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WORK SMART

THE OPTIMIST

TOY STORY

Why tomorrow’s office will have intelligence built-in

How EMC Chairman Joe Tucci dealt through the downturn

Mattel CEO Bob Eckert reﬂects on 10 years at the top

www.busmanagement.com • Q3 2010

REBUILDING GM One-year on from its Chapter 11 exit, does the restructured auto giant have the smarts to succeed in a changed operating environment?

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FROM THE EDITOR 7

The long journey back All businesses hit bumps in the road; it’s how you deal with them that counts.

n the long and profitable history of global commerce, you can probably count the number of firms for whom business has been consistently easy on just one hand – and for the record, I can’t actually think of any right now. Indeed, Since Ug the inventor debuted his new sled only to find a rival had come up with the wheel it’s been a fact of life for every capitalist that sometimes, things go against you; you just have to roll your sleeves up and get on with the dirty business of survival. And whether it’s for internal reasons (mismanagement, oversight, negligence) or external factors (force majeur, market volatility or changing customer demand), managing that process well is essential. For big companies, bouncing back from corporate scandal, financial malfeasance or public disaster is difficult – but it isn’t impossible. Take the case of Mattel, for example. Back in 2007, the toymaker discovered it had a problem with some of its products being manufactured in China, when high lead paint levels led to the recall of millions of toys during the peak shipping months for Christmas delivery. No company wants to be perceived as putting the health of children at risk; it could have been a PR disaster. Instead, because of the swift, transparent and honest action it took – as well as the fact that it maintained open lines of communication with the media and other related stakeholders 24/7 – the incident is widely regarded as a model of crisis management. “We knew we had made mistakes and I think we were quick to acknowledge that,” explains CEO Bob Eckert in our interview on page 36. “You need to tell people, ‘I don’t care what it takes. We will fix this

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“They’ve taken a lot of the inefficiencies out of the structure in terms of the management layers and decisionmaking, but they didn’t in any way penalize the product programs or the manufacturing. They preserved the core of the company while cleaning up a lot of the historic bureaucracy.” David Cole, Chairman of the Center for Automotive Research, on GM’s restructuring effort (p68)

and we will spend whatever we need to spend.’” It’s a lesson a number of other high-profile executives currently mired in their own problems – BP and Toyota, to name but two – would do well to follow. Even bankruptcy is no longer a stumbling block to building (or rebuilding) a successful firm. Modern wisdom has it that bankruptcy can be a good thing as long as a company can shed debt, fix its processes and eventually return to profitability. It’s a problem GM is currently grappling with following its highly publicized collapse last year. The company celebrates the oneyear anniversary of its emergence from Chapter 11 this month, and after significant restructuring things are looking up for the automotive giant: in April it announced its first quarterly profit since 2007, and there is no doubt the new GM is a slimmed down, more streamlined operation than its bloated and inefficient predecessor. Again, management is key; but does auto industry outsider Ed Whitacre have the knowledge to restore the company to its former glories? Our cover story on page 68 finds out. All businesses hit bumps in the road now and again, and the best-run firms are able to ensure the wheels don’t fall off when they do. Last June, the wheels fell off for GM. It’s now down to a new team of mechanics to put them back on again.

Ben Thompson Senior Editor

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CONTENTS 9

Toy story Why Mattel CEO Bob Eckert is rebranding the toy giant as a “people development machine” – and how a focus on getting the company culture right is helping him get there

Changing the game Led by charismatic Joseph Tucci, EMC has defied expectation and flourished in a recession

Model of success One-year on from General Motors emergence from bankruptcy protection, Ben Thompson takes a look at what changes have been made and how the automotive giant looks set for the long term

68 Obamacare: Looking after your business Following the controversial overhaul of the country’s healthcare system, Business Management takes a look at how the changes will affect America’s business landscape

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CONTENTS

54 The future looks cloudy Michelle Bailey gives her forecast for the datacenters of tomorrow

60 Smarter, leaner, greener Why the workplaces of the future will have integrated intelligence built in to the very fabric of the building

66 Head in the cloud

Bryan Doerr reveals how the cloud is the solution to IT outsourcing needs

76 Powering the technology generation Duke Energy’s CTO, David Mohler, talks about technology’s role in energy distribution today

78 Self-service business intelligence Ellie Fields reveals the business solutions provided by self-service dashboards

102

Helena Schwenk of Ovum outlines the latest trends in business intelligence technology

90 The future of modern medicine Kaiser Permanente’s Robert Pearl talks to Business Management about the role of technology in healthcare today

94 Mastering multi-sourcing With outsourcing on the rise, how can firms effectively manage multiple sourcing partners and relationships?

96 Enterprise data quality governance Some insight into the importance of quality data for businesses today

100 The paradox of global leadership Mike Thompson explains the importance of rethinking leadership development

DesignworksUSA: Laurenz Schaffer

Gold sponsor

102 Driving design forward

62 Panduit: Shahriar Allen

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80 Doing business the intelligent way

Laurenz Schaffer lifts the hood on the creativity behind DesignworksUSA, engineering heavyweight and the world’s most innovative company

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CONTENTS

Executive Interviews

P.s.

56 Kent Christensen Datalink 58 Fred Stack Emerson 82 Joe Ruck BoardVantage

131

110 The cost of a cloud Europe’s ash cloud left thousands of business people stranded away from home, but some industries were able to capitalize on executive’s travel woes

112 Media, innovation, productivity Tim Hughan explains how to maximize efficiency for the web-enabled business generation

114 Mobile force Lee Wagner explains how mobile technologies can improve businesses today

116 Connecting people Nokia’s CIO talks about the importance of personnel in the world of technology

118 The Lean Solution

131 136 138 140

Marketing the MLS 36 hours in… Chicago Gadget reviews Book reviews

142 Agenda What’s on this quarter 144 Final Word with Jeremy Roffe-Vidal, Capgemini

128

Business Management finds out how Lean and Six Sigma are bringing about performance improvements

120 World leader Like its products, Coca-Cola’s employees are all over the world. Chief People Officer Ceree Eberly reveals the challenges of directing a global workforce

124 Money maker Ben Thompson speaks to the man who brought the world of stocks and shares to the masses

128 Pushing back the boundaries Business Management reports on how philanthropy is entering the IT shop through a new initiative

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UPFRONT v2_25 June 09/07/2010 15:57 Page 16

THE BRIEF

Consumer protection or entrepreneur threat?

s America continues to nurse its wounds from the crippling economic crisis and businesses endeavor to return to a state of growth, President Obama’s proposed financial regulatory reform legislation reaches its conference committee. Since plans to overhaul the existing financial regulatory system were announced in June last year, they have been met with a barrage of opinion both for and against. Lengthy and complex in nature, the legislation is intended to minimize the risk of a future financial crisis, including measures to establish a systemic supervisor, to implement an arbiter between consumers and financial institutions and to impose a more stringent regulations on derivatives trading. The proposals have attracted an abundance of attention, with many in America hoping to see the financial sector held accountable for the economic maelstrom; it is also proving unpopular with some in the financial services sector, who claim the reform is too stringent and will be detrimental to economic growth. But what will these changes mean for the country’s convalescent businesses? A level playing field, says Tim Duncan, serial entrepreneur and Chairman of the informal American Business Leaders for Financial Reform group. “The financial services industry needs to regain a lot of credibility in this country and across the world,” explains Duncan. “I’m

not sure that a lot of the executives in some of the larger companies and the banks really understand the extent to which people across the United States are upset about what’s happened to the economy.” On the other side of the fence, John Dearie, Vice President of Policy at the Financial Services Forum, explains that contrary to popular belief, his organization is in favor of reform. “It has long been understood in this country the framework for supervision and regulation was inefficient,” Dearie explains. “One of the things that made us vulnerable to financial crisis was that no one was looking at the big picture and so no one really had a good understanding of how risks evolving or emerging in, say, the mortgage market might affect financial institutions and other aspects of the financial system.” Duncan’s group are lobbying specifically for the instatement of the proposed Consumer Financial Protection Bureau, the agency that would operate as a regulator to oversee various consumer debts, such as mortgages, credit cards or consumer loans, providing consumers with a buffer against lenders. Duncan suggests that the CFPB will benefit businesses looking to succeed in today’s increasingly competitive market, explaining that financial institutions across the board will be offering reasonable, transparent financial products. “The biggest problem we’ve had in the past,” he explains, “is that you have a segment of the industry that has hid-

“One of the things that made us vulnerable to financial crisis was that no one was looking at the big picture” John Dearie

UPFRONT v2_25 June 09/07/2010 15:57 Page 17

THE BRIEF 17

den fees, has non-transparency contracts, unfair agreements that trap people into entering.” Critics of the agency, most notably the American Bankers Association, claim that it would prevent smaller banks from operating effectively. The ABA wrote a letter to Congress back in April, outlining concerns that CFPB would subject banks of all sizes to a set of poorly constructed rules in order to monitor retail bank products. Duncan disputes these concerns, pointing out that as many as 98 percent of the banks in the US will be exempt from the examination authority of the agency. “The idea behind this,” he explains, “is that the agency can focus on products. It’s not focusing on who’s originating those products, so if a bank is making a loan, or an auto lender is making a loan, or a private payday lender is making a loan, what’s going to be looked at is the loan.” More significantly, the Financial Services Forum is concerned that the new consumer protection bureau could have a potentially negative impact upon small businesses. Though the Forum is strongly in favor of enhancing consumer protection, Dearie explains that consolidating the consumer protection duties of financial regulators within a single bureau could be a misguided approach to the issue. There is a feeling that consumers will inevitably find it hard to get credit and, if they do, will be obliged to pay higher upfront rates to ensure banks have the necessary capital in reserve. For small businesses and entrepreneurs this could be a potentially crippling eventuality, particularly in a time of recovery. “The intentions are good in terms of protecting consumers,” Dearie says, “but, in protecting consumers, I think there is a very real risk that a new agency in Washington could take an approach that might negatively impact the kinds of financing alternatives that small businesses rely on. “If your perspective is the business community, your priority with regard to finance is a wide availability of financial products and services and a low cost of capital. And I think both things are going to become more difficult. It’s going to be more difficult environment for business to get the same kind of range of products and services that they’ve been used to. So in that sense, I think it would amount to a more challenging financial environment for businesses.” Duncan is not concerned, and explains that the agency, as with the greater majority of the reform legislation, is concerned with getting businesses going again in America. He adds that there are aspects of legislation that deal with credit card fees and other such expenses that concern small businesses that will ultimately prove helpful to the small businesses across the country. “I think it’ll, hopefully, begin to once again level the playing field in terms of the cost of financial services and encourage people to look forward instead of looking back.”

News in pictures

Leaders met in Toronto in June to address issues including the global economy. They agree that banks need signiﬁcantly higher capital reserves in order to avoid another ﬁnancial crisis, which supports the proposed changes that feature in the regulatory reform legislation.

Disney lost a $269 million law suit against television company Celador. The British creators of Who want to be a millionaire?, the hit TV show made popular in the states back in 1999, claim Disney did not pay appropriate royalties for the show.

In one of the most hyped deals in American sporting history, LeBron James announced his decision to sign to Miami Heat. James is the most valuable player to transfer between major clubs as a free agent since Shaquille O'Neal signed for LA Lakers in 1996.

UPFRONT v2_25 June 09/07/2010 15:57 Page 18

NEWS & NUMBERS

Social media in business

Internet giants jump on the social media train a little too late

wo years on from its $850 million purchase of Bebo, AOL have sold the struggling social media site to private investment firm Criterion Capital Partners for an undisclosed sum, reported to be in the region of under $10 million dollars. Bebo, which struggled in the US since its launch in 2005 and found most of its users in Britain, was already beginning to struggle against Facebook back in 2008 when AOL took over. The original purchase of Bebo, which took place before the current CEO, Tim Armstrong, was at the helm of AOL, had been part of a strategy to improve the international presence of the firm as well as grab hold of the fast moving and highly lucrative social media business. Unfortunately, even as the best-laid plans often do, this strategy backfired, with the acquisition being described by the BBC as “one of the worst deals of the dotcom era”. Disastrous though it undoubtedly was, AOL is by no means the only media giant who sought to get in on the social media action and missed the boat. News Corp. paid around $560 million for MySpace back in 2005, and were stung with $450 million worth of “impairment charges” last year. Also to blunder in the social media world were British television broadcaster ITV, who bought Friends Reunited for £175 million ($262 million) and later sold it for just £25 million ($37 million). Speaking at a conference following the sale, Armstrong explained, “Bebo was a major distraction for the company. Every meeting I went to, everyone was talking about spending the $850 million; it wasn’t working out that well.” While the acquisition of Bebo was certainly a black mark against AOL’s business record, it is by no means the biggest strategic error in the firm’s history – $850 million seems a tiny sum when compared to the $160 billion they paid for Time Warner in 2000. And according to a spokeswoman from the company, the huge loss suffered can be turned into a “meaningful tax deduction.”

With more people utilizing social media technology such as Twitter and Facebook, companies are coming to realize it is another resource to reach their clients. As such, many ﬁrms can now be found on a variety of social media networks. Here we take a look at the Fortune Global 100 Companies.

3 companies Latin America

20 companies Asia Paciﬁc

29 companies United States

FORTUNE GLOBAL 100 COMPANIES How are the top 100 companies embracing and utilising social media?

48 companies Europe

65% have a Twitter account

33% have a corporate blog

54% have a Facebook fan page

50% have a YouTube channel

FREQUENCY OF ACTIVITY

68% Percentage of Fortune 100 companies using their Twitter account per week

27 tweets on average per week

Percentage of Fortune 100 companies using their YouTube account per month

59% Percentage of Fortune 100 companies using their Facebook page per week

10 videos

3.6 posts

on average per month

on average per week

36% Percentage of Fortune 100 companies using their corporate blog per month

7 posts on average per month

[ Source: The Global Social Media Check-up - Insights from the Burson-Marsteller Evidence-Based Communications Group ] [ Graphic by T Farrant | Twitter @fallenblossom ]

UPFRONT v2_25 June 09/07/2010 15:57 Page 19

NEWS & NUMBERS 19

Winners of the social media movement…

Around the world in 80 days

1. Mark Zuckerberg The CEO and founder of Facebook frequently tops lists for his success in social media. Recent estimates place Facebook’s value at around $11.5 billion. According to Zuckerberg, Facebook is almost guaranteed to reach one billion members, just not this year.

2. Pete Cashmore

Photo courtesy Ewan McIntosh/Flickr

The British born CEO and founder of Mashable, a Technorati Top 10 blog on social media and technology. Cashmore himself has around two million followers on Twitter and Mashable currently welcomes 10 million readers every month, generating millions of dollars in advertising revenue.

Our guide to the last quarter’s global events – and their impact on your business.

3. Michael and Xochi Birch

Mineral rich

Blowing away

Creators of Bebo spent £8000 ($12,000) building the site, let it grow into one of the most popular social networks in the world, and sold up at the height of its popularity, to AOL in 2008 for $450 million. Two years later the brand’s worth shrunk to a fraction of that size.

A team from the Pentagon have placed estimates of Afghanistan’s mineral wealth at around $1 trillion. The announcement has helped reawaken resolve to ﬁght for the country, in order to tap into its reserves of vital minerals. BMUS impact rating: ´´´

China has boosted its production of wind turbines so as to reclaim the country’s wind energy market from foreign companies, including General Electric. Investors, such as Siemens are responding by offering newer technology to the Chinese market. BMUS impact rating: ´´´´

…And the losers TGI Fridays The restaurant chain set up a marketing campaign last year, whereby ‘fans’ of TGIF mascot Woody’s Facebook page would receive a coupon for a free burger. Rather than generating popularity for the brand, all the page did was provide a platform for angry customers to post complaints that they had never received their coupon.

Nestle In March the global confectionary manufacturer demonstrated how not to use social media. Antagonistic comments from the company itself on the Facebook fan page sparked a barrage of posts from consumers accusing Nestle of unethical practices. This was exacerbated as Nestle told ‘fans’ they would simply delete unfavorable comments.

