,080

$999

Wealth management advisory fee2

2001: 1.88%

1.64%

Average health insurance premium (family of four)

2005: $13,302

$18,142

Commercial inpatient admission

2007: $13,961

$19,614

2008: $112

$297

Product 1

Express Scripts Brand Prescription Price Index

Fotografías:

64 J U L Y - A U G U S T 2 0 1 7

1 For these examples, both historical and current pricing are expressed in 2016 dollars. The cell phone comparison is between a Motorola DynaTAC 8500XL in 1988 and an iPhone 7 in 2016. The laptop comparison is between a Macintosh PowerBook 100 in 1991 and a Macbook Air 13-inch in 2016.

The most recent pricing data for financial advisory services are from 2014, and so historical pricing is expressed in 2014 dollars.

3 For inpatient stays, the most recent data are from 2015, and so historic pricing is expressed in 2015 dollars.

The Prescription Price Index tracks price changes using 2008 dollars and $100 as a baseline; it gave the 2016 price as $264. If 2016 dollars are used instead, the baseline price would have been $112 in 2008, and the current price would be $297.

Source: Biz Journal. May 8, 2014; Kayak. November 17, 2016; Apple website; PC World; The Cerulli Report: U.S. Retail Investor Advice Relationships 2014; Kaiser Family Foundation; 2005 Employer Health Benefits Survey and 2016 Employer Health Benefits Survey; American Hospital Association. T rendwatch Chartbook 2016; Express Scripts. Drug Trends Report 2016.

WWW.CEO-NA.COM 65

IN DEPTH

Shubham Singhal is a senior partner at McKinsey and head of the firm’s global Healthcare Practice

ve enabled other industries to deliver “more for less.” Between 1999 and 2014, labor productivity (defined as real value added per worker) increased by only 6% in healthcare— but by 18% in other service industries and 78% in manufacturing. In most years during this period, productivity in the healthcare industry actually declined at the national level. Only in 2008 did the industry experience a comparatively large (2.9%) year-on-year increase in productivity. (The slowdown in hiring

EXHIBIT 2 Healthcare utilization decreases as actuarial value declines Indexed service utilization1 % 100 85

100

Actuarial value, % 1 Impact of changes in actuarial value on utilization of medical services, holding all else equal (e.g., age, risk).

Source: Brooks RH et al. The effects of co-insurance on the health of adults. Results from de RAND Health Insurance Experiment. San Monica, CA: RAND Corporation, 1984. Report R-3055-HHS.

66 J U L Y - A U G U S T 2 0 1 7

BUSINESS MODEL CHANGES

Too often today, healthcare delivery is based on outdated approaches that rely heavily on overly expensive labor and care venues. Alternative approaches are possible, though. For example, ambulatory surgery centers (ASCs) have radically redesigned the provider business model for operations by using a smaller capital footprint, better asset utilization, and higher labor productivity. ASCs capitalize on the fact that when surgeons and facilities perform a high volume of specific procedures, care quality improves and

EXHIBIT 3 Price transparency for elective health services also decreases utilization

-15

-12 -8

Physician price index4

Tummy tuck3

Liposuction3

Eyelid Lift3

Change in price for elective, non-reimbursable services, 2006-141 % Breast augmentation3

during the Great Recession may have led to a temporary boost as output grew faster than employment in the sector. Our experience suggests that in some regions of the country, 2008 was the only year between 1999 and 2014 that saw an increase in healthcare productivity.) Calculating productivity changes in healthcare requires agreement on how the intended “output” should be defined and how the underlying costs needed to produce it are measured —two formidable yet surmountable obstacles. Thus, comparisons of productivity gains between healthcare and other industries are inexact. Nevertheless, our experience indicates that healthcare is far behind other industries —and indeed its own potential. Healthcare organizations that develop the ability to define and measure both their target output and associated costs will likely have a distinct advantage over competitors, because these are the first steps to improving value for consumers while minimizing costs. If healthcare productivity is to rise —even if only to the level achieved by other service industries— two things need to happen: both payors and providers need to radically alter their business models, and we, as a society, will want to consider adopting “smart” regulations.

productivity increases. ASCs have prices that are, in many cases, close to half those at most health systems and for consumers, the benefit is clear: more for less. Diagnostic laboratory chains, retail health clinics and dialysis companies offer other examples of how the provider business model can be redesigned. We have found, for example, that the lab chains are able to provide most tests at about half of what a typical hospital charges. (We recognize that some of this variation is a result of differences in the complexity of the diagnostics.) They do so by offering consumers convenient, local collection centers and by shipping the samples to much larger centers for analysis. The larger centers gain the benefit of scale and are better able to balance fluctuations in demand, thereby enabling not only better labor capacity utilization but also more efficient use of capital. There is no reason to believe other new entrants will not find ways to offer other traditional hospital services in outpatient settings —at a much more attractive price point and, potentially, with increased convenience for consumers.

LASIK2,3

Too often today, healthcare delivery is based on outdated approaches that rely heavily on overly expensive labor and care venues

-8

-5

1 Prices adjusted to 2014 dollars, according to US Consumer Price Index. 2 LASIK costs reflect price for one eye. 3 Prices are national average surgeon’s fee. Not included are fees for hospital services, anesthetist, pathology, or radiological investigations. 4 National Health Expenditure Accounts price proxy for physician and clinical services (composite index: produce price indexes for offices of physicians, and for medical and diagnostic laboratories).

Source: American Society of Plastic Surgery Annual Statistics, 2005-14; lasik. com; allaboutvision. com; National Health Expenditure Accounts 2014.