Recall As Toyota struggled with the effects its product recall earlier this year, the car manufacturer suffered another blow in June. A further 270,000 models of the Lexus vehicle were recalled around the world, predominantly in the USA and Japan in order to fix an engine problem. BMUS impact rating: ´´

On the move Despite signs of recovery of the US car market, major manufacturers are planning to shift production to Mexico to cut costs. This news comes a year after more than $80 billion was spent on propping up General Motors and Chrysler in order to save American jobs. BMUS impact rating: ´´´´

Russia speaks out Russia has rejected allegations of a spy ring run in US after 10 people were arrested on charges of consipiracy to act as unlawful agents of a foreign government. Renewed tensions between the US and Russia come just days after President Obama and President Dmitry Medvedev publicly enjoyed a burger on Medvedev’s visit to the White House. BMUS impact rating: ´´´

Job cuts According to a government report, private employers signiﬁcantly reduced job creation in May this year. The private sector saw only 41,000 new jobs creates, drastically lower than the 218,000 that were available in April. Wall Street viewed the ﬁgures as a possible indicator that economic recovery has come to a stand still. BMUS impact rating: ´´´´

UPFRONT v2_25 June 09/07/2010 15:57 Page 20

UPFRONT

What do countries think about green brands? It would be legitimate to think that with the US coming out of a recession, shoppers would be more pre-occupied with the economic downturn than saving the planet, and according to the ﬁfth annual ImagePower Green Brands Survey that appears to be the case, although there is a growing concern for green practices.

Most consumers think the environment in their country is on the wrong track

Business leaders form clean energy council

group of the country’s foremost business leaders have collaborated to create the American Energy Innovation Council. The group, which includes former CEO of Microsoft Bill Gates, CEO of General Electric Jeff Immelt and chairman of Bank of America Chad Holliday, aims to boost the country’s economy, national security and environment through use of cleaner technologies to modernize the energy system. The Council called upon Washington to invest $16 billion every year for research and development of clean energy, a $9 billion increase from the current annual investment in this sector. Gates explained in an interview with NPR Media that funding from government is essential in order for the sector to ﬂourish and provided much-needed boost to the US economy. “Government investment unlocks a huge amount of private sector activity,” he explained, adding that the funding would “create jobs and create new technologies that will be productized.” Keen to assert the US as the global leader in energy efﬁciency, the Council is looking to encourage home grown innovation in this sector. Council member and Silicon Valley venture capitalist, John Doerr pointed out that the US spends more annually on potato chips than it does on clean energy research, and his fellow member, Ursula Burns, explained that the country currently relies too heavily on foreign investment in this sector.

Allocation of US taxes in 2009 44% Military 19.7% Healthcare 2.5% Energy and Environment

47% 48% 54% 48% 42% 29% 57% 66%

USA UK France Germany Australia China India Brazil

Wrong Track

34% 37% 33% 40% 43% 65% 36% 30% Right Track

Cost is the biggest factor for consumers choosing green labeled products

5 USA | UK | France | Germany | Australia Countries that felt green labelled products were too expensive

1 China Countries that found green labelling confusing or untrustworthy

2 India | Brazil Countries that found there was a limited selection of green products to choose from

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IN FOCUS

A series of unfortunate events: the Gulf of Mexico oil spill at a glance

04.20

04.30

At 11 pm EST, the Deepwater Horizon, an oil rig drilling for energy giant BP at a well in the Gulf of Mexico, suffered an explosion on board killing 11 people. The rig soon sinks into the ocean and oil begins to ﬂow from three leaks in the well at a rate estimated as high as 25,000 barrels a day.

Around 1000 ﬁsherman from the area, whose livelihoods have been indeﬁnitely suspended by the spill, campaign for employment from BP to help with the clean up effort

05.18

06.15

06.17

06.20

06.29

Waterworld star Kevin Costner holds a press conference to unveil a machine that his ﬁrm, Ocean Therapy Solutions, has been developing, which he claims can separate 97 percent of the oil from the water. The machines are being sent to the Gulf of Mexico to aid the clean up.

President Obama addresses the nation about tackling the issues in the Gulf. Two weeks earlier he had announced plans to stop deepwater drilling for at least six months, a decision which is overturned less than a month later.

BP commit to putting $20 billion in a compensation fund and state that they will not pay shareholders dividends this year, yet CEO Tony Hayward still refuses to stand down. This news comes amid speculation that they could be looking to a chapter 11 ﬁling.

Hopes that BP can recover in America from this catastrophe dwindle as Tony Hayward commits yet another PR blunder, this time spending Father’s Day weekend on the Isle of Wight in Britain, watching his yacht race at Cowes, fuelling anger among the American public.

As BP’s clean up costs reach highs of $2.65 billion, British energy analyst, Fred Lucas, speculates that global energy ﬁrms Exxon or Shell could potentially take over for approximately £88 billion ($132 billion).

UPFRONT v2_25 June 09/07/2010 15:57 Page 23

IN FOCUS 23

The Gulf’s glimmer of hope Business disaster, PR nightmare, a $2.65 billion clean-up bill… and that’s not to mention the environmental effects. But for one company, the BP oil catastrophe has provided the perfect business opportunity.

cean Therapy Solutions made headlines in May, when co-founder and Hollywood star Kevin Costner held a press conference to bring attention to the firm’s siphoning machines that separate oil from water, leaving the end product 97 percent clean. Costner explained how the largest machines can seprate 200 gallons of oil a minute, and the machines are now being sent out to the Gulf of Mexico to help with the John Houghtaling mass clean up operation. As BP chief executive Tony Hayward remains something of a blundering villain in the US media, Costner and his business partner in the venture, John Houghtaling, have emerged as national darlings, both testifying before Congress and stressing the importance of cleaning up the spill. Speaking to Next Generation Oil & Gas, Houghtaling outlined the challenges facing Ocean Therapy Solutions, the problems of underwater blooms and successful trials. “We had been running the factory with no customers,” he explains. “It’s practically been dormant. So we have spun the factory back up. We have 10 V20 [machines] that are already manufactured. Those are either on vessels right now, or they're being put on vessels in Venice, Louisiana.” For Ocean Therapy Solutions, the disaster has very much been an event they wished they would never have to respond to. After witnessing the Exxon Valdez disaster, CEO Kevin Costner invested $26 million of his own money into developing the separation machines so if such a disaster happened again, there would be devices capable of aiding the response. “The orders that we have gotten from BP are for the huge ones, the V20,” Houghtaling reveals. “To fill that order, we’ve got 10 of those down on the ground, and we're starting the factory up. By August 1st, we will have all 32 of the big V20s working. And after August 1st, we’re going to be able to make, at a minimum, 10 a week.” Houghtaling was positive about his firm’s relationship with BP. “I sat with Doug Suttles (President of BP operations in Alaska) about four days ago,” he says, “and he told me at the very beginning when we talked about the technology, he had looked into it and he just without any doubt says, ‘Let’s go with these [machines] immediately – let’s get them out there.’” Houghtaling went on to support BP’s Suttles, explaining how he had been keen to find a way of deploying Ocean Therapy Solution’s machines in the future. “Our vision was to be a metaphorical fire truck. And we have a fire solution, in case there’s a problem. And Suttles said he would be in favor of a program like that. “Kevin and I have sat with Rahm Emanuel (President Obama’s chief of staff), Senator Mary Landrieu, and Senator Buchanan, and they’re in favor of this program. Kevin and I also sat with John McCain, and John McCain has spoken with the governor, and they are both in favor of the program. “Really, the machines need to be in place on boats, and rigs, before there’s a spill, so that we can deploy. Had we had machines out there at the spill, we would be recapturing all the oil without any dispersant. In addition to doing what we can to work on the cleanup, we are very intent on being able to help as a preventative measure.”

UPFRONT v2_25 June 09/07/2010 15:57 Page 24

IN FOCUS

Tablet talent

The tablet PC is revolutionizing the way we consume media, but what does this mean for the future of publishing?

n April 3rd Apple’s greatly anticipated iPad hit the stores of America. Since it was ceremoniously unveiled in January, the technology giant’s first tablet PC has received a phenomenal amount of hype, even by their publicity standards. Journalists, reviewers and bloggers quickly divided into parties of iLove and iHate, producing catalogues of materials about the device’s chic aesthetics, its lack of USB port, its variety of convenient functions or its short battery life. Regardless of personal opinion,

it has become impossible to deny the success of the iPad, with unit sales hitting the two million mark in a matter of weeks and that figure projected to double by the end of the year. But while writers busied themselves with either praising or berating Apple, a more pressing issue for the publishing world has received comparatively little media attention. Whatever the iPad itself may lack, it is impossible to ignore the effects that tablet PCs of this kind are having on an industry already reeling from a recession. Mobile internet access combined with features such as electronic reader technologies and popular newspaper applications allow users to access everything from the latest headlines to their favorite magazines on a single device, transforming the way people consume media. The publishing industry is in the process of undergoing significant changes to adapt to the digital market and, according to industry experts, pub-

“Publishers will have to ask themselves whether they have the right structure and right talent for this new world” Lynne Seid, Heidrick & Struggles

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IN FOCUS 25

lishers looking to stay relevant will need to incorporate these changes into all levels of the business. Lynne Seid, former president of advertising firm Foote, Cone & Belding and head of the digital marketing unit at the leadership advisory firm Heidrick & Struggles, suggests that while publishers must incorporate personnel with digital expertise into the business, those new media experts must have experience of traditional publishing in order to ensure a successful business model. “Organizations need talent at the top that can bridge the old and new worlds,” says Seid. “Rather than looking for change agents, companies need truly transformational leaders who can add on capabilities to the organization.” This shift in media consumption does not come as a surprise. Since the rise of the internet people have turned to the digital world for their news, sales of traditional publications have steadily fallen and publishers for the most part have managed to establish strong, content-rich websites. But while there has been a shift in focus towards digital media, few publishers have made the changes necessary to fully integrate digital media into the existing publishing business structure. “The implications of consumption from print to digital devices will echo back into the publishing organization itself,” explains Seid. “Publishers will have to ask themselves whether they have the right structure and right talent for this new world.” One of the biggest changes for publishing companies is the shift in demands placed on employees. More emphasis on components such as search engine optimized content and video reports or interviews will mean journalists and editors must be familiar with a much broader range of skills than was previously necessary. In addition, firms must have enough technological expertise in place to stay on top on the fast moving digital world without significantly reducing profits. On top of that, the change in publishing medium will have huge consequences for the advertising revenue a publication can generate, as well as hard copy sales. Tablet PCs do not bring a complete transformation for the publishing industry – digital media has been steadily evolving since the mid 1990s – however they certainly represent the next stage in media production. Publishers must meet the changing demands of the industry as we move into the era of the tablet PC. Seid explains, “The shift is forcing a new way of thinking about what it means to publish a newspaper or a magazine or a book, and executives must understand this dynamic process or they will simply have no place in the new world.”

Apple or Android?

pple continues to top headlines this quarter with their latest gadgets. With iPad hype still warm off the press, the technology ﬁrm announced the release of its hottest new iPhone model. Hundreds of people waited in line at Apple stores across America on June 24th hoping to be among the ﬁrst to own the iPhone 4 and pre-orders surpassed 600,000, making the fourth generation iPhone the most popular model to date. This new model features a higher-resolution screen than previous models, greater battery life, video chat via Wi-Fi and a gyroscope sensor for improved gaming. However, as we expect from any new Apple gadget, the iPhone 4 has not been met without its fair share of criticism. Though technology columnists across the country are hailing it as the phone to beat this year, speculation remains rife that Apple will be overtaken by brands using the Google Android mobile operating platform within the coming years. Google’s Android mobile operating system is a relative neophyte compared to Apple. However a recent survey of 2733 mobile application developers highlighted that more than half prefer the Android to Apple’s iOS system, the platform used in the new iPhone, seeing it as the competitor with the highest long term potential. The platform favored by manufacturers Samsung, Motorola and LG, the Android operating system is currently welcoming 100,000 new users daily, and is set to surpass iOS by 2012 to become the most popular mobile operating system in the world after Blackberry’s.

Operating system market share

35%

28%

RIM Blackberry OS

Apple iPhone OS

-2%

+2%

9% Android OS

+2%

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UPFRONT

Top 10… Most Innovative Cities A recent survey of the 100 largest metropolitan areas in America has compiled the country’s most innovative cities. Looking at factors such as number of patents per capita, venture capital per capita and the ratios of high tech, science and creative jobs in the area, Forbes was able to determine which cities are pioneering tomorrow’s technology.

San Francisco, California California’s second of three appearances in the top 10 had the second highest rate of ﬁnancial investments in ventures per capita.

1 San Jose, California Silicon Valley leads the country as a magnet for the brightest minds in business. San Jose and its neighbors are home to some of world’s leading technology companies including Google and eBay.

Austin, Texas A surprising runner up in Forbes’s survey, Austin produced on average 1.7 patents per thousand residents over the last 12 months. The Cockrell School of Engineering and IBM’s research lab have been attributed to the city’s success.

5 Seattle, Washington

Raleigh, North Carolina

Forbes nominated Raleigh as the country’s Most Wired City for its strong mix of academics and industry. Major technology players Cisco and Lenovo beneﬁt from a pool of talent at Duke, North Carolina State, and University of North Carolina.

This rainy city boasts a higher than average number of creative jobs to bring it into the top ﬁve.

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Provo, Utah

Provo was the second strongest city for its number of science and technology jobs per capita, and its proximity to Brigham Young University.

10 Portland, Oregon

While having a lower than average rate of both creative and technological jobs, the people of Portland had a strong level of patents per capita.

San Diego, California

Like San Francisco, San Diego had a higher than average rate of investment per capita, highlighting California as the best state to ďŹ nd venture capital.

Madison, Wisconsin

Another strong university city, Madison did particularly well in its proportion of creative jobs per sector.

8 Boston, Massachusetts Highly rated in the investment category, Boston beneďŹ ts from a relatively close proximity to Harvard University.

New York City, often considered to be at the cutting edge of so many industries, came in at a disappointing 49th place, with one of the lowest rates of patents per capita of all the cities tested.

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UPFRONT

A decade of DOD architecture-driven modernization projects

Work management for the 21st century

e’ve all done it, we’ve all been there. You come into the office, sit behind your desk and stare blankly at your computer not knowing where to begin. Your tasks lie in front of you in Excel spreadsheets, emails, MSProject tasks and random post-it notes lining your desk. All the information from several disconnected systems makes it impossible to get a clear view of your priorities, making it all the more difficult to determine where to begin and how to manage your day. A serious concern for the modern manager is employees who spend time on the wrong tasks, the wrong priorities, or waste their time trying to collect all the data sources in one place. Most employees simply do not know what they are going to do each day, making it impossible for management to have any level of visibility into the organization’s resource allocation, staffing levels, budgets and overall work load. That is where Work Management comes in. Moving beyond Project Management, Work Management brings these disconnected islands of information into one platform. Ad-hoc information, like emails and notes, and structured information within projects and tasks get migrated into one holistic platform. With real-time project, task, budget, timeline and resource data integrated into one location, workers now have a single location to depend on to be the definitive, one-stop work environment used throughout the organization. With everyone working in the same place, based on the same real-time data, employees are empowered to focus on the work that most directly affects the bottom line. Employees are now focused on the correct priorities and management can rest assured that every employee not only knows what they should be doing each day, but that they are actually motivated and dedicated to getting the work done. For further information, please visit clarizen.com

ow is the United States Department of Defence, which runs the most complex IT infrastructure in the world, tackling modernization of its legacy systems? The Systems and Software Technology Conference (SSTC) attended annually in Salt Lake City, Utah by thousands of defense contractors, federal government CIOs and DoD software professionals, shed light on this question. The opening general session keynote, given by Philip Newcomb, CEO of The Software Revolution, Inc., presented an impressive review of dozens of defense legacy systems that had been successfully modernized during the past decade using his company’s technology, based on the Object Management Group (OMG)’s architecture-driven modernization (ADM) standards. It was eye-opening to learn that the DoD has an impressive lead on industry and most federal agencies in tackling its massive legacy system inventory. It has done so by using ADM, a software modernization approach that has been shown to consistently deliver the highest quality modernized software, typically with success rates approaching 100 percent. The defence department has a long history of promoting systematic software engineering processes. With the Forrester Group citing 63 percent failure rate for past replacement efforts, the DoD’s embrace of ADM is not surprising. With large modernization projects routinely delivered in months by small teams, ADM is an emerging body of OMG standards supported by conformant tools, methods and practices that employ modelbased, rule-driven analysis, transformation and refactoring to modernize systems into new target languages, platforms and environments in a fraction of the cost, time and risk of manual methods, and it works for virtually any legacy software language. By highlighting the importance of ADM at the opening general session of the SSTC, the DoD implicitly embraced the coming of age of ADM as a mature technology for modernizing its vast inventory of legacy systems. The key ‘game changing technology’ message at the SSTC this year was there is simply no longer any excuse for failure-prone manual software rewrites. With nearly a decade of successes, architecture-driven modernization is a proven approach with state-of-the-art tools and technology that can tackle virtually any size or kind of legacy software modernization problem.

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UPFRONT

The President of Bolivian Coca Industrialization Social Organization shows two bottles of 'Coca Colla'.

“I've developed my own secret formula. I started making the drink at home, based on my beloved but otherwise reviled coca leaf and outsourcing the bottling process," says the drink’s creator, Victor Ledezma. “Now we are building a plant in Santa Cruz and aiming to have investments of at least $1 million. That's for a start. The whole world should know that coca, besides from its good taste, is good for the body and the soul.” Drinks derived from coca leaves are nothing new. At the turn of the 19th century, Corsican entrpreneur Angelo Mariani sparked controversy with his coca-based wine, Vin Mariani. The drink offered “health, strength, energy and vitality” and was even awarded ofﬁcial recognition

The real thing? The sticky brown drink has a red and white label, tastes ultra-sweet and gives you a buzz; it’s not quite Coca-Cola, but it’s pretty damn close.

n unlikely newcomer has made the world of soft drinks a little more crowded: Bolivia has started producing a new ﬁzzy drink using the coca leaf. And just to make sure its competitors in the global beverage industry sit up and take notice, it’s appropriated the look – and virtually the name – of its biggest rival. Called Coca Colla after the Colla people, the Andean tribes who cultivate coca in Bolivia, Chile and Argentina, the new energy soft drink is being made by a private company but is backed by a government policy of industrializing the cultivation of the coca leaf – a key element in the Andean people’s culture and economy. The leaf is a mild stimulant that wards off fatigue and hunger, and has been used in the Andes for thousands of years in cooking, medicine and religious rites. However, it also provides the raw material for cocaine, the powerful narcotic that is the primary target of the US-led ‘war on drugs’. As such, the drink faces signiﬁcant hurdles as it looks to challenge beverage giants such as Red Bull and its near-namesake. With the notable exception of Coca-Cola, products using coca leaves are banned in most nations beyond the Andes, and exporting the beverage would require the International Narcotics Control Board to take the leaf off the list of dangerous drugs, where it has been since 1961.

MARKET BUZZ In 2009, some 3.9 billion cans of Red Bull Energy Drink were consumed worldwide Coca-Cola produces more than half of the world’s beverages, including the top-selling Monster brand By 2014, the global soft drinks market is forecast to be worth at least $483.8 billion

“I’ve developed my own secret formula. I started making the drink at home, based on my beloved but otherwise reviled coca leaf and outsourcing the bottling process” Victor Ledezma by Pope Leo XIII. More recently, coca leaves have been cited as elements in the formula of the Red Bull Cola energy drink. But most famously, the leaves helped provide the kick in Coca-Cola’s original formula. The company dropped cocaine from its recipe more than 100 years go, but the secret formula still calls for a cocaine-free coca extract. The Coca-Cola Company is said to import eight tons of coca leaves from South America each year, mainly from Peru. “The coca leaf has three alkaloids. Extracted from the leaf and concentrated into cocaine with chloride, the coca alkaloid is highly stimulating and, potentially, very addictive,” explains Dr Jorge Hurtado, a local psychiatrist and coca expert who heads the International Coca Research Institute. “However, the small dose present naturally, and unprocessed, in coca leaves provides only a slight energising sensation and it is not addictive; it carries less of a kick than a cup of coffee. The same applies to Coca Colla or other coca-based products like toothpaste, ﬂour or sweets,” he adds. The ﬁrst batch of 12,000 bottles, priced about $1.50 for a half-liter, were distributed in the capital La Paz, as well as Santa Cruz and Cochabamba, in April. And if the coca spin-offs work out, the government has said that the area of land authorized for legal cultivation of the leaf may expand from 12,000 hectares to as much as 20,000 hectares.

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INTERVIEW

Cool for cats How do you promote an über-cool brand for the fickle sports lifestyle consumer? Antonio Bertone, former record shop owner, club promoter and now Puma’s Chief Marketing Officer, explains. Of all the C-level roles, marketing is perhaps the most hip. It’s the cool kid-brother to HR, the counter-culture cousin to uptight older relatives such as legal and finance. And no one better reflects this desire to be at the cutting-edge than Puma’s Antonio Bertone. The son of Italian immigrants living in Boston, Bertone rocked up at Puma’s US door as a fresh-faced 22-year-old with a skateboard tucked under his arm. With no college education behind him or MBA to his name, Bertone knew more about 360-kickflips and 50-50 grinds than he did about marketing metrics. But what he lacked in qualifications he made up for with that most crucial of attributes: a finger on the pulse of what kids found fashionable and wanted to wear. He was also instrumental in Puma’s push from sports apparel into lifestyle clothing and skateboarding footwear. “I had a very big mouth and I had no professional training,” he reveals bluntly. “When I came in I think there was a lot of wonderment from my perspective because I was like, ‘Wow, I get to make sneakers’.”

“Puma is a great company to work for – it really entrusts its people more so than processes and I never feel like I’m a cog in the machine” He had no grand visions of becoming the global marketing chief and a member of the board though. “I wouldn’t have even known what a CMO was back then; I was just happy to be employed,” he laughs. “I didn’t go to university and it’s a daunting task when you’re a kid and you have to pay for food and stuff.” Yet Puma employed him as a trainee marketing consultant and within three years he was elevated to global marketing director. Not bad for 25. Bertone, who has been CMO since 2007, insists inspiration for Puma’s marketing and brand strategy comes from people around him, the media and even the weather. “I’m generally better when the weather is nice,” he smirks. His efforts have a direct impact on Puma’s balance sheet so he admits getting a real buzz out of seeing what’s proving popular in the stores. “I’m a little old-fashioned in that I still get excited about what sells at the register, so I love to go into the stores and see what’s selling; and I love it when it’s not the thing that you thought it was going to be – that’s kind of fresh.” Inevitably, not everything is a hit; some products or ideas will crash and burn despite all the market research. His assessment of the thin line between success and failure is somewhat enigmatic, but it still

conveys his point. “Product launches either make a nice big bowl of lemonade or a really shit omelet.” It comes back to the basic questions that need to be answered before any rollout: “You need to ask yourself who is going to wear this, who is going to pay for this and is it too much money? If you stick to those simple questions whenever you approach a new product launch you will have much more success, but sometimes people just try to make it like curing cancer and that just makes it too frickin’ complicated.” Failure is all part of the learning curve for marketing execs and brand champions. It makes you stronger, Bertone asserts – amongst other things. “It makes you humble, especially if you put hype behind something and then you fall flat on your face – it stings for a little bit. Failures also make you smart, because you can’t have a crystal ball and anybody who pretends they do is full of shit. You’ve got to be human at the end of this; it’s not like I’ve got some supercomputer spitting out these ideas – it’s a human being and already that is faulty.” And with consumer opinions and purchasing choices constantly evolving, your marketing strategy needs to be fresh and relevant. Coming up with a hit advertising campaign or a groundbreaking online video that goes viral is one of the biggest challenges. “I always used to have this theory that marketing is like bug spray,” a cryptic Bertone explains. “You kind of come up with one bug spray and then the bugs get used to that spray and they don’t die anymore, so you have to come up with something stronger to kill the bugs, and marketing is the same way.” When it comes to his best “bug sprays” or successes to date, he is suddenly reticent to blow his own trumpet. “I don’t know, I get freaked out by those kinds of questions,” he responds, slightly vexed. He reluctantly lets his guard down though. “I love the fact that we updated the overall delivery, design, look and feel to contemporize Puma. I’m also proud of working on the first-ever Puma store in Santa Monica, which eventually led to our rollout of retail with over 500 stores worldwide. Other than that, I find it freaky thinking about that stuff.” So is Bertone as enthusiastic about working for Puma as he was when he arrived in his youth? “It’s been 16 years but I’m still really motivated. I still see a lot of areas where we can do better, but I think Puma is a great company to work for – it really entrusts its people more so than processes and I never feel like I’m a cog in the machine.” It’s not all plain sailing though. “I actually get to earn my pay check here; I don’t want to get comfortable.”

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California Dreaming Ex-CEO of eBay and Republican nominee for Governor, Meg Whitman, thinks she has what it takes to bring the shine back to the Golden State.

here is no denying California’s critical levels of debt. With a budget deficit of around $25 billion annually and two million residents out of work, America’s most populous state is crumbling behind its sunny façade. California is quickly earning itself the nickname of ‘America’s answer to Greece’, with its economy rated more likely to default than countries such as Kazakhstan. In April, unemployment rates stood significantly lower than the national average at 12.6 percent, a shocking figure in a state whose economy contributes 13 percent of the whole country’s economic output. Manufacturers are shifting operations to other states, the prison system is overflowing and the education system ranks among the worst in the country.

Where she stands… Tax cuts Whitman proposes targeted and affordable tax cuts for key sectors so as to immediately spark job growth. In the long term, she plans to implement wider income tax relief. In addition she plans to eliminate taxes on small business start-ups, manufacturing equipment and capital gains.

Cut spending Whitman plans to impose a cap on spending, in order to enforce discipline and protect tax payers from future sudden tax increases.

Education Whitman intends to ﬁx California’s education system, which currently ranks 48th in the US, by maximizing the percent of the education budget that reaches the classroom.

“It is about time for a governor who has created jobs, managed a budget, led and inspired large organizations”

Help, however, could be on the horizon. With Governor Schwarzenegger standing down this year, ﬁxing the economy is proving the prime concern for those looking to take over. This economic mess that California has found itself swamped in might be an unattractive environment for most budding politicians, but ex-Silicon Valley matriarch Meg Whitman has taken it in her stride. As the Republican candidate for governor, Whitman is playing on her experience of leading multi-billion dollar organizations to succeed in the November elections. Hers is an impressive resume, featuring stints at Bain & Co., Disney, Florists Transworld Delivery and Stride Rite. Most famously, Whitman was responsible for taking eBay, a specialist auction site with 30 employees and a revenue of less than $5 million, and transforming it into to the world-renowned internet brand it is today. But despite impressive business credentials, she is a ﬂedgling in the world of politics. Getting a taste for it whilst on the campaign trail endorsing John McCain in 2008, Whitman

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has no experience in a position of public service, while her Democrat opponent, Jerry Brown, served as governor in the seventies and is the current Attorney General. This does not deter Whitman; in an interview with the LA Times last year, she said, “This is something I’ve done before. I think maybe it is about time for a governor who has created jobs, who’s managed a budget, who’s led and inspired large organizations, who listens well and who can drive an agenda.” Certainly, Whitman’s claim is undeniable; her 10-year stint at eBay saw one of the most notable successes of a firm in recent years. She guided eBay through the dotcom crash that rippled through Silicon Valley in 2000 and 2001 and shrewdly pushed for the purchase of PayPal in 2002 at the bargain price of $1.5 billion, an acquisition that was widely considered one of the brightest big deals of the time. But an opportunistic businesswoman does not necessarily translate to a dynamic politician, something California will certainly need in order to wade through the fiscal mess. Though experienced in creating jobs and revenue by turning a small but successful firm into a global brand, Whitman is now faced with the challenge of managing the state’s crippled education system, a suffering healthcare system and a broke economy with resources that stand at a fraction of those needed to meet the demands of the public sector. In the last year, Governor Schwarzenegger has been forced to make billions of dollars worth of budget cuts in order to fill the expanding fiscal hole, resulting in mass job losses in the public sector. The cuts proposed last May outlined eliminations or significant reductions in funding to programs such as financial assistance for families, state drug programs and community mental health. The construction industry has suffered a 38 percent decrease in its workforce in the last two years, and the real estate sector, once a booming contributor to California’s economic output, has lost around 15 percent. As a hotbed for business innovation Silicon Valley remains a promising economic resource for California, but the taxes slapped on small businesses today are hindering entrepreneurs from flourishing and boosting the state’s economy. As Whitman continues along the campaign trail, the question all Californians are asking is, “can that business success actually help turn the state around?” All she needs to do is persuade them the answer is yes.

Company Index Q3 2010 Companies in this issue are indexed to the ﬁrst page of the article in which each is mentioned. ADP AOL 2953 Analytics Alliance for Wellness ROI Altus Corp AT&T Bavaria Yachts BMW Group Boardvantage Boeing Capgemini Center for Automotive Research Chrysler Cigna Corp CIOs Without Borders Cisco Clarizen Coca-Cola Coca-Colla Datalink DesignworksUSA Duke Energy eBay Edmunds.com Embraer EMC Corp. Emerson Ford Frost & Sullivan Gartner General Motors Gensler Harvard HEAD Hewlett-Packard Hyundai Motor America IBM IDC

Whitman’s campaign so far has cost $90 million California’s deﬁcit stands at $19 billion 12.6% of the population is unemployed

125 18 65 84 110, 111 65 100 100 82, 83 100 144 65 65 84 128 108, 110 28, 98, 99 120, 131 23 56, 57 100 76 34 65 100 46, 60 9, 58, OBC 65 135 95 65 60 46 100 46, 100 65 46, 60 54

IHS Global Insight inCode ING Intel Kasier Permanente Kraft Layered Tech Lexus Lithium Mattel Meet the Boss Microsoft MIT Nissan Nokia Northeastern University Oracle Panduit Politec Puma RBC Wealth Management RCA Revolution Computing Ridgeway Chevrolet Savvis Sennheiser SGI Siemens Six Sigma Small Business Administration Software Revolution Tableau Software Toyota Unisfair Unisys University of Michigan Virtusa Wang Global

65 112, 113 126 46 90 84 13 65 92 36 139 100 46 65 114 46 60, 110 4, 60, 64 74 32 78 46 75 65 66, 67, IBC 100 53 7 116 84 28, 29 78, 79 65 11 46 119 96, 97 46

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Some interesting news from the corner ofﬁce: Mattel is not a toymaker. Or at least, it’s not just a toymaker: it’s a “people development” company. Here, CEO Bob Eckert explains why encouraging people to enjoy themselves actually takes a lot of hard work – and why the approach paid dividends during the ﬁrm’s recall crisis and recent downturn in the economy.