IMPROVE MARKET FUNCTIONING

In well-functioning markets, demand-side and supply-side incentives are balanced. Think again of consumer electronics: the combination of engaged consumers making informed choices and a competitive market of providers has led to a steady stream of product innovations and frequent price reductions. However, balanced incentives are rare in healthcare. Instead, misaligned incentives —between patients and providers, providers and payors, and among different providers— all too often result in increased costs without any related benefit to consumers. On their own, both demand-side and supply-side incentives can be effective in healthcare. Considerable evidence shows, for example, that utilization decreases when consumers pay more out of pocket. Even a 10% increase in consumers’ share of costs (a 10% reduction in actuarial value) decreases utilization by 15% (Exhibit 2). Similarly, the pressure of engaged consumers paying full costs in a price-transparent market has led to declining prices for elective procedures, in some cases by double digits (Exhibit 3).

Episodes payments and other bundled payment approaches that reward providers for outcomes rather than volume have also been shown to lower prices and reduce the delivery of unnecessary services, including emergency room visits and excessively long hospital stays. The State of Arkansas, for example, launched episode payment for attention deficit/hyperactivity disorder and found that the average episode cost fell by 29% in the first year. It also saw reductions in average episode cost for other conditions, although in a few cases its spending remained flat. Another payor has found that the use of episode payments for hip replacements significantly decreased the average cost of that procedure while substantially reducing the postsurgical readmission rate. Under the model of “smart cost sharing,” subsidies may be needed to help lower-income individuals afford appropriate routine and elective WWW.CEO-NA.COM 67

IN DEPTH

EXHIBIT 4 One-third of total healthcare expenditures are related to chronic disease US healthcare costs, by medical risk category % Routine

Preventive

Chronic care Catastrophic, chronic

Discretionary

Purely elective

Catastrophic, not chronic

End of life

2007

2012

Source: National Health Expenditure Accounts; Medical Expenditure Panel Survey; National Vital Statstics System; Healthcare Cost and Utilization Project; Dartmouth Atlas of Health Care; McKinsey analysis

Balanced incentives are rare in healthcare. Instead, misaligned incentives all too often result in increased costs without any related benefit to consumers care. Furthermore, this redefinition of covered benefits does not match most people’s current conception of health insurance, and it is not fully consistent with existing mandatory or essential health benefits. Employers and payors would need to work through mandated benefits requirements, depending on the applicable federal and state regulations. However, the impact of adopting this approach could be profound. Our research has shown that almost 30% of the medical costs covered by commercial plans result from routine, discretionary, or purely elective care (Exhibit 4). If a payor curtailed coverage 68 J U L Y - A U G U S T 2 0 1 7

for these types of care, the premium reductions it could pass on to consumers could be significant. Some providers could also benefit from this redefinition of health insurance coverage. Productive providers, for example, could gain market share by offering consumers more attractive pricing, added convenience, and perhaps higher-end amenities for routine, discretionary and elective care. In addition, the providers could partner with payors on outcomes-based payment models for catastrophic and chronic care to earn higher revenues and margins for their more efficient, lower-cost care. For this redefinition of insurance coverage to succeed, however, certain supportive elements must be in place. Consumers must have effective mechanisms to help them absorb the costs --health savings accounts do not yet meet this standard. Consumers would also need tools to help them understand the benefits and risks of the types of care they are considering, and to enable them to compare quality and

prices at different providers. Transparency tools have a long way to go, but evidence is already emerging that when consumers do have access to cost data, they use it. For example, a high proportion of consumers on the public exchanges are comparison shopping for insurance coverage, with many purchasing lower-priced plans. IMPLICATIONS FOR INCUMBENTS

The healthcare industry is ripe for disruption, and incumbents must be prepared to respond. New entrants have already demonstrated the effectiveness of radically rethinking healthcare business models, and there is no reason to think others will not follow. Incumbents that want to avoid being overtaken by these new entrants must pivot quickly to act like attackers themselves (as Charles Schwab did following the advent of online brokerages—it was able to stave off attackers and maintain margins by radically lowering its prices, introducing online trading, and improving customer support).

11 2 15

As payors and providers rethink their business models, improving productivity drastically and quickly must be uppermost in their minds. The first incumbents that can do this will gain a significant competitive advantage. Thus, radical new ideas should be strongly considered —minor tweaks will not be sufficient in a world where an Amazon- or Walmart-like attacker could materialize. Some of the changes payors and providers need to make are quite different. Payors, for example, should focus not just on back-office services but also on front-office operations. Digital sales are significantly less expensive than traditional sales. Providers could start with supply chain optimization and better clinical workforce management, but they should not forget the other levers available to them. Both groups should be aggressive in their efforts —in our experience, many of them do not pull these levers hard enough. There is also a real opportunity for collaboration between payors and providers to reduce complexity and increase transparency and the use of payment for value. In addition, incumbents could collaborate with appropriate public agencies to update the regulatory framework. Smart regulations can ensure that both consumers and medical standards remain protected while enabling the innovations needed to increase productivity and improve market functioning. Collaboration between payors, providers, and public agencies could also help rebalance incentives in the healthcare market, enabling that market to operate more efficiently. For example, redefining what constitutes essential health benefits has the potential to benefit all three groups— without adverse impact on consumers, who may, over time, see an improvement (i.e., more cost-effective and/or convenient choices). Finally, payors and providers should remain alert for innovations that advance best practices, as well as for emerging evidence about the value digital technologies can bring. Both of these have the potential to deliver substantially greater improvement than we have estimated in this article. The time for incumbents to act is now. Simply put, traditional approaches to delivering and paying for healthcare are no longer adequate. WWW.CEO-NA.COM 69

IN DEPTH Healthcare

Bursting into the

most demanding health market Caroll H. Neubauer, Chairman & CEO of B. Braun Medical Inc.