By Ben Thompson

ome companies make products, others offer services; many do both. Nearly all claim to be about people. But not all demonstrate the same level of commitment to employees as California-based toy giant Mattel. As befits a company dedicated to coming up with new ways of having fun, Mattel and its enthusiastic (and hugely likeable) CEO Robert ‘Bob’ Eckert sees staff members’ enjoyment of work as integral to the health and long-term success of the fi rm. “We create magic,” he says at our fi rst meeting, eyes twinkling. “The people who work at Mattel see that every day, they know that’s what they’re here to do. We work at fun. It’s a great place to work.” It’s a message that Eckert and his leadership team are keen to promote. And sat in the lobby of Mattel company headquarters on a large corporate campus in El Segundo, just south of LAX airport, I’m certainly struck by an overwhelming sense of corporate benevolence. Behind the reception desk straight ahead is a large backdrop of children at play bearing the tagline, “The world’s premier toy brands, today and tomorrow”, and the toymaker is clearly – and understandably –

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proud of its heritage: it has a huge portfolio of some of the world’s bestloved and longest-running toy brands, including Hot Wheels, which celebrated its 40th anniversary in 2008; Barbie, who turned 50 last year; and the octogenarian, pre-school favorite Fisher-Price, founded in 1930. Generations of kids have grown up with these brands, and Mattel is conscious of the legacy. But the toys themselves only tell a fraction of the company’s story. To my right the Mattel federal credit union welcomes in a constant stream of employees looking for all kinds of fi nancial assistance; in a room off to my left a seminar on alleviating back pain at work is taking place in the company’s new digital training center. A TV-screen overhead exhorts staff to “create a healthy lifestyle, build a better financial future and enhance their work/life balance” like some benign Big Brother. And posters dotted around the open, airy space provide recognition of the company’s recent awards – with Fortune’s 100 Best Companies To Work For, Ethisphere’s Most Ethical Companies and CRO Magazine’s 100 Best Corporate Citizens prominent amongst them. If anyone’s in any doubt as to where its priorities lie, the fi rm’s charismatic leader dispels them instantly. “People like to be around happy people,” Eckert insists in his office up on the 15th floor. “We spend so much time and energy at work, you

really need to enjoy it; if you don’t like your job, go get another. It’s just a waste of a lifetime otherwise. The people that work here really get that. They understand that we’re at the intersection of what is unique and innovative and new. They understand the importance of toys to a child’s development in learning and socialization. And they all want to be a part of that. We create 8000 ideas a year for toys, and this doesn’t happen on a computer. It doesn’t happen in a system. Somebody comes up with these ideas. Somebody develops the ideas, engineers the ideas, gets them manufactured in Asia, gets them shipped to the right place in the world before Christmas and works with the retailer to get them sold. So we are truly a people-oriented organization, and recognizing that is key to our culture.” With a strong focus on core brands, customer satisfaction and employee welfare, it’s not hard to see why Mattel is the number one toymaker in the world. But it wasn’t always that way.

years is a long time at the top for today’s chief executive. Indeed, according to recent research from Booz & Company on CEO succession rates, in the past decade alone boards have shaved nearly two years off the average CEO’s tenure, from 8.1 years to 6.3 years. “New CEOs have fewer years

How did Mattel handle 2007’s product recall? Eckert explains. HAVE AN OPEN CULTURE INTERNALLY “We wanted to know what the issues were in order to be able to deal with them collectively and quickly. An open culture means people are engaged and there is no unnecessary fear that the messenger of bad news is going to get shot.” ENSHRINE HONESTY AS A VALUE “We talk about the value of playing fair. We want to do the right thing. We knew we had made mistakes and I think we were quick to acknowledge that. Our messages were very consistent, particularly in terms of speaking to parents.” TAKE RESPONSIBILITY FOR WHAT HAPPENED “We said, ‘We’re sorry; you don’t need to worry about your toys, we’re here to worry about the toys. We’re sorry we put you in this position where you have to think about your toys and you have to worry about how your children play.’” COMMUNICATION IS ESSENTIAL “Let people know exactly what happened and what you’re doing to ensure it doesn’t happen again. We were open with our communications – with regulators, with our retailers, with the media and directly with the consuming public.” HAVE A CRISIS MANAGEMENT PLAN “I don’t go anywhere in the world without the contact list for activating our crisis management plan. It’s in my wallet. It’s in my briefcase. It’s on my shelf here at work. I’ve got the chain of command on whatever the issue is and I can reach anybody, anywhere, 24 hours a day.”

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in the role than their predecessors,” suggests Richard Rawlinson, Vice President at the management consultancy giant. “They need to balance clarity and boldness with a realistic understanding of what is possible in their organizations.” Eckert, who celebrates a decade at the helm of the toymaker this year, has done this better than most. He arrived in May 2000 to discover a company reeling from an ill-judged acquisition of children’s soft ware firm The Learning Company the previous year and rife with internal discord. The $3.6 billion deal was supposed to give Mattel a leadership position in the market for online education, adding popular titles such as Reader Rabbit, Where In the World Is Carmen Sandiego? and Pokemon to its portfolio; but the hoped-for synergies failed to materialize and led to management conflicts, rivers of red ink and a plunging stock price – not to mention a round of corporate blood-letting, including the resignation of CEO Jill Barad. Eckert is the fi rst to admit that it was something of a baptism of fi re. “We made that acquisition at the peak of the dotcom boom, and when that market imploded, unfortunately The Learning Company imploded with it,” he says. “The business was hemorrhaging cash. My predecessor had exited. A lot of the management had left. And while the culture at a deeper level was very positive, very warm, very friendly, very supportive and very nurturing, at the very top of the company the culture had gotten a little dysfunctional. The company was in tough shape, but I saw it as a real challenge.” He claims he was inspired to take on the role during a conversation with a Mattel director who, in response to Eckert’s question about what the company culture was like, told him it could be whatever he wanted it to be if he was in charge. As a result, Eckert’s fi rst move – right after cutting his losses with The Learning Co. in a pennies-on-the-dollar sale – was to try to change the culture for the better. “Being able to influence and change a culture as opposed to being a product of or influenced by a culture was really appealing to me,” he says – a process that he believes begins at the top. He’s certainly not your average CEO; he wears a name badge, eats in the company cafeteria most days and rides in the elevators with the rest of the staff. He fl ies American Airlines, eschewing the traditional trappings of the corner office and the luxury lifestyle. “There was a time when the senior executives at Mattel weren’t like that,” he explains. “They were very distant, very removed from the people that actually do the work here, they were isolated. I’ve tried to be more open. That’s just my natural personality.” In addition to instilling that C-level visibility and accessibility, the company has also made some significant investments in people development, leadership development and functional training to let employees know that they are valued. “We want to make sure people know that for whatever time they’re going to spend here, we’re going to invest in them,” says Eckert. “They’re going to learn. And if they decide to leave Mattel, they’re going to be better prepared, a better person, a better leader and a better manager than they were when they came here. Letting people know that we value them and are investing in them has paid tremendous dividends for us.”

When Eckert joined the company, business outside the US represented just 29 percent of Mattel’s overall sales; last year it was 46 percent. Here he reveals why expanding internationally is a key part of its focus.

ur publicly stated goal is 50 percent, but our President of International knows the day we achieve 50 percent his new goal is 60 percent. When I joined the company, I benchmarked the really well-run global consumer goods companies – Unilever, Proctor & Gamble, Coca-Cola, Kraft Foods – and typically about half of their business was done outside of the US. It seemed to me that at 29 percent we were underdeveloped – and as it turns out, about half of the global toy business is done outside of the US, so there’s a lot of growth potential there. Economies are growing. Middle classes are growing. Populations are growing in many parts of the world. So virtually all of the growth in this company is coming from outside the US. Today, the global toy industry is about $50 billion. We’re the largest toy company in the world at $5 billion, and we only do 10 percent of the world’s toy business. But in a place like China, which is a huge and quickly developing market, the entire toy business is maybe $1-2 billion today, and of that the branded toy business where we want to play is maybe only between $100-300 million. That’s the whole market, and we only have a small share of that market. So we’ve got to develop the toy business. The economy helps. People investing more in their children and wanting to see their children have a better future helps. But we’ve got to create the toys that appeal to that market, and then promote toy brands and our brands speciﬁcally. So it’s a challenge from a marketing standpoint, but not unlike the challenge our predecessors faced when they developed the toy market in the 1950s in the US. I got an email last week from one of our directors on a business trip to China and she said, “Bob, I just went into a mass merchandiser here in Shanghai and the toy department is really small, it’s at the very back of the store and it looks like they could use some help in how they display toys”. That’s not atypical. We’re used to walking into stores here in the United States where the toy section is a big, beautiful department with lots of brands; it’s very colorful and exciting and entertaining and a fun place to shop. But if you go to a mass merchandiser in China today, toys are probably category number 83 out of the 100 categories they have in the store, and we’ve got a lot of work to do to help them realize that if you put enough energy into it you can make toys number 60 in a hurry, and then someday if all goes well it can be like a Walmart in the United States where, during the holiday season, toys is one of the two or three most important departments in the store at Christmas. But we’ve got a lot of work to do to help retailers understand that, and it’s going to take a lot of time to develop those markets.

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It’s all part of his plan to make Mattel a truly 21st century business – one that embraces greater communication, collaboration and partnership as a means to achieving its goals. It’s most apparent in the rapport the company has with its employees, but it’s also there in the relationships it has built with suppliers, manufacturers and retailers. Increasingly, companies are being forced to look outside of their own corporate boundaries in order to deliver the best results for customers and shareholders alike, and Mattel is no exception. “A business can no longer be isolated in its own little space,” asserts Eckert. “It really started with our retail customers, who were increasingly open, more demanding

and more willing to partner with vendors regarding how to build their business. We saw the benefits of that, and have embraced a similar approach here at Mattel. We are more collaborative. We are more open. We take advantage of our scale. It’s good for business and we get better ideas when we’re more open.” One such example is the series of strategic alliances the company has built with its retail partners. “We are sitting down and talking

about where the toy business is today and where it can go in the future, and the strategies we can jointly deploy to achieve that end state in a few years. If we have a common view of the future and a common strategy, then decisions around pricing, assortment, marketing, etc. take on a different perspective. So we are constantly engaged with retailers in this business. It is so fast-paced. It is so seasonal. It is so productoriented. None of us is smart enough to do this by ourselves, so we work collaboratively with our customers to fi nd out what’s important to them and how toys fit into their strategy, and that makes the partnership that much more productive.” And such a strong focus on communication was to prove invaluable as the company faced up to the biggest challenge in its history.

ob Eckert is not a superstitious man, but even so he is the fi rst to acknowledge that Friday 13th has taken on a heightened sense of significance for Mattel. In the fi rst instance, it was on this date in December 1998 that the fi rm struck the ill-fated Learning Co. deal that very nearly sunk the company; in the second, it was on Friday 13th July 2007 that Eckert received the news that was to turn his world upside-down and catapult Mattel onto the front pages of newspapers around the world for all the wrong reasons. “I was sitting in my office right here when our Worldwide EVP of Operations and the Senior Vice President of Product Integrity walked in and said, ‘We think we have a problem’,” remembers Eckert. “And in

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MATTEL’S SUMMER WINS

my experience, when the head of quality walks into your office and says there’s something wrong, the antenna goes up straight away.” The news was bad: an internal probe had discovered a Chinese manufacturer had used a non-approved paint pigment on a range of the company’s toys – including characters popular with young children such as Sesame Street’s Big Bird and Elmo, and Nickelodeon’s Dora the Explorer – violating Mattel’s own stringent in-house safety standards. What do you do when faced with such a problem? For Eckert, the answer was simple. “The first thing we had to work on was fi nding out the scope of the problem,” he says. “How big is it? Where is it? How many toys are involved? What caused it? How long has it been going on for? We had a lot of homework to do but fortunately we had a lot of professionals on the ground who started digging right away.” What they found was frightening: around 1.5 million Chinese-made toys worldwide could contain excess lead levels in their paint. In the worst cases, the lead in paint was found to be significantly over the US federal limit. On August 2nd, the company recalled the toys, including 967,000 in the US. Then came the hammer blow. Just two weeks after the initial recall, Mattel took the decision to recall an additional 18 million toys worldwide, this time over concerns about high-lead levels and the use of small, strong magnets that could be dangerous to children if two or more were to become loose and ingested. A third recall of a further halfmillion toys followed in September.

Such a public relations disaster would have floored most companies, but the Mattel machine quickly sprang into action. In fact, the fi rm is now widely praised for the way it responded to a potentially crippling crisis. “It took us some time to adequately defi ne the scope of the problem,” he admits. “It wasn’t like day one we understood it. However, we knew we had a problem with what ended up being 83 products recalled on August 2nd. Even then we increased our testing, looking for more, and by August 14th we had our second recall. We tend to have two or three small recalls a year in the toy business, but when you have two big recalls two weeks apart you’re suddenly talking a whole different level of crisis.” In response, the company essentially shut down its supply chain in its two busiest shipping months, August and September, in order to contain the impact. The other thing that Eckert says was key was seeking advice. Drawing on a previous crisis management case study – that of Johnson & Johnson’s handling of the Tylenol recall in the 1980s – he called a retired J&J director to ask for help. “He told me that there’s two things that are important,” recalls Eckert. “Number one, the CEO needs to be seen as active; whether you like it or not you need to be visible. People need to see somebody and they need to see you, not a subordinate. And number two, you need to make sure people understood this isn’t about money. You need to tell them, ‘I don’t care what it takes. We will fi x this and we will spend whatever we need to spend. Today I’m not the

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capitalist concerned about profits. I’m the person concerned about your kids and I will do whatever it takes fi nancially, culturally, personally to make sure you don’t have to worry about your kids anymore.’ That was great advice.” And Eckert took it, putting himself at the forefront of the media effort and taking direct responsibility for rectifying any issues and addressing consumer, retailer and regulator concerns head on. He won customer kudos for his open communication style and plaudits both inside and outside the business community for his clear-headed handling of a difficult situation. And he won the respect of his employees for his honesty and transparency. It’s a lesson a number of other high-profi le executives currently mired in their own problems – BP and Toyota, to name but two – would do well to follow. Typically, however, he’s reluctant to take the applause, preferring instead to share the credit with his 27,000strong team. “It was a big challenge for the company as a whole, but the people of Mattel delivered unbelievably during some really demanding, taxing, trying times,” he says. It’s typical of a man who claims to be a big believer in the Boy Scout motto ‘be prepared’ to take nothing for granted. “We didn’t practice a recall related to lead paint but when that issue appeared we did have a plan in place regarding who does what when, and how we engage,” he says. “The other thing is that we’re a global company and around the world, someone is always available 24 hours a day, seven days a week. So twice every day, seven days a week, we had phone conferences – one at 7am Pacific time and the other 4pm Pacific time (the perfect transition between either

Europe and Asia and the US) – to coordinate what had been happening on a given continent, what needed to happen in the next 12-hour period and what the impact of that was globally. We had 30 or 40 people on the line all over the globe at different levels in the organization, so we were pretty current all the time. There weren’t many surprises.”

hey say whatever doesn’t kill you only makes you stronger – and Eckert certainly feels the experience, whilst hardly beneficial in the short-term, has actually helped forge a stronger bond between Mattel and its employees, between the management team and the people on the front line. More importantly, it has also enhanced the levels of trust between the company and its customers. He feels such mutual trust has been invaluable during the recent downturn, where tightening belts and pulling together has been paramount. “We all hunkered down,” he says. “We were tough on the cost side of our business. We were tough on expenses and spending. We had layoffs. We had no promotions, no salary increases. And we didn’t make so many toys. Our vendors had to deal with that, and we didn’t sell too many toys to our retail customers who in turn didn’t want to buy too many toys. It was a tough year all round. But somehow we got through 2009 together.” Fast forward to 2010, and Eckert believes the firm is in much better shape to capitalize on any potential upturn in the economy. “The company did better than I expected in 2009,” he maintains. “It was a tough year for our employees but they really stepped up and delivered. Our sales were down in 2009 by about

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eight or nine percent. Revenues were down. But our profits were up over 30 percent. Our cash flow was also very strong. It was the best performing year I saw among Mattel’s employees and the most challenging year we’ve had. So if they can do that, if we maintain that discipline and focus, we’ll have a really good 2010. That’s where all the investment we made in people really paid off.” Allied to this optimism is the fact that a number of big entertainment properties are set to drive sales this year and next for the toy giant. Mattel has a strong relationship with firms such as Disney, Warner Brothers, Nickelodeon and the Cartoon Network, which Eckert says provide it with great intellectual property. “Right now Toy Story 3 is incredibly popular,” he enthuses. “It is a fabulous movie. It’s just a really warm story and toys are obviously at the center of that and we’re fortunate to make a lot of the toys that support the Toy Story franchise. Our number one priority is to do the best job we can for the intellectual property that comes out of television and movie studios.” Mattel is also set to follow in the footsteps of its great rival, Hasbro, and begin developing stories around its own brands. “There has been a new genre in fi lmmaking that starts with the toy and turns it into an entertainment property,” says Eckert, “and we’ll participate in that. We’ll probably do some things with brands like Masters of the Universe, which at one point was bigger than Barbie. We’re also looking at other properties that have been away for a while – for instance, we had a property called Major Matt Mason that was about our fascination with life on the moon, and it turns out that it was one of Tom Hanks’ favorite toys and he wants to make a movie out of that. I don’t think that turning toy properties into movies is going to be around forever, but as long as people in the entertainment business are interested in that then we’ll participate.” Certainly the future looks bright for the toy giant. According to investment bank Caris & Company, key sales drivers in 2011 will be

the launch of Cars 2, Warner Brothers’ Green Lantern and a possible Monster High live-action musical movie from Universal. Key 2012 drivers will be the release of Batman 3, Ghost Busters, a Barbie movie and Tom Hanks’ Major Matt Mason treatment. As with Cars, the studios are also planning follow-on entertainment to support Toy Story and Green Lantern as ‘evergreens’. But while bullish on his company’s prospects over the next few years, Eckert maintains that the results will only come if he and his team remain focused on developing the right culture. “Mattel is fi rst and foremost a people development machine,” he concludes. “We’re helping kids develop, and while we’re helping kids develop we’re helping ourselves. And hopefully, that will continue long after I’m gone.”

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GOOD TECHNO AD.indd 2

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INSIDE THE C-SUITE

Not many companies can claim to be bigger now than at the start of the downturn. But led by charismatic New Yorker Joseph Tucci, Bostonbased EMC continues to rip up the regular recession playbook.

n the day of our meeting, Joe Tucci is a man of divided loyalties. As CEO of one the world’s largest IT infrastructure firms, he’s spent the past nine years putting Boston on the technology map through an ambitious acquisition strategy that has seen his firm – the $14-billion, Hopkinton-based EMC Corp. – become the number-one data storage solution provider in the world, as well as significantly expand its product portfolio and IT consulting and services businesses through a number of strategic investments. He lives and breathes Boston; nearly 9000 of the company’s approximately 43,000 employees live and work in Massachusetts, and Tucci is intensely proud of what he and his team are building down in the Cradle of Liberty. It’s a tightly knit firm with strong roots in the local community. There are productive links with Harvard, MIT, Northeastern and the numerous other colleges and universities in the area. And EMC is a major sponsor of the local football, basketball and baseball teams. But therein lies the rub: this weekend his beloved New York Yankees are in town for the opening game in the 2010 MLB season, and for one night only Tucci is hoping against hope that not everything goes right for the people of his adopted hometown. A native New Yorker, Tucci grew up just blocks from Yankee Stadium in the Bronx, watching greats such as Yogi Berra and Mickey Mantle take teams apart for fun. “Baseball is in my blood,” says the tough talking chief executive. “I always dreamt of playing pro-baseball.” Indeed, in his early 20s, he played in semi-professional leagues as a catcher – “the one position where I could see the entire game and call the shots,” he recalls with a grin – until a skiing accident put paid to his major league dreams. Even so, the hugely competitive Tucci never lost his love of the game and appetite for a scrap; instead, he transferred his keen analytical skills and ability to read a situation before making the right decision to the world of big business, and has never looked back. Since his arrival at EMC in January 2000, Tucci has led EMC through a period of dramatic revitalization, continued market share gains and sustained double-digit growth. Most notable has been his transformation of the company’s business model from what was a near exclusive focus on high-end storage platforms to what is now the industry’s most comprehensive portfolio of bestof-breed platforms, soft ware, services and solutions that enable organizations to successfully make the transition to what EMC calls ‘private cloud’ computing. Today, EMC operates with a balanced product portfolio in which soft ware and

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services generate more than 35 percent of its annual revenues, a far cry from when he first arrived and the company was known purely as a hardware heavyweight. Over the past nine years, Tucci has doubled revenue, transforming EMC from a supplier of high-end data storage systems to a multi-faceted vendor of storage, virtualization and security products with $14 billion in sales. Unsurprisingly, people at the company love him for it. “He puts himself last, his customers first, and leads with humility,” explains former head of EMC Investor Relations, Polly Pearson. “He offers praise to his people profusely, and seeks no accolades. He spends most of his time in the field, not in any executive suite. And he has a brilliant understanding of business strategy.”

Riding out the storm We meet at the firm’s Hopkinton campus on a grey weekday in April. The rain is hammering down on the rooftops, as it has been for days; Boston has been experiencing some of its wettest weather for years, and the incessant rainfall provides an apt metaphor for the financial storm that has been pummeling IT companies large and small for the best part of two years now. According to outplacement company Challenger, Gray & Christmas, the technology sector announced 174,629 planned job cuts in 2009, 12.3 percent higher than the 155,570 job cuts announced in 2008 and the biggest year-end total since 2005, when tech employers eliminated 174,744 jobs. The list of

AT A GLANCE Headqu arters : Founded: 1979

Hopkin to n , Massac huset t s

Market capitalization (March 2010): $38 billion

Country presence: >80

R& D investment (2009): $1.6 billion Worldwide ,000 employees: 43

ues : 2009 reven $14 billion

CEO/ Chairman: Joe Tucci

those cutting jobs was a real technology ‘Who’s Who’: Microsoft, IBM, Adobe, Yahoo, AOL, AT&T, Sprint, Cisco Systems, Nokia, Seagate and Sun, to name but a few. Even Google made cuts in its sales and marketing and recruiting forces. Yet unlike many in the soft ware industry, EMC has weathered the recessionary whirlwind particularly well. It took $500 million out of its cost base between 2008 and 2010 – and yet it has a higher headcount now than at the same time last year and is aiming for 18 percent revenue growth by 2011. Ambitious? You bet. Achievable? Tucci certainly believes so. For one thing, the company’s cash position is really strong. “Despite spending almost $3 billion on acquisitions since 2008’s economic crisis, our cash is ahead of where it was 18 months ago,” he says, leaning across the desk in his understated office to make his point. “And if you look at how we ended the year, we ended it with the best quarter in our history. Sure, the downturn affected us, but we have emerged with a record quarter, with close to record cash, a couple of great acquisitions, and with forecasted growth of 18 percent on the top line. So yeah, I think we dealt with this recession much better than most.” Later in April, the firm backed up this success by announcing record financial results for the first quarter of 2010. So how did they do it? “It took a lot of hard work,” he concedes. “But the other part of it was that we didn’t deny what was coming.” One element of this transparent

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approach was to ask employees to help out by taking a five percent pay cut (Tucci himself slashed his own pay by over 20 percent) and promising to keep layoffs to a minimum if they did; the response was overwhelming. “More than 85 percent signed up voluntarily to the measure because they knew it would keep EMC stronger, preserve jobs, and they liked the program we laid out for them,” he says. “That’s pretty amazing. I’ve always said that whatever doesn’t kill you makes you stronger, and in fact I think you learn more in tough times than good times; it’s how you react to external and internal events in a tough period that really shape a company. We found ways to be more efficient and we learned a lot.” For Tucci, the key to getting that message across successfully was to ruthlessly focus on what he calls the most important aspect of leadership: communication. “The three rules of managing in a tough environment are communicate, communicate more and communicate again,” he explains. “And then you start over: communicate, communicate more, communicate again, and go back to point A. You have to communicate a balance of reality and honesty, with vision, strategy and proof points built in. If we do X, this is what’s going to happen. If we do Y, this will happen. You honestly address the reality of the situation. ‘I thought this would happen, but we fared even better that that’. Or ‘I thought this would happen, but we fell a little short for these reasons; here’s what we’re going to do about it’. You have to be very open, and I don’t care where you’re

EMC became the ﬁrst company to have a logo on the famous Red Sox uniform in April 2008. The company is a major sponsor of the MLB franchise, and recently had a section of the famous Fenway Park named after it.

from in the world, people react to that. If they think for a second that you’re giving them spin, you’ve lost them.”

Catching the next wave The reality of the situation is that actually, the company has little need for such spin; as far as Tucci is concerned, EMC is in great shape. “There’s this great wave of change that is happening right now in the form of cloud computing, and we think virtualization and storage are incredibly important to that,” he explains. “You look at survey after survey that say companies are going to spend more on virtualization, companies are going to spend more on storing information, companies are going to spend more to make sure what they’re storing is compliant in terms of governance, risk and compliance (GRC), and this is where our strengths lie.” While some enterprises still shy away from the idea of cloud computing, a recent survey of over 1500 global CIOs showed that investigating the possibilities of the cloud was their number two priority for 2010. Worldwide spending on data center technology infrastructure and services exceeds $350 billion annually, according to McKinsey and Company estimates, with half of that spent on capital expenses and half on operating expenses. Further, an estimated 70 percent or more of those costs are expended to maintain existing infrastructures, leaving 30 percent or less for new technology initiatives and applications that can provide breakthrough differentiation for businesses. It

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is also estimated that approximately $85 billion, or 20 percent of this total market, can be addressed with data center virtualization and private cloud technology by 2015. The cloud is coming, and EMC plans to be at the forefront of that movement. Indeed, Tucci feels that cloud computing offers the greatest opportunity to transform the IT landscape since the advent of distributed computing in the mid-1990s, and follows previous waves such as mainframe, minicomputing and PCs as a potentially game-changing technology. “In such waves of change, companies can get very dislocated and disrupted. In a way, it throws a lot into the air, and how you embrace that change and what technologies you have at your disposal will determine how well you do.” In this regard, EMC is very well placed. Driving the demand for cloud computing models are the increased complexity and costs inherent in current data centers, and the explosion of data that only promises to grow, says Tucci. Such data growth comes from multiple sources, including the growth of mobile device users, medical imaging advancements, increased access to broadband and smart devices. But unlike firms such as Amazon and Google, which use cloud computing to deliver their own

“It’s getting more like a sprint than a marathon, and in a 100-meter dash, if you fall down you’re done”

Solid returns At the end of April, EMC reported first-quarter 2009 revenues of $3.15 billion, reflecting solid revenue results in a challenging global economic environment. Through its continued emphasis on operational efficiency, EMC generated operating cash flow of $864 million and free cash flow of $681 million, all contributing to record cash and investments of $9.8 billion. David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “EMC’s first-quarter results reflect the resiliency of our business in a very challenging global economy. We executed well on our cost reduction plans during the quarter and maintained disciplined expense control, which resulted in decent profitability and excellent free cash flow, while continuing investments to further enhance our product and services offerings and expand our customer reach.” Goulden continued, “We are taking additional near-term cost reduction actions that will save EMC an additional $100 million in 2009. We now expect to reduce EMC’s 2009 Information Infrastructure costs by approximately $450 million from our 2008 spend, increasing to approximately $500 million in 2010. We believe these near- and longerterm actions to improve our effectiveness and efficiency will help EMC ride out this period of economic uncertainty and put us in a position of even greater strength when conditions improve.” EMC’s best estimate is that 2009 global IT spending will decline as a percentage in the very-high-single-digit to very-low-double-digit range compared with 2008. EMC also expects second-quarter 2009 global IT spending will probably be flat compared with the first quarter of 2009, and the second half of 2009 will be stronger than the first half of the year.

online services and host business applications for other firms through so-called ‘public clouds’, EMC is pushing the concept of ‘private clouds’ where individual companies create specialized online data centers. Tucci predicts that thousands of businesses will set up private clouds in the next few years, and he is positioning EMC as a major supplier of the hardware and soft ware they will need. “If you look at some of the basic tenets of cloud computing, we’re sure X86 technology plays a major role, we’re sure virtualization plays a major role, you have to build in a lot of automation, you have to find ways to deliver IT as a service,” says Tucci. “And if you think of what EMC does, we’re the leader in virtualization through VMware and X86 technology, the leader in information management, the leader in information security – all pivotal technologies that will help form this next wave of computing.” In response to this growing trend, EMC recently announced the Virtual Computing Environment (VCE) coalition – a three-way collaboration with Cisco and VMware – that promises organizations of all sizes an accelerated approach to data center transformation and significant reductions in both capital and operating expenses. The partnership aims to deliver the next generation of data center architecture, products and solutions (or Vblocks – complete technology packages that have been built, tested, proven and documented by the VCE coalition) to accelerate customers’ ability to increase business agility through greater IT flexibility, and lower IT, energy and real estate costs through pervasive data center virtualization and a transition to the private cloud. Need an internal cloud capable of supporting 2000 virtual machines? There is a Vblock for that, as the commercial might say. “I don’t think any company can get where it needs to be by itself,” explains Tucci. “I think you need to first of all have a good business yourself and then you need to cooperate.”

Looking to the future For Tucci, riding the next technology wave is all about looking after the long-term interests of the company – something he concedes is increasingly difficult in today’s results-obsessed environment. “It’s getting more like a sprint than a marathon,” he admits, referring to the relentless pressure to hit quarterly earnings targets. “And in a sprint, if you don’t start well it’s almost impossible to win. In a marathon you can fall down, and as long as you don’t hurt yourself you can get up and run because you’ve got 26 miles to catch up. But in a 100-meter dash, if you fall down you’re done.” The challenge for EMC is that business survival is increasingly like trying to run a marathon at 100-meter pace. Companies need to be agile enough and fast enough to be quick-to-market in a rapidly changing technology environment, but, as Tucci is at pains to point out, they

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High tech on the

big screen also need to be in business for the long haul if they are to be truly successful. Balancing that focus on the long-term whilst keeping shareholders happy is key. “You need to set the right expectations and do what you say you’re going to do,” he suggests. “A lot of people complain about too much short-term focus or too much long-term focus; I find if you have a good long-term plan and you come clean and tell the world what you’re going to do this quarter, next quarter, and the one after that in order to achieve those aims, they’re usually very accepting.” For instance, EMC will increase its R&D expenditures this year by a not-insignificant 20 percent to around $2 billion, while since 2001, the company has invested approximately $11 billion in upwards of 50 strategic acquisitions. “On the one hand, that suggests I’m not maximizing profit, per se; but I am investing, and the stock went up as a result. I think our shareholders are happy with the fact that EMC is going to deliver a pretty good top line, a pretty good bottom line, and that we’re investing for the future.” Such long-term thinking is a big part of the company culture; Tucci is one of only three men to take the role of CEO since EMC was founded in 1979. But while he has committed to stay on until the end of 2012, the firm’s leadership beyond that date is less certain. High-profile hires, such as Pat Gelsinger from Intel as President and COO of Onformation Infrastructure Products, along with a recent reshuffle in the executive suite, suggest that the company

EMC has invested $11 billion in 50 strategic acquisitions

Tucci is aiming for 18 percent growth in 2010

roduct placement in Hollywood blockbusters is big business for an increasing number of firms in all kinds of verticals. And now technology hopes to get in on the action, too. EMC is betting that the technology experts who make buying decisions at big companies could be influenced by seeing certain systems and solutions in the movies. “They form the backdrop to key scenes,” explains Mark Fredrickson, EMC’s vice president of marketing strategy and communications, who has placed EMC products in a number of high-profile entertainment vehicles in recent years. For instance, when Leonardo DiCaprio and Russell Crowe face off inside a US embassy in Body of Lies, an EMC Clariion system lurks in the background (see picture). Kiefer Sutherland’s counter-terrorism team in the hit TV show 24 are regular users of EMC technology. And the Shia LaBoeuf thriller Eagle Eye features a command center stuffed with EMC hardware. And while Fredrickson concedes that corporate technology buyers won’t necessarily purchase a million-dollar storage array just because they saw it in a movie, he does feel it helps break the ice. “It doesn’t get you the business,” he says, “but it gets your call returned.”