B. Braun Medical has increased its size significantly in the US market during the last decades, and the German company is pulling out all the stops to grow even larger and adapt to a demanding commercial environment set up by stringent health regulatory processes and the power of large purchasing groups. Text by Chief Executive Officer Staff

Fotografías:

Caroll Neubauer joined Melsungen, Germany-based B. Braun nearly three decades ago looking to develop a career as a legal counselor for the medical equipment company’s headquarters, and for a few years that was the case. With law degrees from both German and American universities, the New Jersey native spent a few years going back and forth between countries for the company first as legal assistant to Chairman of the Board Ludwig Georg Braun and later as general counsel for the company.

70 J U L Y - A U G U S T 2 0 1 7

But as contact with the operational side of the company increased after his appointment to the medical equipment company’s board, Neubauer says his business acumen started to grow and he was asked in 1996 to take over North American operations, then a niche, US$200 million a year unit.

“Knowing that the US was going to be a focus market in the future hit me quite by surprise,” Neubauer says of his start as head of the US unit in 1996. “Now we’re talking nearly 20 years later, and we are about 10 times the size we were, or at least we’re going to be that before I retire, that’s for sure.” The B. Braun Group, known worldwide for medical products for the treatment of diabetes care to infusion therapy, including dialysis, pain management and nutrition among others, supplies hospital equipment, outpatient products and the like to almost every country in the world, with operations in more than 50 of them. In North America it is increasing its footprint and is preparing large investments to widen its market position. “Just over the next four years we will invest over a billion dollars in the

NAME: Caroll H. Neubauer COMPANY: B. Braun Medical Inc. POSITION: Chairman & CEO HQ: Bethlehem, US ANNUAL SALES: FY16 US$1.75 billion EMPLOYEES: + 6,900 in North America WWW.CEO-NA.COM 71

US to grow our presence and increase our capacity,” says the executive. “The only thing that’s keeping us from growing even more than we are now is that we are running out of capacity on every corner of our factories here in the United States, and over 70% of the products that we sell here are manufactured locally.” EFFICIENCY AND INNOVATION

Medical technology is a difficult act to keep together. Between the increased demand of services by a longer-living population, with more affluent clients in industrial countries and the demands of cost-efficiency and low price in developing ones, as well as dozens of agencies in charge of regulating human-health related devices, services and products, a company like B. Braun must act as a very competent juggler. People’s well being is a very serious business. “Product innovation has been a driver for B. Braun all along. I could give you a huge list of first products, innovative products that B. Braun is responsible for. That is certainly something that sets us apart. We’re not a “me too” company, we’re a company that develops new things and also brings efficiency and effectiveness, but also new treatments,” Neubauer adds. Efficiency and the advantages of scale and streamlining are part of what helps the company thrive. B. Braun is constantly looking at how to make its everyday products more efficiently, he says. Digitalization is a part of it and the company is very much 72 J U L Y - A U G U S T 2 0 1 7

aware of the discussion surrounding Industry 4.0 standards of connectivity and automation. Customers also play a big part on how the company tackles efficiency challenges. “We have to constantly work with our customers to make them more effective and more efficient to face pricing and cost pressure, we have to work with them on systems now, and make our products and our systems work as effectively and efficiently as they can to bring this effectiveness and efficiency into the hospital setting, which is going to be one of the large challenges,” Neubauer says.

“With 178 years of history, product innovation has been a driver for B. Braun all along” The company, he adds, is devoting attention to making its systems available to customers to help them do just that. And it is working heavily to gain even more traction with group purchasing organizations (GPOs), large consortia of hospitals and healthcare facilities, some of which handle tens of billions of dollars in contracts every year, from bandages to hospital beds. “We have an excellent portfolio of group purchasing agreements that will provide us the opportunity for this growth.” All of the agreements, all of the investments serve one goal: taking a larger share of the market for B. Braun’s top of the line solutions. The company is looking at its largest investment program for the US market in its history. “We have all these projects, there’s a lot of balls up in the air that have to be

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Robotic Platforms

juggled and that is a challenge of its own. We have increased our team materially, we’ve increased inside knowledge and brought knowledge from the outside to make these things happen. That is one part, and we have a regulatory environment, which of course is going to have its own challenges. All the new products, and all the things that we’re doing have to go smoothly through the most rigorous regulatory process in the world, which is the US.”

As the company makes most of its end products itself, it is raw material suppliers that B. Braun demands the most of. “Our API (Active Pharmaceutical Ingredients) suppliers are very supportive and important, our plastic suppliers, too. For a company that makes practically most of it from scratch that is very important. And yes, we do have very important strategic relationships, like with Philips in regional anesthesia just being the latest.”

A large and able workforce and heavy manufacturing muscle are also an advantage for this difficult task. Close to 60,000 employees in the B.Braun Group carry considerable clout. “In comparison to our revenue we have a lot of expertise in manufacturing and making our products ourselves. We don’t go out and buy, we keep this special know-how in making products ourselves and setting up manufacturing lines,” Neubauer explains.

Flexible Scalable Modular

The company is not resting on previous achievement either. Looking into the future, creating more integrated treatment and therapy systems is something that needs to be in the pipeline. “And it’s not only products, we are going to have to continue following up our product offering with services in education. One of our strongest educational platforms is B. Braun’s Aesculap Academy, which is one of the largest continuing education platforms for healthcare professionals in the world. B. Braun worldwide has been very good in providing this additional education. Ser-

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B. Braun has a particular focus on making its own products, and particularly for the US division, it boasts of making at least 70 percent of the products it sells in that market locally. But no company stands alone and a well-oiled supply chain is a big part of success. “Most of our products are B. Braun products, so we have our own way of course.” But suppliers enter the system to increase efficiencies. “We buy from Malaysia and Japan, we buy from Germany, Italy, France. Working with our internal and external suppliers on the one hand to be more efficient is obviously a driving force.”