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Born : 1947

Curriculum vitae

Education : business policy, at tan College ; MS in nh Ma e, gre de r’s Bachelo Columbia University ision Career: RCA’s computer div nagement trainee in 1969 Started as a ma ms programmer rer, and became a syste mputer manufac tu rporation, an early co Co y err Sp d ne Joi 1972 programming where he continued oration to become with Burroughs Corp 1986 Sperr y merged US information e role of president of th to e ros he ere Unisys, wh systems obal and guided the ecutive of Wang Gl ptcy 1991 Became chief ex m Chapter 11 bankru quick emergence fro company through a protec tion president and COO 2000 Joined EMC as n and CEO 2001 Became chairma n nt, CEO and chairma 2006 Became preside Family: children ildren and two grand Married with two ch Hobbies: g guitar hill skiing, golf, playin Water spor ts, down

is already looking beyond Tucci’s tenure, while the CEO himself has admitted that the current executive management structure needs to be enhanced and expanded as the firm progresses from $14 billion in annual revenues to a $25 billion IT infrastructure company increasingly capable of competing among the tech titans. Currently in the running for the top job, according to the Wall Street Journal, are Gelsinger; Howard Elias, President and Chief Operating Officer of Information Infrastructure and Cloud Services; and David Goulden, current EVP and Chief Financial Officer. According to Tucci, it’s all about having options. “You’ve got to assume something could happen,” he says. “Say you get hit by the proverbial bus tomorrow, then you need to have plans in place for that.” So what can his successor expect from the job? “In a business like this that changes so frequently, there’s a lot of pressure,” he says. “There are some businesses that have a lot of time to create change, but technology’s not one of them; the cycles of new products and the ways you can get disrupted occur very quickly. So there’s always a lot of pressure on, and that’s never fun. But on the other side it’s tremendously challenging; it’s like the world’s greatest game of chess, and you’re playing against some really great players. So it’s incredibly invigorating, and it’s intellectually challenging. It’s a real thrill, and I like it. But I would not call it fun. I definitely would not call it fun. Fun is when I’m scuba diving, fun is when I’m playing golf, fun is when I’m with my kids. That’s fun.” Such candor – not to mention self-awareness – is refreshing in a leader, and one of the reasons Tucci’s management style has proved so successful over the years. “I’ve witnessed him handle brutally strategic situations and confrontations with such wisdom, conviction and blunt honesty it took my breath away,” says Pearson. “He does not fear doing what he sees as the right thing; he cares, big-time.” Which brings us back to that season opener at Fenway Park, and Tucci’s other great passion. The Red Sox overcame multiple deficits en route to a memorable 9-7 victory over Tucci’s Yankees – their bitter rivals and defending World Series champions – thus subjecting the EMC boss to much short-term teasing from his staff at HQ. But like Tucci, the Bronx Bombers are nothing if not resilient; at the time of writing they currently have the best win-loss ratio in the league for 2010, top the division and remain favorites to defend their title. It provides confirmation of an age-old sporting truism that an ex-ball player such as Tucci would appreciate: that championships are won over a season, not on the basis of one game. He knows that immediate results don’t automatically translate into longerterm success, and under his guidance, EMC certainly won’t be taking anything for granted. But they will be expecting plenty more wins over the years ahead.

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MICHELLE BAILEY_june10 09/07/2010 15:27 Page 54

TECHNOLOGY FOCUS

The future looks cloudyâ&#x20AC;Ś Michelle Bailey gives Business Management the forecast for the IT infrastructures of tomorrow.

MICHELLE BAILEY_june10 09/07/2010 15:27 Page 55

he world of IT is evolving. Again. Billed as the greatest transformation in the use of the internet since it began, cloud computing is pushing a revolution in IT infrastructure for the modern business. And with good reason; the efficiencies that come with the cloud and virtualized data centers are being commonly recognized by businesses the world over as crucial to operations today. For a firm that spreads across multiple offices, states or even countries, immediate access to the vast quantities of important and sensitive data, without compromising security, could be potentially game-changing – not to mention the cost saving involved in the shift to a virtualized data centre. The cloud has been steadily evolving for a number of years now, and as it begins to mature some of the kinks that have hindered companies from jumping on board in the past are beginning to be ironed out. “By far and away, security is the overarching concern around public cloud environments,” explains Michelle Bailey, Research Vice President for IDC’s Enterprise Platforms and Data Center Trends unit. Indeed, security is more often than not a firm’s top priority when implementing any IT infrastructure. Whether it’s highly confidential client data for, say, a financial institution or a healthcare provider, or simply sensitive company information such as payroll or staff recommendations, protecting company information is paramount. Bailey underlines this point: “That's one of the reasons why we at IDC predicted that the private cloud will have so much more momentum behind it because you can still control security in the same way you’ve always been able to control security.” Bailey’s statement highlights a common feeling among organizations today. When it first emerged as a new and untested system, many firms were cautious about fully transferring their IT infrastructure into the unknown cloud. Soon industry heavyweights such as Google began to develop cloud-based programs and systems that were manageable and carried a familiar and trusted logo, encouraging wider participation across a variety of industries. Now, as the cloud becomes more recognized in the workplace and mobile devices such as smart phones and tablet PCs enabled with Android technology emerge onto the market, more organizations are identifying the benefits and establishing their own networks. “I think it’s easy for people to think of the public cloud because there are players that have

such great visibility in the market like Google and Amazon, for example,” explains Bailey. “It’s easy to understand what the public cloud means. What’s fuzzier is this notion of a private cloud.” Bailey goes on to explain that a private cloud provides exactly the same automated information service as a public cloud, but can be accessed from within a firm’s own data center using the firm’s own resources and remaining secure and confidential to that firm. “You could actually be going to a hosting provider, buying dedicated systems and infrastructure from them, but they are helping you to provide that utility pricing that goes back to your business,” she says.

Cost cutter Key beneﬁts to a cloud system when designing a data centre are twofold: time and money. “I think it’s all about money and it’s all about economics,” explains Bailey, “so if you’re a public cloud provider, you can run a data center at a completely different cost point than you can a typical, internally managed data center. There’s very good reasons why they can get that kind of

the public cloud, build it out there, once it’s ready and you feel like it’s ready to fall into the maintenance mode, then you can bring it back into your own data centers.” She goes on to explain that those applications are economical in themselves, stating that the majority of enterprise applications appearing in the cloud today have a lower value. Beyond the scope for company or industry speciﬁc applications, the cloud also enables a ﬁrm to share its products more quickly, whether that’s using the public to share upcoming products with the market, or using the private cloud to share prototypes with other members of staff. “I think the more important driver around moving to a cloud strategy is about the time to market, if you have an element of your portfolio that you want to rapidly build out.”

Looking to the future Still a relatively young technology, enterprises across America still have a lot to learn from the cloud, but as Bailey explains, that can only come with time. “People will learn as they go with the public cloud – and there’s going to be many fail-

“I think the more important driver around moving to a cloud strategy is about the time to market, if you have an element of your portfolio that you want to rapidly build out.” leverage, and it’s because they tend to have fewer applications to support.” Bailey goes on to highlight that a cloud-based data center runs on a payas-you-go system, so parts of the data center that do not get used will no longer be wasted, an approach that both saves on overheads and improves energy efficiency. The resounding reason behind the popularity of the cloud as a platform for today’s enterprise data center is its speciﬁc customization for the businesses it is built to support, says Bailey, so companies can utilize the center to its maximum potential. As well as being able to eliminate redundant parts of the data center so as to reduce wastage, any individual ﬁrm can develop its own applications and programs for use across its data center, a time-efficient technology that could mean potentially huge bottom line savings for a multi-national company. “Application development is another incredible use of public cloud,” says Bailey. “If you have a need to build an application quickly, send it out to

ures along the way, but ultimately that’s where an element of the market will be going,” she says. She muses over the biggest drivers behind the development of the cloud as a business platform, going on to predict that the customers moving towards a private cloud data center will have a focus on standardization, but develop standards that closely mimic those that can be seen in public cloud in order to maximize the opportunity to federate in the future. However, Bailey says, “I don’t know if standards are the greatest driver right now or the greatest inhibitor.” Ultimately, as with most revolutionary technologies, Bailey predicts that it will be a young man’s game, with fledgling businesses that are flexible and bursting with innovative brains seeing the maximum potential for the cloud. “When I think about the cloud over the next five years and I think about the companies that will make best use of it, I think of newer companies that have new applications and don’t have a legacy environment they have to deal with.” n

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EXECUTIVE INTERVIEW

Virtual reality Datalink’s Kent Christensen reveals to Business Management how a virtualized data center can revolutionize your business. What challenges do businesses face when implementing virtualization infrastructure into their data center? Kent Christensen. In general, getting started is fairly straight-forward and many organizations are well under way. However, as virtualization becomes more mission critical, the challenges in getting optimal results for the business can begin to materialize. In most cases, when organizations initially embarked on virtualization, they did not foresee the degree to which it would eventually scale, involving not just servers, but also integrating storage and networking and eventually aligning with business processes. Thus, one of the biggest challenges is implementing a top down approach with all stakeholders feeding into the solution. What steps can businesses take to successfully move toward the virtual data center? KC. Some of the technology is new and, as a result, can require different skill sets or at least better collaboration with IT teams and business units. Identifying a vision and implementing a virtualization strategy in line with that vision is a good start. It would be unusual though for an organization to go from virtualizing a few servers to having a well-architected virtual data center or even a private cloud in one step. There are many incremental steps that can be implemented that make progress toward the vision and provide tangible benefits to the organization along the journey. Examples include: • Leveraging enterprise features of a server virtualization management suite to provide a platform more suitable for mission critical applications. • Aligning the storage architecture to complement and extend server virtualization while also reaping significant benefits in storage efficiency and utilization. • Integrating a converged network strategy to optimize infrastructure and integrate with the overall architecture. • Aligning the virtualization services offered to what business units require to drive growth for the organization. When implemented and managed successfully, what advantages can businesses expect to gain from a virtual data center?

KC. The most immediate is significant cost savings. IT will require fewer physical resources across servers, storage and networking to deliver the same or more applications to the business. The next is simplicity, in that a common application platform can be leveraged to provide more services with fewer platforms to manage, which ultimately increases operational efficiency. With that comes more flexibility and agility, making IT more valuable to the business. Revenue generating applications can be brought up in a fraction of the time with better levels of service and at a reduced cost. What do you expect to see in the coming years in terms of virtualization technologies? Do you anticipate any new factors coming in to play in virtualization infrastructure? KC. There will be significant advances in technologies in several areas, including management, integration and cloud computing. In terms of management, the hyper-visor is becoming a commodity and the framework that manages the virtual environment provides the value. Examples are VMware Virtual Infrastructure and vCenter, Microsoft System Center and Virtual Machine Manager, or Citrix Essentials. For integration, a virtualized data center will still require technologies from multiple vendors. Increased integration of server, storage and networking technologies will create complementary architectures with fewer management points that will work together to meet business needs. With the cloud, the ability to apply cloud concepts, such as policy-based, services-oriented and automated self-service devices, that are aligned with business needs will become more prevalent. Ultimately this will require additional standards for portability and security to enable virtual data centers or private clouds to morph into hybrid clouds that interface with public cloud providers. At Datalink, we meet with customers who are at a variety of stages in adopting virtualization technologies. Our focus is on transforming their data centers to become more efficient, manageable and responsive to changing business needs. We help them leverage and protect storage, server and network investments with a focus on long-term value.

Kent Christensen is a virtualization practice manager for Datalink, a data center solutions and services provider for Fortune 500 and mid-tier enterprises. Christensen leads Datalink’s virtualization practice, keeping abreast on the latest technology developments, directing the adoption of virtualization hardware and software technologies and services, and consulting with customers regarding their data center strategies. For more information, contact Datalink at (800) 448-6314 or www.datalink.com.

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EXECUTIVE INTERVIEW

Keeping cool Emerson’s Fred Stack talks to Business Management about keeping temperatures down for IT infrastructure while maintaining efﬁciency.

For large technology companies, running a wide-spread IT infrastructure can raise challenges. How can businesses ensure maximum efficiency in the face of the challenges posed by having such demanding technology infrastructure? Fred Stack. Businesses can ensure maximum efficiency by reducing energy consumption at the IT equipment level. This approach has the greatest impact on overall efficiency because the energy savings cascade across all supporting systems. In 2008, Emerson Network Power unveiled a roadmap for optimizing data center energy efficiency called Energy Logic, which explores how IT equipment and supporting power and cooling infrastructure can deliver a 50 percent or greater reduction in data center energy consumption without compromising performance or availability. At the core of the Energy Logic approach is the Cascade Effect, which illustrates how the IT load is directly correlated with the data center’s UPS and cooling requirements, driving energy consumption on the infrastructure side as a result. By focusing on saving energy at the initial server component level rather than at the power and cooling level, energy consumption savings will cascade down through all facets of the data center. For instance, one Watt of energy saved at the server component level creates a reduction in total facility energy consumption of approximately 2.84 Watts. Energy efficiency has become a hot topic across all industries. What are the main challenges technology companies are faced with when trying to implement energy efficiency? FS. Rising energy costs and an increased focus on environmental responsibility have pushed many companies to look at energy efficiency as

a way to cut costs. At the same time, new applications have emerged, making the business world increasingly dependent on the IT infrastructure that supports those applications. The challenge for data center managers now is to maintain or improve availability while simultaneously reducing costs and increasing efficiency. A rash of well-publicized data center outages in 2008 and 2009 led to speculation that cost cutting was resulting in increased downtime. In the wake of those outages, respondents to Emerson Network Power’s fall 2009 Data Center Users’ Group survey showed a renewed emphasis on availability. It jumped from the fourth-most important concern just six months earlier to the number one concern of data center and IT managers participating in the study. How can businesses today maintain energy efﬁcient practices without compromising on productivity?

FS. There are various tactics, specific to cooling, that can help businesses maintain efficiency without compromising availability. The first, which has a significant impact on all other actions recommended, is a proper isolation of the hot and cold air. This is achieved through hot aisle/cold aisle arrangement of the IT racks, blanking panels in and between the racks (and between the rack and the floor); sealing cable entry cut-outs; and plenum air return tactics. These tactics enable the increase of the cold aisle and CRAC return air temperatures, which increases both efficiency and cooling capacity. To allow for future IT expansion, data centers are designed with excess cooling capacity. Using variable capacity cooling tactics – including variable capacity compressors such as digital scrolls, variable airflow on CRAC or CRAH fans or variable speed components within the chiller plant – to match the actual load will reduce energy consumption. Some of these tactics can be retrofitted in existing data centers. For instance, upgrading a blower system to variable speed and reducing fan speed by 20 percent will result in a 50 percent reduction in fan power consumption. Using high-density cooling tactics to bring cooling closer to the heat source can reduce cooling power consumption by as much as 65 percent compared to traditional, roomonly designs. Cold aisle containment is another tactic that can minimize hot spots and lead to a significant reduction in carbon footprint, with energy savings of 50 percent compared to conventional perimeter cooling when intelligent controls are utilized. Economizers, which use outside air to reduce work required by the cooling system, can be an effective approach to lowering energy consumption if they are properly applied and maintained, thus mitigating the availability risks caused by issues such as gaseous contamination and transitions to and from free-cooling.

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Can you outline some of Emerson Network Power’s solutions for these issues? FS. One critical feature in all of Emerson Network Power’s Liebert cooling units is the implementation of the Liebert iCOM controls, which enables independent control of each unit’s cooling capacity and air flow management. Th is optimizes the variable capacity features and allows for a variety of intelligent control algorithms depending upon a user’s room architecture and operational practices. The most advanced implementations utilize sensors located at the server racks to control the temperature and the air flow to precisely meet the needs of the servers. Other solutions include high-density, row-based cooling options like the Liebert CRV, which brings cooling closer to the heat source and continually adjusts to changing operating conditions based on real-time temperature and humidity readings. The Liebert SmartAisle solution utilizes cold aisle containment to increase cooling efficiency and rack capacity. Th is option can deliver greater than 30 percent energy savings and a 40 percent cooling capacity increase without compromising availability. Another option, the Liebert Air Economizer System, utilizes advanced enthalpy control to deliver average annual energy savings of 30 to 60 percent depending on geographic location. It is compatible with downflow configurations of the Liebert DS and Liebert CW precision cooling systems. An example of rack cooling that eliminates the need for cooling system fans is the recently released Liebert XDR, which results in savings of over 90 percent compared to perimeter cooling. How do you assess which of your solutions would be the most effective for each particular customer? FS. All companies have unique needs, so cooling options need to be assessed accordingly. Our sales representatives utilize a consultative approach that focuses on listening to and observing the user’s needs, enabling the representative to properly advise the customer on various approaches. Additionally, we offer a full suite of assessment services that includes a detailed CFD analysis of a site’s infrastructure, which can identify efficiency solutions without implementing additional cooling hardware.

“One Watt of energy saved at the server component level creates a reduction in total facility energy consumption of approximately 2.84 Watts” Data centers are most effective when they are accessible by most staff members. How can businesses ensure they fully optimize their data center’s potential? FS. The best practice is to minimize physical access while maximizing virtual access. Gaining control of the infrastructure environment, through centralized monitoring and visibility, leads to an optimized data center that improves availability and energy efficiency. Centralized monitoring system – such as Liebert SiteScan or Liebert Nform – provide not only a window into equipment and facility performance, but also point out trends and prevent problems wherever they may be located. What do you predict will be key inﬂuences on energy efﬁciency in this industry over the coming years? FS. In 2005, an EPA study determined that the IT industry accounted for 1.5 percent of all energy consumed within the US. Since that time, the demand for IT applications and productive output continues to rise exponentially, but the actual energy consumed is flat to down. Innovations in hardware and

application approaches have reduced energy consumption reductions despite increases in work output. Examples of this include the elimination of the CRT display for LCD technology, and the adoption of virtualization techniques that increases the server utilization from 10 percent to 80 percent. The next step in the evolution of data center cooling is to eliminate the need for any fans (which typically account for 10 percent of the IT server energy load) in the cooling system or the servers. A fluid cooling approach – not water, but a two-phase refrigerant – results in the energy consumed by the entire cooling system being less than the energy consumed by the server fans alone. Th is challenges the math on how to claim a percentage of efficiency improvement. We prefer to call it energy consumption elimination. Because of the perceived trends from the 2005 EPA study, government regulators are poised to implement regulations that stifle these new innovative approaches. Without interference, technology will continue to develop to meet rising user demand. Data center managers will continue to seek out ways to cut energy consumption while preserving uptime, and precision cooling is just one of the areas that will be impacted. Fred Stack is the Vice President of Marketing of Liebert Precision Cooling at Emerson Network Power. He is responsible for developing new precision cooling product development roadmaps that reﬂect evolving market needs and incorporate new technology. These roadmaps are the foundation for his teams development of new products and application engineering tools to ﬁll gaps in data center infrastructure.

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SMARTER, LEANER, GREENER

INTELLIGENT WORKING

Why the workplaces of the future will have integrated intelligence built in to the very fabric of the building. By Ben Thompson

percent of Panduit staff work in an open-ofﬁce environment

he brand new, state-of-theart building certainly looks like the sort of modern corporate edifice that management likes to eulogize over and employees love to work in. The glass and steel exterior, accented with redwood reclaimed from water towers, is the epitome of commercial chic. The roof is an eco-friendly ‘living’ structure that supports and conserves wildlife systems while insulating the building and minimizing heat gain. A bright, airy atrium runs the length of the structure, letting natural light flood into offices located down a central spine and offering uninterrupted views of the tree-lined creek running through the campus. To the naked eye, Panduit’s new global headquarters building in Tinley Park, Illinois, is a shining showcase of what the modern, sustainable business is all about. But it is under the gleaming glass facade that Panduit’s new nerve center really shows its smarts. Buildings consume 72 percent of all the electricity produced in the US and emit almost 40 percent of all greenhouse gas emissions, according to the US Green Building Council. But by integrating critical building functions that are historically siloed – such as control, computing, communications, power and security – Panduit’s holistic approach to building design, construction and operation hopes to reduce energy use by as much as 30 percent. “The new world headquarters brings to life our vision for creating environmentally sustainable and healthy places to work,” explains John Caveney, Panduit’s CEO. “We set out with a mission to create the ‘building of the future,’ and we feel we’ve set a new precedent by combining state-of-the-art visibility and control for all critical building systems, sustainable energy, operational cost savings and intelligent design features − all aligned under a single unified infrastructure.” The building, which opened in April to great acclaim, provides state-of-the-art visibility and control into all critical building systems, integrated and aligned under a single, unified, intelligent infrastructure. Designed to maximize sustainability, global collaboration and innovation, the HQ will initially serve 800 employees and will be able to accommodate an additional 800. The five-story building comprises 280,000 square feet of office, conferencing and training space and will enable

collaboration through unique design features such as open office concepts, shared workspaces and the deployment of the latest technologies to connect internal and external employees, partners and customers. Robert Smith is the company’s Director of Global Real Estate. As de-facto project manager for the development of the new building, Smith’s team fi rst conducted numerous interviews with senior management and other key stakeholders to establish exactly what it was the fi rm was trying to achieve with the new build and how that would help defi ne who the company was. “We used this project to redefi ne how Panduit was thinking about our workspaces,” he explains. “I believe that

“We used this project to redefine how Panduit was thinking about our workspaces” your physical environment affects the way you do your work, affects the way you live and the way you interact at home with your family, so I really wanted to make sure that this space – and all of our spaces in the future – supports who we want to be as a company.” That vision is guided by a number of key principles. “Every project we have, we want to demonstrate our global vision of the company,” he says. “We want to focus on innovation, collaboration and sustainability, and whenever we design a new project we use those tenets to guide our direction.” For instance, in order to reinforce the fact that Panduit needs to be a collaborative environment, Smith explored the concept of open-office working. “Before, our environment was 70 percent closed offices; now, 90 percent of our staff works in an open-office environment and we’ve created ‘touch points’ where employees naturally collide, increasing the collaboration elements of the design.” Panduit has always been committed to sustainable practices within its manufacturing environments – even before it was cool to be green – and thus the LEED verification system was seen as a natural way to incorporate sustainability into the project. To ensure that Panduit’s commitment to innovation and the environment were reflected in the design of the world Continued on Page 61

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Ask the expert Embracing a new view for data center efﬁciency

Enterprises are increasingly turning to automation, along with virtualization, to become more efﬁcient. Panduit’s Shahriar Allen explains why.

he introduction of automation has done a great deal to addresses efﬁciency challenges, albeit in a limited way. For instance, automation has proved successful in providing real-time information around such items as connectivity, which deﬁnes the relationships between connected network devices. This has enabled functions such as asset tracking, automated documentation and troubleshooting, which in turn helps streamline infrastructure operations processes and assists with capacity planning. However, today’s automation systems must expand functionality to include energy and environmental capabilities. In addition to connectivity monitoring, systems must enable enterprises to understand what is happening from an energy consumption perspective. They must help to monitor and measure heat generation or humidity within the data centers, so that data center owners and managers have a complete end-to-end solution. By integrating new data center infrastructure management (DCIM) capabilities alongside traditional intelligent physical layer management (IPLM) capabilities, enterprises can monitor and catalog complete network performance and energy consumption within data centers and other IT environments, for organizations to better understand their own carbon footprint and put a strategy in place to reduce it. This end-to-end monitoring of the physical infrastructure also provides the visibility, which is often lacking, to effectively execute virtualization initiatives. In the past customers have been doing

a lot of consolidation, playing with form factors of devices and merging multiple facilities into one. Now, many are adopting a virtualization approach. Yet, industry sources have estimated that only 20 percent of today’s virtualization is in a true production environment, while 80 percent is still in a development environment – meaning that most are not yet ready to risk the complete jump to virtualization. The biggest reason cited for the hesitation is lack of visibility of a management solution that can effectively monitor from an end-toend perspective across the physical and the logical infrastructure. This lack of visibility from a physical infrastructure perspective makes resource provisioning, capacity planning, or remote management difﬁcult to do in an effective, energy optimized, sustainable manner. Intelligent appliances and software can help to address all of these challenges holistically, bringing them all together to provide information that can help improve operational efﬁciency. Panduit’s approach is to provide complete visibility of the data center infrastructure. By monitoring real-time data, as well as the environmental factors that may impact that data, you not only have powerful information on the performance of the network, you have an appropriate level of context about that information to make more meaningful operational decisions. Panduit’s Physical Infrastructure Management (PIM) Software Platform works with PanView iQ (PViQ) System Hardware to visually monitor network connectivity in real-time, offering

such benefits as asset tracking, guided change procedures, and automated documentation. And the latest version of our PIM Software Platform is expanding these tools to enable complete data center infrastructure management, including management and monitoring of power usage, cooling temperature and humidity levels within data center racks and cabinets. By leveraging the power of real-time information in the context of connectivity along with power, cooling and space, the PIM Software Platform provides meaningful information that data enterprises can use to operate more efficiently. Optimization of the physical infrastructure of the data center in terms of the performance at the pod, cabinet and rack level can bring significant benefits to the power and cooling systems infrastructure, potentially lowering operational and capital expenditures. For example, if an enterprise can identify ways to improve cooling efficiency through passive means enabled by softwarebased automation, then it may be able to operate with fewer CRAC units, or operate at a higher thermal set point, increasing the overall efficiency of the data center operations and lowering the operating expenses. Panduit advocates a comprehensive approach to data center operations management. Software-based automation of the physical infrastructure that is integrated with the logical systems management software will play a critical role in the optimization of data center operations as we embark on virtualization and cloud computing initiatives.

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Continued from Page 58

headquarters, the company turned to leading architectural fi rm Gensler – a mutually beneficial partnership. “Th rough our relationship with Panduit, we better understand how technology and IT strategies can be a key component to sustainability, and the monitoring and control of a building’s energy use,” says Jay Longo, Senior Associate at Gensler. “Th rough the UPI vision, this building will not only be a standard office building, but a flexible workspace in which the occupants can control their environment more readily.” Indeed, it is the company’s innovative Unified Physical Infrastructure (UPI) concept that provides

“It provides the intelligence that we need in that building to provide for a truly sustainable environment” the real key to the building’s success. Originally developed to deliver new ways to build converged physical infrastructure for smart data centers and connected buildings, the approach was so successful in reducing energy use, improving operational efficiency and minimizing running costs that Panduit decided to apply the same concept to the design of its fl agship headquarters building. UPI provides a vision for the evolution of the physical infrastructure that aligns closely with – and provides a solid foundation for – the evolution of a logical systems infrastructure as defi ned by leading IT companies. In this new headquarters, the company is practicing what it has taught clients for years – how to build sustainable, energy-efficient environments. The site is already being viewed as a model for best-in-class integrated buildings worldwide, and is expected to earn LEED Gold certification later this year, one of very few such buildings in the State of Illinois. By collaborating with UPI Technology Partners such as Cisco, IBM, EMC, Emerson, Fluke, Haworth, Lutron, Oracle and Tridium, Panduit is able to address challenges that cut across multiple business and technology domains. The company put together a large, cross-functional group – involving representation from facilities management, HR, marketing, R&D, external design consultants and technology partners – to talk about how it could incorporate unified physical infrastructure into the building, and the best ways to do that. “It was a very holistic approach,” confi rms Darryl Benson, Panduit’s Global Solutions Manager for Connected Buildings. “We dived into every single aspect of the building design to make sure everything was aligned. I think that’s one of the differences that you’re

starting to see in the industry: traditionally, data and communication have been an afterthought, something you would tie into the building at the end. With the prevalence of network infrastructure and data design, these systems need to be brought in at the beginning of the process so it can be properly included in the design.” And besides the benefits provided by a happier, more motivated workforce and the obvious environmental gains inherent in Panduit’s approach to building design, the project has also realized considerable cost advantages, too. Smith explains that the company has already been able to decrease its energy usage by between 30-35 percent as a result of utilizing the UPI concept and adhering to LEED standards. And with LEED requirements accounting for around two percent of the total building costs, Smith estimates that the return on that investment will come in under five years, with the building design directly contributing to minimum savings of around $175,000 per year on energy usage, based on current rates. “Lights, HVAC units and all other devices in the building have an IP address assigned to them and are connected back to the network,” he says. “Because of that we’re able to very effectively leverage all the natural light we have coming into the building, as well as rapidly adapt to changes in temperature. For instance, if it’s a sunny day, the system detects the amount of natural light coming into the building and adjusts the lights accordingly, resulting in a big energy reduction.” The building is already attracting praise – from employees who love the working environment on the one hand, to industry experts impressed by the building’s attention to detail on the other. “Green buildings are a critical part of the climate change solution and Panduit’s approach is a great example of the impact we can have on energy use and our carbon footprint when we better integrate all the systems we depend on,” says Doug Widener, Executive Director at the US Green Building Council. “Th is is exactly the kind of innovation we are looking for in buildings of the future.” Ultimately, Panduit hopes the headquarters will serve as both a functional, sustainable and innovative workspace and a showcase for what the company has to offer in terms of its technology solutions. “The infrastructure provides the foundation upon which our employees can better collaborate, and in parallel it provides the intelligence that we need in that building to provide for a truly sustainable environment,” concludes Panduit President Tom Donovan. “Not only are we doing the right thing for the planet, we’re also doing the right thing for our employees; we’re driving higher employee morale, greater productivity and, ultimately, better fi nancial performance, which is important to all of us.”

Panduit anticipates savings of around $175,000 per year on energy use as a result of the new building

Energy use has decreased by

30-35 percent thanks to the UPI approach

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NEXT BIG THING

Head in the cloud Bryan Doerr, CTO of Savvis Inc., outlines a “converged cloud” approach to satisfy enterpriseclass IT outsourcing needs.

hile many in the IT industry continue to move applications to the cloud, enterprises often transpose are hesitant to jump into mass-market cloud offerings. Many enterprises are concerned with the privacy and security of their data, as well as the performance of their cloud-based applications. Savvis, a forerunner in utility computing, has invested heavily in cloud and utility services for several years. Based on extensive experience in delivering virtual and multi-tenant solutions, we addressed enterprise concerns with our recently launched Savvis Symphony line of cloud services, which layers a range of enterprise-class cloud services on top of fully managed infrastructure to create a flexible, credible service offering tuned to the needs of clients. In talking to numerous clients and analysts, we learned that cloud buyers seldom considered the network that provides access to cloud computing resources. While Internet connectivity is perfectly appropriate for some applications, enterprises learnt long ago that differentiated network services are essential to acceptable performance across the full range of enterprise applications. Accordingly, enterprise buyers are increasingly aware that they need more from their cloud provider, namely a completely integrated cloud infrastructure that includes network services. The fi nancial community offers a prime example, in which an entire ecosystem has been built around the need for secure, consistent, low-latency access to massive hosted trading platforms and databases. In that case, the network is anything but public, and there’s no tolerance for inconsistent quality or oversubscription of services. While the requirements for many organizations aren’t that extreme, similar requirements usually are present in one or more corporate applications. We have found that the scenario of a public cloud versus a dedicated cloud set to meet the needs of a demanding user community actually represents two end points on a spectrum. In response to the range of applications and related performance requirements that fall in between, Savvis has expanded the concept

of cloud services into something that we refer to as the converged cloud. The converged cloud includes three major elements. First, the commonly held concept of cloud – a managed virtualized hosting environment – is certainly part of the mix. We expand that concept by adding a secure, low-latency distribution network, then enhance the value proposition with a unique business model that allows Savvis to offer a complete, end-to-end, quality of service-enabled solution for our customers, from inside the data center to the end-user location. The Savvis Symphony suite of cloud services introduces the converged cloud to enterprises. The suite includes Savvis Symphony Virtual Private Data Center (VPDC) and Savvis Symphony Open – both public cloud services – which offer differentiated service levels with predictable performance for scenarios ranging from development and testing of new applications to automated capacity increases due to seasonality or unforeseen demand for IT resources. There is also Savvis Symphony Dedicated, a private cloud service, which allows clients to tailor and scale their dedicated infrastructure at their own pace. Our converged cloud includes network options ranging from public connectivity over Savvis’ Tier 1 IP network backbone to secure, low-latency, quality-ofservice-enabled Application Transport Services (ATS), Savvis’ core Multi-Protocol Label Switching (MPLS)based service. There are few vendors that offer converged cloud solutions with tight integration of technologies, applications and infrastructure delivered on a global scale. Enterprises that shy away from mass-market cloud offerings are looking for solutions that fit their unique needs. The converged cloud isn’t just technologies coming together to enable virtualized data center services or multiple applications joined on a single virtualized network. The converged cloud involves tight integration of technologies, applications and infrastructure, plus a commitment to deliver services to the most demanding customers, anywhere in the world.