“We have a lot of expertise in manufacturing and making our products ourselves. We don’t go out and buy, we keep this special know-how in making products ourselves”

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5/2/17

“We have to constantly work with our customers to make them more effective and more efficient to face pricing and cost pressure, we have to work with them on systems now, and make our products and our systems work as effectively and efficiently as they can to bring this effectiveness and efficiency into the hospital setting”

vices are another part, our pharmacy network, compounding pharmacies throughout the United States that help hospitals provide better pharmacy services, more effective, efficient and cost effective. These kinds of services are going to continue to increase their importance, as they strive for effectiveness and efficiency, and bring the costs of healthcare expenses down in this country.”

2:14 PM

That diversification is achieved through stringent quality checks. “We have to make sure that the quality systems of the supply chain are a quality chain all the way through. It is more than just getting it there fast and cheap, so we have to work with suppliers who we can completely rely on, who can document and work with us and take no shortcuts. That’s one important part in keeping our organization running and assuring that we keep the quality of products that everybody can expect from B. Braun.

CMY

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IN DEPTH Manufacturing

Buildingthe

Machinery that Saves Lives Wilson R. Jones, CEO of Oshkosh Corporation

With a unique business model among global industrials and a commitment to pushing people, Oshkosh is continually looking to the future. Text by Paul Imison

for wilson r. jones,

President and CEO of Oshkosh Corporation, quality products mean the ability not only to keep customers and shareholders happy, but also to make a difference. The company, which celebrates its 100-year anniversary this year, designs and builds the access equipment, specialty vehicles, and accessories that enable military personnel, technicians, and fire and emergency services to go about extremely dangerous work safely, and for Jones, that can be incredibly rewarding.

Fotografías:

“When you hear a soldier’s mom or his wife talking about how one of our military vehicles saved his life and you share those testimonies with your suppliers, you get a higher level of inspiration,” he says proudly. “The differentiator first and foremost is our people who rally around the goal of protecting the serviceman in a war zone and the firefighter or the technician working 185 feet in the air.”

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Unlike many global industrials, Oshkosh Corporation, founded in Oshkosh, Wisconsin, operates across four key business segments – access equipment, defense, fire and emergency, and commercial – to appeal to a broad range of customers in the public and private sectors. With operations in 28 countries, their products range from refuse collection vehicles and concrete mixers used by municipal governments in the United States to military vehicles favored by the US’ Department of Defense in combat zones and emergency-response fire and emergency vehicles.

NAME: Wilson R. Jones COMPANY: Oshkosh Corporation POSITION: CEO HQ: Wisconsin, USA ANNUAL SALES: FY16 US$6.3 billion EMPLOYEES: 15,000 Globally WWW.CEO-NA.COM 77

IN DEPTH

Jones took over as President and CEO in January 2016 with the benefit of thirty years of experience in the specialty vehicle and construction business, eventually spending three years as president and COO of Oshkosh –experience that not only enabled him to better understand the markets he currently serves, but also convinced him of the value of people to any successful business enterprise. “I’ve always been a student of people,” he says. “I’ve learned over the years through being in experiences where unfortunately people weren’t valued as much as they should have been, but I’ve also been in situations where I was part of a leadership team that really did value people. I’ve put that into practice at Oshkosh, and you certainly see that it’s making a difference in our company today.” Upon becoming CEO, Jones looked to continue the company’s flagship MOVE strategy, based on four core principles: Market recovery and growth, 78 J U L Y - A U G U S T 2 0 1 7

“When you hear a soldier’s mom or his wife talking about how one of our military vehicles saved his life and you share those testimonies with your suppliers, you get a higher level of inspiration” Optimize cost and capital structure, Value innovation, and Emerging market expansion. “We call ourselves a Different Integrated Global Industrial,” says Jones. “We really work to integrate whereas a lot of industrials don’t. Today, we’re taking technologies from our defense segment and sharing those with our fire and emergency and our commercial segments. We’re taking products to market in a third of the time we used to just because we’re sharing intellectual property.” “That’s becoming a really sustainable competitive advantage for us,” he adds. “Five years ago, our different business segments competed with one another. Today, they collaborate.”

IN DEPTH

“There are also a lot of airports being built today in places that want to attract tourism. With that you’ve got to have the proper fire protection or the big carriers simply won’t go in there.” “Commercially, we have lots of opportunities with concrete mixers and refuse collection vehicles, mostly down through Central and South America,” he adds. “We’re also selling a lot of our defense vehicles in the Middle East right now.” For Jones, none of this would be possible without a commitment to operational excellence that includes identifying efficiencies, inducing collaboration between different business divisions and achieving supply chain excellence through close and productive strategic partnerships, all areas in which Oshkosh is continually looking to improve. He particularly emphasizes what he calls the company’s own version of the Toyota Way –the Oshkosh Operating System– which is dedicated to understanding the customer. Despite an ongoing slump in the US’ construction industry, one of Oshkosh’s key markets, the company saw revenues and earnings per share grow in FY2016 and is expecting further success in 2017. Furthermore, the company is highly regarded in the wider business world for its practices. In 2016 and 2017 it was named to the World’s Most Ethical Company list by the Ethisphere Institute, the global leader in defining and advancing the standards of ethical businesses, and recently picked up the Workplace Excellence Award from the governor of Wisconsin. It is also included in Forbes America’s Best Employers list. Overseas and emerging markets form an increasing part of the company’s growth strategy. In FY2016, approximately 24% of the company’s revenues came from outside the US and the firm boasts manufacturing operations in Australia, Belgium, Canada, China, France, Mexico, Romania and the UK as well as operations to support sales or deliver services in over 150 countries. “In Asia, India, all around the world where you think about countries that are going through rapid urbanization, we’re going to have good opportunities there with our access segment,” Jones explains. 80 J U L Y - A U G U S T 2 0 1 7

“We started with the question of why: ‘why are we doing this?’” says Jones. “We focused on 15,000 team members getting up every day thinking about how they can not only understand who their internal customer is, but how they are dealing with that customer and what they need to do to improve. It’s a case of driving the DNA of how you think, not just because it’s a box we need to check each month when we go through our strategy employment exercise.” “We really believe that if we take care of our internal customers, the external customer and our shareholders will be very happy,” he says. Yet incentivizing staff is also key to both innovation and performance. “What we learned is that a lot of improvements were taking place in different business segments that would also work well in others,” he explains. “So, we started what we call the Oshkosh Excellence Awards so that team members, whether they’re working in the finance area or the production floor or sustainability, they document ideas that have worked and put them in a program which is shared across the company because what works in one segment will work in others.

IN DEPTH

Chris Moore, President and CEO of Northeast Wisconsin Industries, a large production machining operation, has partnered with Oshkosh Corporation for many years, speaks highly of the exposure to Oshkosh Corporation: “We have and continue to significantly improve our own operations assisted by the developmental support Oshkosh provide us which, in our experience, is without equal across other major original equipment manufacturers for which we produce.” Jones says that Oshkosh’s key strategy for future growth is to be quick to seize on opportunities. “In the next few years we’re going to be in a good position with hardly any debt, so, if there are some M&A opportunities there and they fit our core value proposition, we’re certainly going to look at that,” he says. “Where we are today as a company, which is No. 1 in the majority of our markets, there are opportunities for us to pursue some strategic alliances and we’re certainly open

“If there are things that aren’t creating value should we stop doing those or should we redesign the process? I call it a journey – a continuous improvement journey” “We judge them and each time a team wins in a certain category, Oshkosh Corporation Foundation gives them funds to donate to the local charity of their choice,” Jones says. This sharing and learning process works on several levels and Jones believes it has been crucial to the company’s success. “We’ve taken some of the worst-performing product categories in different segments and worked to increase performance, which increases margins,” he explains. “Another step we’re taking now is what we call simplification. That’s going in and seeing where the complex-

ity is in a given process. Our team members know because they’re frustrated. If there are things that aren’t creating value should we stop doing those or should we redesign the process? I call it a journey – a continuous improvement journey.” Oshkosh also looks to innovation on the supply chain front. Six years ago, the company centralized its purchasing and developed the Global Procurement Supply Chain Academy as a way of integrating suppliers into the process of constantly improving quality and customer service. “We bring in suppliers and we work with them on supplier quality issues, supplier development, helping them understand what we’re trying to do,” Jones explains. “The suppliers that have been performing in one segment, we try to leverage them into other segments and make them a little bit bigger. When they have ideas for new product development that we aren’t thinking about it, they share them. We see our suppliers as partners.”

“We’re taking products to market in a third of the time we used to just because we’re sharing intellectual property. That’s becoming a really sustainable competitive advantage for us” to that. But we still have lots of opportunities for organic growth.” Ultimately for Jones, passion and the will to keep moving forward are what really drives Oshkosh’s success. “We have this perseverance DNA in our company,” Jones says. “We’re continuously working to improve our culture and that will continue to improve our business. This will be the third year that we will grow revenue earnings in a year that our largest segment will be down again. We really believe that being a different integrated global industrial with a positive long-term outlook will bode well for us over the next several years as we continue to make a difference in people’s lives.”

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IN DEPTH Technology

A Focus the Future onof Manufacturing Interconnection and sensors are becoming a central part of how humans live and work and TE Connectivity is right in the middle of that new industrial revolution, thinking side by side with its customers as well as looking into how to bring about the automated Factory of the Future. Text by Chief Executive Officer Staff to call Switzerland-based TE Connectivity, a provider of sensor and connectivity solutions would be like calling Ford an engine manufacturer. Yes, they are, but the scope and breadth of the multinational activities go so above and beyond that definition that it doesn’t do the technology company any justice.

The company, with US$12 billion in revenues in 2016, offers solutions that are helping bring about the new industrial revolution, the advent of the cloud, the mass deployment of the electric car and the Internet of Things (IoT), among others. And very close to where that action is, TE’s Industrial Solutions President Kevin Rock is happy that his background in sales and customer-facing roles –among others- makes a ton of sense as the company is taking the lead from its customers to decide where and how to keep developing its product and service offerings. “We think about where our customers are going and what they are looking for from sup84 J U L Y - A U G U S T 2 0 1 7

pliers,” Rock says. “They want fewer suppliers and suppliers that are more capable,” he adds, pointing to the advantage of scale in a company that invested US$644 million in R&D and engineering only last year to move in that direction. Clients, he adds, also want companies to move into more integrated, higher level structures instead of simple products. SCALE AND DIVERSIFICATION

Scale and diversification play a big a part of a manufacturer’s success, as smaller companies attempt to go toe to toe with TE Connectivity in all the areas it deploys its expertise. “There are people that might be strong competitors in our connector portfolio that may not play at all in our relay portfolio. Our competitors in wire and cable are much different than those in our tubing business.”

NAME: Kevin Rock COMPANY: TE Connectivity POSITION: President, Industrial Solutions HQ:

But the technological revolution is not just happening outside, as medical advances in imaging and minimally invasive procedures are taking the world of healthcare by storm and helping humans live longer, healthier lives.

Schaffhausen, Switzerland ANNUAL SALES: FY16 US$12 billion EMPLOYEES: +75,000 WWW.CEO-NA.COM 85

IN DEPTH

In its 2016 annual financial report, the company signaled and expectation of 7% growth in the interventional market, and over 120 patients benefiting from a minimally invasive device using TE technology every minute. The company boasts of having the confidence of very large, very critical industries such as telecommunications, aerospace and defense, among others. “The design cycle for a new aircraft in between 5 to 10 years before development activities and new products are deployed. It is understood by Airbus and other aircraft manufacturers that TE is committed to supporting these long design cycles and the life of new aircraft.” THE FUTURE OF MANUFACTURING

The industrial business is one where Rock is particularly excited about what his company is working on. “Factory automation is a big area of focus for us, there’s a tremendous amount of development underway today regarding the factory of the future and that will continue over many years.” He adds that “with factories or machinery becoming much more, lets say, intelligent or smarter… imagine a piece of equipment today running and providing statistical data around manufacturing tolerances, and as that equipment moves over time it gets closer and closer to the limits of tolRock is also in charge of the company’s medical business spanning heart repair catheters that allow physicians to repair cardiac valves without opening the body to metal and polymer wires half the breadth of a human hair used for pulmonary diseases and robotic surgery, offering 4K video capabilities to improve vision inside the body. “We see minimally invasive therapies as a growing market, growing high single to double digits,” Rock says. “People are living longer and there is a need to move away from conventional surgery as –relative to minimally invasive procedures– it is much harder on the patients and very expensive.” Typically, he explains, a minimally invasive procedure opens a very small incision and tiny implements move through veins or arteries to reach their destination and repair damage to an organ or vessel. 86 J U L Y - A U G U S T 2 0 1 7

“Factory automation is a big area of focus for us, there’s a tremendous amount of development underway today regarding the factory of the future and that will continue over many years” erance, it will signal to management that it will have to be shut off instead of making bad parts. When you think about equipment being able to self-diagnose or indicate there’s a problem coming or that it’s time to do maintenance you could imagine how productivity over time will go up.” About what he brings to the table, Rock –an old TE Connectivity hand with over 20 years under his belt- says he is comfortable that the focus on growth and customer relations that the compa-

ny is taking fits his large background in sales and business development. “Quite a bit of my time, in fact the majority of my time has been in external or customer facing roles. I started in sales in various capacities up to the corporation sales leadership. I’ve been in business development and product management, and with the focus the corporation has on growth today, I feel very comfortable. “For the industrial segment, which I’m responsible for, I’m very comfortable with what I bringing to the job at this point.” One of the projects he mentions is his oversight of the industrial operations participation on the company TE Operational Advantage (TEOA) program, its own lean business initiative to define the critical metrics of business and operational improvement. “There’s a lot that goes into it, but it starts with really personal teaching and learning our operating system, know how to drive improvement… In terms of collaboration across business units we feel pretty good today, we will definitely collaborate and take advantage of our global scale by co-locating in order to vew more efficient and better serve our customers,” Rock says.

“People are living longer and there is a need to move away from conventional surgery as –relative to minimally invasive procedures– it is much harder on the patients”

TE’s Connected Home Setting the temperature controls in the main bedroom and closing the blinds to freshen the room for sleep later, while making sure the ambient music prepares you to rest as you check the doors are locked. All while standing in your kitchen sipping a cup of coffee. The scene might sound like something out of a futuristic movie or from beloved 1960’s “The Jetsons” cartoon, but from home security applications to HVAC (Heating, Ventilation and Air Conditioning) to entertainment options, TE Connectivity is actively helping bring the concept of a “smart” house into the present with components designed to serve as bridges between systems and devices. The company’s current product lineup allows you to monitor dozens of systems, from the water heating to the clothes washer machine from centralized hubs, while enabling users to control gas usage, open doors or open the garage door to let family in or keep an eye on how long the kids have been playing videogames. TE’s sensors, relays, actuators, antennas and such permit an increasingly seamless information flow between devices and appliances, while optimizing usage of utilities such as electricity and water supply, form four categories of components, Environment Sensing, Equipment, Actuators and Controls. “With our global network of engineers, TE Connectivity (TE) can help turn your vision for connected home applications into a reality,” the company says on its website.

WWW.CEO-NA.COM 87

IN DEPTH Manufacturing

Kiyoshi Okazoe:

Traditions

for the future Kiyoshi Okazoe reveals how the efficiency-centered approach of Mitsubishi Heavy Industries America is transforming supply chains — and benefiting the environment. Text by Stephen Woodman

texas might not be the first place you’d expect to find traditional Japanese business philosophies, but Kiyoshi Okazoe, the president of Mitsubishi Heavy Industries America (MHIA), believes the Japanese tradition of kaizen, or constant improvement, is perfectly suited to the US.

The MHI group’s unique business portfolio covers land, sea, sky and space. The conglomerate’s expansion in the US is driven by the manufacture of a huge range of products, from forklifts and tire machinery to massive systems like gas turbines and carbon capture technology.

The concept involves all employees making small changes to improve efficiency throughout the supply chain and has been the central strategy for MHIA’s parent company, Mitsubishi Heavy Industries (MHI), for around 70 years.

“MHI brings together a wide portfolio of products and solutions,” says Okazoe, who has worked in the US for 14 years.

But Okazoe is not interested in tradition for the sake of it. His efficiency-based approach is now more relevant than ever. In the rapidly changing world of modern business, waste reduction is essential to survival and also key to environmental protection. “MHIA has a very unique business approach, blending American culture and Japanese sensibilities in everything that it does,” Okazoe says.

While the company offers some of the world’s most sophisticated and efficient products, what really makes it stand out from the competition are the hundreds of manufacturing experts, engineers, productivity specialists and aerodynamicists dedicated to its projects. Take MHIA’s Machine Tool Division, which produces horizontal boring mills and gear shaping machines but can easily leverage knowledge from aircraft and aerospace systems — allowing the company to develop truly state-of-the-art products.

NAME:

Kiyoshi Okazoe COMPANY: Mitsubishi Heavy Industries America POSITION: President of MHIA HQ: Houston, USA ANNUAL SALES: FY16 US$35 billion (global) EMPLOYEES: 7, 300 WWW.CEO-NA.COM 89

IN DEPTH

He has a particular passion for environmental sustainability, having served as the General Manager of MHI’s Environmental & Chemical Plant Division. He now aims to place the company at the forefront of green technologies that improve output while reducing environmental impact. One such project is the carbon dioxide capture system that allows industrial plants to collect up to 90% of their carbon emissions, pointing the way toward future large scale use.

“We bring not only highest quality products but also the best engineering solutions to the US market,” Okazoe says. WORLD-FIRSTS IN EFFICIENCY

MHIA currently has 7,300 employees across 30 US states. The company recently moved its North American headquarters from New York to Houston as part of a continued expansion drive in the region. Engineering expertise and a focus on efficiency have led Japan-based manufacturers such as MHI to be among of the most successful and sophisticated sources of foreign direct investment in the US. MHI is bullish on the US manufacturing market and Okazoe is aiming for 20% growth over the next two years. “My challenge would be to make MHI a more popular company in the fields where we are now trying to expand,” he says. Okazoe took the reins at MHIA in October last year. The wide portfolio of products the company offers mirrors the range of experience on his resume. Having joined MHI more than 40 years ago, Okazoe has held five different leadership positions, so he brings a broad understanding of all its activities. 90 J U L Y - A U G U S T 2 0 1 7

MHIA PATENTED POSTCOMBUSTION capture systems help industrial plants and power plants grab and retain up to 90% of their CO2 emissions, helping place plant operations at the forefront of green technology utilization.

Since January, the technology has been in use at the Petra Nova project, the world’s largest carbon capture project, which opened on time and budget in Houston and has been selected by the Department of Energy (DOE) to receive up to $190 million as part of the Clean Coal Power Initiative Program (CCPI), a cost-shared collaboration between the US government and the private industry.

the US because of historic tie-ins with two of the world’s biggest and oldest industrial groups, Hitachi and Siemens. “Our current priority are our long term relationships,” Okazoe says. “They are a testament to our ability to align strategic goals with our partners and suppliers. We want to make it very easy to work with us and share success.” One of its most successful formal joint ventures is Mitsubishi Caterpillar Forklift America, a partnership with Caterpillar. The subsidiary company has benefited from the explosion of online shopping as products are increasingly sold directly from warehouses. MHI has responded to this industry transformation by developing more efficient forklifts. The latest models have a longer battery life and can reach higher, meaning suppliers save on operational costs and can make full use of their storage space, a perfect example of kaizen in action in 21st century America.

Such cutting-edge technologies may be modern, but they tie-in neatly with MHI’s traditional focus on kaizen. The company’s pioneering techniques cut down on wasted carbon, which in turn increases revenue and improves local air quality. Okazoe’s detail-oriented approach demonstrates his company’s commitment to technological, economic and environmental efficiency. “We are at the cutting edge of strategic solutions for greenhouse gases,” Okazoe says. “This technology has been struggling to make headway… but I hope we have opened up the path to commercial viability.” COLLABORATIVE BUSINESS MODEL

MHI’s expansion into the US is facilitated by numerous partnerships and joint ventures. The conglomerate has close ties with iconic US companies like Caterpillar, Boeing and Southern Company. MHI has grown in

Powered by People. Founded in 1974, TIC – The Industrial Company is a direct-hire contractor serving a wide range of heavy industrial markets throughout North America. Through our network of local operating centers, access to vast resources and focus on self-performing work, we deliver safe and high-quality results on projects of virtually any size.

TIC, along with our partner Mitsubishi Heavy Industries America, Inc., recently completed Petra Nova, the world’s largest carbon capture project, located in southeastern Texas.

“mhia’s technology and in-depth experience have been invaluable in our work together, especially on the project we most recently completed in Texas. The mhia team is a partner in every sense of the word. They take collaboration, technical expertise and a commitment to success as seriously as any organization we’ve worked with”

—Kevin Needham, President-Power Engineering at Kiewit

But technical expertise and efficiency are not the only features driving the group’s ongoing success. More than anything else, the company’s stellar reputation depends on its tight bonds with other businesses and the community. “Mitsubishi has long standing relationships with some of the most respected companies in the US,” Okazoe says. “We continue to employ thousands of Americans and will create more jobs in the US.”

IN DEPTH Manufacturing

Brand, People & Partners

at the

Heart

ofTechnology: Mani Iyer, President of Mahindra North America

Indian farm equipment behemoth Mahindra’s US unit has turned the leaf of the global recession by relying on its RISE principles and the hard working people at its Houston HQ. Text by Chief Executive Officer Staff

a hardwired set of values both from home and from a company’s culture bent on positive outcomes has helped Mani Iyer take India’s giant farm equipment maker Mahindra’s US unit to the forefront of a very competitive industry and across the worst economic crisis in recent times.

Iyer, a Bangalore-born engineer with decades of experience in the farm machinery sector, says his “dream job” was always to lead a global unit for Mahindra, the company he joined in 1991. But it became a reality when he was named to the position of Mahindra North America in the middle of the Great Recession of 2008-2009, “a very complex time. The economy was in the doldrums, the future looked bleak and the company itself was going trough a bit of hardship,” he says.

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But a culture of hard work instilled by his parents as well as Mahindra’s RISE principles of accepting no limits, thinking outside the box and looking for positive outcomes helped propel the company back into the black in very little time, he adds.

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Iyer sets the reasons for the company’s speedy recovery on what he calls “The Power of Three”:

“The first Power is the brand. I am talking about our business and the fact that we are here for the long run,” he says. Figures from the company certainly look that way, as Mahindra North America claims to have tripled market share and quadrupled revenue while growing at five times the market pace in the last five years. In the last financial year the company grew its North American business by 8% as it also plans to double its portfolio and market share in the next five years. Power Two, Iyer adds, is the company’s valued partnerships. “You can only do so much on your own, but there are partnerships with people across the organization as well as with supplier partners across the world. You need to have trust and transparency and work together with your partners for mutual success. We get products from Japan and South Korea, we get products from India: we also do significant local sourcing within the US.” Finally, “Power Three is our employees. At the end of the day, people are the most important asset of any company and we have a very flat, passionate, and responsive matrix organization,” Iyer claims. During the last fiscal year the company focused on tripling the size of its facilities to support the

NAME:

Mani Iyer COMPANY: Mahindra North America POSITION: President & CEO HQ: Houston, Texas GLOBAL SALES: FY16 US$17.8 bln (Mahindra Group) EMPLOYEES: 170 (US) WWW.CEO-NA.COM 93

IN DEPTH

“After I joined Mahindra I worked through many functions, as a city guy mostly I was interested in the automotive sector but they put me in the farm sector. I traveled through the landscape of India and the simplicity of the entire business attracted me to stay in the farm equipment sector. I worked in many functions and got coaching from very good leaders during my younger days after finishing my engineering degree,” he says. The company’s global footprint gave him the opportunity to expose himself early to different styles of leadership beyond that of India, including managerial staff from the US, Iyer adds.

“At the end of the day, people are the most important asset of any company and we have a very flat, passionate and responsive organization” growth of the parts business including the addition of an automated parts delivery system to increase response time and efficiency. The company, which assembles and sells tractors in the US from 20 to 105 horsepower, said in a press release that it also “relocated and expanded its West Coast assembly and distribution center to Marysville, California, and expanded the facility in Bloomsburg, Pennsylvania, serving its northeast dealer network.” And after improving distribution and service in Canada in late 2016 with the sixth Mahindra Authorized Distribution Center (MADC) in Adstock, Quebec, a 22,000 sq. ft. assembly and distribution facility, Mahindra is also looking to complete the set of NAFTA countries it services from Houston by entering Mexico with a distribution center in the Latin American country, Iyer added. WHAT MAKES A LEADER?

As a company with a long history of developing leadership and reaching out to new sectors, Mahindra was a great place to become a leader, according to Iyer. The Indian conglomerate makes its business from the farm equipment to the hospitality sector, crossing everything from telecommunications to automotive to defense systems in between and leadership couching came early after he joined the company in 1991. 94 J U L Y - A U G U S T 2 0 1 7

Dedication and focus is also where it’s at, Iyer insists. “We have worked nearly 24/7 to give our employees and our partners the confidence to stay, unlike many companies that sort of gave up,” after the global financial crisis. The company’s rise to prominence has been rewarded with increased visibility. In June last year, the US Department of Commerce appointed Iyer to the newly formed Investment Advisory Council (IAC), a body created to promote foreign direct investment (FDI) in the North American country. EXPANSION PLANS

As the company’s footing looks more firm in the northern part of the continent, Mahindra is setting its sights also on South America. Iyer said they recently purchased the assets of its Brazil distributor with the aim of entering that market and eventually the rest of the southern part of Latin America. “That is one shift, from being Mahindra North America to being Mahindra Americas.” “The second big shift is the revamping of our product portfolio to launch new products in the category as well as expand it and our distribution network,” he added. Those changes become a necessity in a market where large competitors such as Deere and Company (NYSE:DE) –with annual sales of $26.6 billion last fiscal year– “have deep pockets and have been highly competitive for the last one or two years.” “It is going to be tough, it is not something I take lightly but to be a strong number three or to get to being number two or even one in the market is going to be a game to play,” especially when faced with weak forecasts for the agricultural industry in the US, Iyer adds.

A US Department of Agriculture (USDA) report in February painted a mixed outlook for the country’s agricultural activity in the middle of the a slow global economic recovery. “Over the next several years, the agricultural sector continues to adjust to lower prices for most farm commodities. Although reduced energy prices have decreased energy-related agricultural production costs, lower crop prices result in declines in planted acreage,” the report on US agricultural projections to 2026 says, adding that “while the combination of slowing economic growth rates and a stronger dollar is expected to be a drag on growth in US agricultural exports over the projection period, global demand for food and agricultural products will continue to expand.” SIMPLICITY WORKS

Keeping it simple is one of the company’s mantras, as it helps maintain the business in good shape. But that does not mean staying the same, as innovation and the combination of strong domestic partners and a worldwide supply chain are also key.

“To offer the best value, we source globally to take care of cyclical changes and exchange rate variations across the world. We also think out of the box and one example comes from the more stringent emissions standards set by the government, where we have come up with a lower maintenance engine than what the competition can offer,” he says.

“I traveled through the landscape of India and the simplicity of the entire business attracted me to stay in the farm equipment sector” In the search for more efficient business models, the company relies a lot on the expertise of partners and is also looking to further invest in and expand its distribution network. “We do look for an efficient model in all areas of business including supply chain, sales and marketing programs, but we also keep the business very simple.”

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