Bryan Doerr provides technology leadership for corporate strategy, product, software development, M&A support, and next-generation platform evaluation. Before joining Savvis, Doerr held positions in management, software technology research, and software development at Bridge Information Systems, Boeing and the Applied Physics Laboratory.

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It’s been one year since a chastened – and heavily restructured – General Motors emerged from bankruptcy protection. The move was trumpeted as a fresh start for the company. But are the changes enough to safeguard the automotive giant’s long-term future? By Ben Thompson

“I think all of the issues related to bankruptcy will remain controversial. But if the products prevail, the pricing is right, and the consumer perceives that there is real value in the product, that’s what will really count”

idgeway Chevrolet knows all about tough times. The customer pictures and vintage photos that cover the walls at the dealership in Lansing, Illinois, tell the story of a firm that was born shortly before the Great Depression and has survived numerous economic downturns over the intervening years. But even so, when the news came last spring that GM would be axing around 1600 of its dealerships as a means to cut costs and streamline operations – and that Ridgeway was one of the retailers on the hit list – owner Bob Van Ramshorst must have wondered whether the auto retailer’s time had finally come. GM, with whom the company had been associated from the beginning, was going through the most difficult period in its history. Once the largest company in the world, the firm had been losing market share since the early 1980s. A potent mix of high production costs, legacy spending and the collapse in credit markets and consumer confidence led to losses of $30 billion in 2008. Slow to move away from producing gas-guzzling SUVs when consumers were looking for more fuel-efficient vehicles, GM also lost its 77-year reign as the world’s biggest carmaker when Japanese rival Toyota announced higher vehicle sales that year. In June 2009, in a widely anticipated move, GM was finally forced to seek bankruptcy protection. Former GM CEO Rick Wagoner – who fought bankruptcy right up until the point in March 2009 when the Obama Administration decided he was standing in the way of progress – believed the stigma of going under would cause people to stop buying GM products, and drive a lot of GM suppliers into bankruptcy too. But on the one-year anniversary of its exit from Chapter 11, GM is still standing – and many believe it is now better equipped than ever before to meet the realities of business in the 21st century head-on. Bankruptcy allowed GM to tear up its labor contracts, repudiate much of its debt, jettison non-profitable dealers, close factories and brands it didn’t need and borrow billions from the US taxpayer. In fact, according to auto experts Edmunds.com, filing for bankruptcy may turn out to be “one of the best things that ever happened to the company.” The slimmed-down GM has cut its operating costs by more than $10 billion annually.

The company has fewer dealers, fewer divisions and fewer employees. Most of GM’s old-guard management is gone, signalling a fresh, new outlook and a desire to embrace change. The company has also decided to pick up its marketing game in an ostentatious way, hiring current industry top gun Joel Ewanick – architect of Hyundai Motor America’s recent marketing successes, including the seminal Hyundai Assurance program – from under the noses of its Japanese rival Nissan. And most importantly, the firm’s bloated product portfolio has been significantly streamlined, reducing redundancies and conflicts of interest. “It is the smaller, leaner, tougher, better cost-focused GM we’ve been hoping for,” said George Magliano, an automotive analyst with consulting firm IHS Global Insight, on the firm’s emergence from Chapter 11 last year. Key to the firm’s turnaround has been its appointment of Ed Whitacre as CEO. Following in the footsteps of its great rival Ford, GM looked to an auto industry outsider for inspiration; Whitacre took over as chairman of GM on July 10, 2009, and replaced the 25-year GM veteran Fritz Henderson (himself a replacement for Rick Wagoner, jettisoned in March 2009) as head honcho in December. Both Wagoner and Henderson were seen as ‘company men’ who lacked the ruthlessness and dispassionate eye required for a complete overhaul of the firm’s structure, processes and personnel. Whitacre, on the other hand, came from a telecoms background and wore his outsider status as a badge of honor. “I don’t know anything about cars,” he told reporters on his appointment. “But a business is a business, and I think I can learn about cars.” And while that might not have gone down well in the auto industry’s Detroit heartland, few could argue that a fresh perspective wasn’t exactly what was needed. The former AT&T CEO has already made a big impact on how his new company operates. Whitacre has shaken up the ranks of top management more than once. He has streamlined decision-making with a few bold strokes. He has set high goals and has frowned on excusemaking. And when it comes to GM’s crucial product-development and manufacturing operations, Whitacre has known enough about cars to leave well alone. David Cole is the Chairman of the Center for Automotive Research in Ann Arbor, Michi-

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Inside The Volt The Volt has been hailed as GM’s savior and the future of the American automotive industry. But what makes it so special?

Chevy Volt Stats

Charge ports

Availability: Nov. 2010 Base MSRP: $40,000 Est. tax credit: $7500 Technology: Plug-in hybrid Body type: Sedan Seats: 5 Range: 40 miles + gas Battery size: 16kWh

From Concept To Reality

Ports on each side of the car allow a driver to recharge the batteries; a full recharge takes up to eight hours on 110V power, and about three hours using 220V

FRONT Rounded side corners, a ﬂat front grill and a long windshield help lower air resistance, which extends battery life

Brakes The Volt’s innovative regenerative braking system redistributes power back to the batteries during braking

Battery pack A 16kwh lithium-ion battery pack provides enough power for up to 40 miles of driving before the generator is required

Electric motor Gasoline engine The 1.4-liter ﬂex-fuel internalcombustion engine turns on as needed to power the electric generator. Gas, diesel engines or hydrogen fuel cells could be used

The Volt is built around a set of components GM calls E-Flex, based on a fully electric powertrain; the only thing that powers the car is a 150hp electric motor

REAR The aerodynamic spoiler and long rear window help air ﬂow away quickly, lowering turbulence and drag

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Five things you need to know 1

1. How does it work?

2. How far can I travel?

3. What’s the fuel economy like?

4. What will it look like?

The Volt is not a gas-electric hybrid in the traditional sense; it’s a plug-in electric vehicle (EV) propelled only by a powerful electric motor. The small gasoline engine works strictly as a range-extending generator to recharge batteries and provide current to the electric motor.

A full charge will provide a maximum EV range of 40 miles; if your commute is shorter than that, the gasoline engine may not need to run at all. After battery power is depleted, the Volt should offer another 360 miles of range with the gasoline engine/generator providing the juice.

In the worst case, when the battery is down to 30 percent charge and the gasoline engine needs to run for extended periods, the Volt should offer 50mpg. If your trip is shorter, say 60 miles (40 miles of electric operation and 20 miles with the gasoline engine running), overall fuel economy will be around 150mpg.

The production Volt differs substantially to the concept car, having undergone more wind tunnel testing that any product in the history of General Motors. Small changes to the surface deliver signiﬁcant gains in lowering aerodynamic drag, which accounts for 20 percent of the energy needed to move the car at speed.

5. When is it due? GM ofﬁcials are backing the promised introduction deadline of November 2010. To meet that deadline, GM has made Volt development a top priority with considerable resources brought to bear. Estimates place the early production versions at $40,000, with costs coming down as production ramps up.

Comfortable Ride GM says that the interior will be a strong point for the Volt. A driver-conﬁgurable, liquid crystal instrument display, seven-inch touchscreen vehicle information monitor and optional navigation system will all highlight GM technologies. Bluetooth for cell phones and USB/Bluetooth for music will be standard.

gan. He feels that the reorganization has been a success – largely because it has not cut too deeply into the company’s real areas of expertise. “They’ve gone through massive restructuring, but have not in any way hurt their product development or manufacturing,” he explains. “They’ve taken a lot of the inefficiencies out of the structure in terms of the management layers and decision-making, but they didn’t in any way penalize the product programs or the manufacturing effort. They preserved what was really the core of the company without tearing that up. And I think that was very positive.” To truly give GM a reasonable shot at long-term viability, the new chief had to transform the culture of one of the most ossified large corporations in America. And in this, he’s making noticeable progress. “He’s done a very good job of cleaning up a lot of the historic bureaucracy inside of General Motors,” Cole admits. “He’s a pretty impatient guy, but at the same time he’s somebody that is very personable, he connects well with people, and that’s important. I think with the car guys there, he has a terrific team. It’s leaner and faster than the old team, but I don’t think they’ve compromised their ability to do things. If Whitacre had come in and started to tear up the manufacturing or product development organization he would’ve failed. But he was smart enough to realize that those areas are in good shape and instead he just cleaned out the management structure and tried to flatten the organization. What that does is it takes some of the bureaucracy out.” Cole admits that what has surprised him most is the magnitude of the costs that GM has been able to take out. He explains that just a few years ago the major American manufacturers – with GM chief amongst them – had a cost disadvantage of around $2000-3000 per vehicle when compared with foreign competitors such as Toyota, Honda and others, largely because of legacy cost problems. “The competitor with the better cost structures always sets the price,” he says. “When you have a cost advantage, you can put things in that dramatically add to the value. And if you’re not that firm, you start to do things to keep costs down, like taking features out, cheapening the materials and the interior, things like that. What bankruptcy has done is to give GM a cost advantage that it has not had in decades.”

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This is evident in the products currently coming off the production line, with the forthcoming Chevy Cruze a prime example. Due to be built at the Lordstown, Ohio, plant, the new compact sedan is expected to become one of GM’s major sellers over the next few years. The Cruze offers more interior room, more miles per gallon in the Eco model, and more standard safety features than any of its competitors, while options include an in-dash navigation system with 40-gigabyte hard drive, pauseand-play radio, downloading of audio CDs, the ability to transfer MP3 files from a USB memory device and heated leather seats. Cole, for one, is impressed. “We drove the car in a back-to-back comparison with its competitors, and the differences in things like ride, handling, noise, etc. were dramatic,” he says. “It’s a really sophisticated car. And what it tells you is that we’re seeing the emergence of a totally new company that is in the sort of competitive position that the old GM hasn’t been in for many, many years.” Indeed, GM posted a net profit of $865 million in the first quarter of this year (compared with a loss of $5.98 billion 12 months ago), a turnaround the automaker believes could put it on track for its first full-year profit since 2004. The key to this success has been bringing down the breakeven point for its products. According to analyst estimates, through the dramatic reduction of debt associated with bankruptcy, more global integration, plant closings, layoffs, and the elimination of many of the legacy costs related to retiree benefits and labor unions, the company has been able to take around $5000 out of the cost of a typical car. “Their breakeven point is way lower than it used to be,” says Jim Hall, Director of Industry Research at 2953 Analytics. “Before, their breakeven was actually non-attainable with their market share. So they’ve adjusted that. They’ve also got a handle on their labor costs, so they have a strategic advantage from a cost standpoint, certainly over Ford; and they have cars in the pipeline that are truly exceptional automobiles. They have a lot going for them right now.” “They have a cost advantage and can now take a leadership position,” agrees Cole. “I think they are poised to be more profitable than we have seen them in many years.” Indeed, in many ways bankruptcy – far from being the wholly negative experience

ONE VERY BUMPYA lookROAD at car sales in the US 17.3 million 2000

16.7 million 2003

! 16.2 million 2007

17.7 million (est) 2015 Number of units sold

13.2 million 2008

14.4 million (est) 2011

Percentage change in car sales between May ‘09 and May ‘10

10.4 million 2009

Chrysler

+ 32.7%

Ford

+ 23.4%

General Motors

+ 17.5%

Toyota

+ 6.7%

Sources: AT Kearney’s ‘14th annual analysis of the automotive industry’ Report, Wall St Journal

Auto industry rebounds A year on from major brands Chrysler and General Motors filing for bankruptcy, the auto industry looks to be back on its feet. Recovery has been slow but steady, with a number of the brands enjoying growth in recent months. Chrysler’s sales in May rose 32.7 percent from a month previously and the brand sold more than 100,000 units for the first time since they filed for chapter 11 in March 2009. Also enjoying considerable growth compared to a difficult year in last year are General Motors, where sales rose 17.5 percent in May. In fact, sales of the company’s four leading brands increased 31.8 percent, the eighth consecutive month of growth. Ford Motors saw a 22 percent rise, making May the sixth consecutive month of growth. Toyota, on the other hand, has found sales haunted by the ghost of its product recall made earlier this year. Sales grew in May by a paltry 6.7 percent from the previous month, and then fell again by 14 percent in June. To add insult to injury, a further recall of 17,000 models was made at the end of June following an announcement from the Japan head-quarters that some of the Lexus luxury cars could have faulty engines. Despite Toyota’s troubles, the auto industry is looking set to increase annual sales in 2010 for the first time since 2007. Sales across the country fell 35 percent between 2007 and 2009, but based on figures from the first five months of this year the industry looks set to rebound.

that many expected it to be – has actually had a number of strategic advantages for GM. “It’s had some very positive benefits,” agrees Cole. “One of the things I talk about is the parallel impact on Ford, and the positive and negative aspects of bankruptcy. The good news is they didn’t go through bankruptcy. But the bad

news is that they didn’t go through bankruptcy. There’s no question that Ford has benefited in the marketplace from not going bankrupt; it’s been very positive PR for them. But on the other hand, they’re now saddled with this $30 billion debt obligation as a result, and GM just doesn’t have that same burden anymore. I hated the idea

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of government involvement in the industry; I just thought it was a terrible idea. But when you look at the choice, there was no choice, because we were at the edge of the collapse of a supply structure that would’ve taken everybody down. From a very practical standpoint, the cost of a failure was much greater than the cost of helping the industry through this period and preventing it from disintegrating.” It raises an interesting point: can the company shake off the negative connotations caused by not just the bankruptcy itself but also by the government bailout? “There’s still that perception of them being Government Motors,” concedes Hall. “The bottom line is that they have to turn that perception around, and the way to do that is through a successful IPO and advertising that tells the unvarnished truth.” It’s a touchy subject for GM. If there has been one major misstep made by Whitacre and his management team over the past 12 months, it was the decision to release a series of ads that claimed the company had paid back its government loans in full in April – five years ahead of schedule. Unfortunately for GM, the public refused to fall for its financial cup-and-ball trick, leaving the automaker open to accusations that it was only able to repay the bailout money by dipping into a separate pot of bailout funds. “It appears to be nothing more than an elaborate TARP money shuffle,” said Senator Chuck Grassley, the ranking Republican on the Senate Finance Committee, in response to the claims. “I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn’t from earnings. It’s actually from another pool of TARP money that they’ve already received.” Cole believes that the controversy won’t disappear overnight. But he does think that the company can move on from the mistake. “I think all of the issues related to bankruptcy will remain controversial,” he says. “But if the products prevail, the pricing is right, and the consumer perceives that there is real value in the product, that’s what will really count. And when the company goes public, people will forget about all the negative issues related to bankruptcy.” So where does the company go next? “GM must maximize its second chance by continuing to turn out great products at a profitable level without getting distracted by egotistic

Whitacre’s announcement that GM had repaid its government loans was seen as controversial – not least because it was widely perceived the debt had been paid back with yet more taxpayer dollars

pursuits,” asserts Edmunds.com Senior Analyst Jessica Caldwell. “It makes no sense to vie for the title of world’s biggest automaker if that puts them back into the hole from which we just rescued them.” Caldwell’s fellow Edmunds.com analyst Michelle Krebs aggress, maintaining that the automaker must concentrate on returning to public ownership, repaying taxpayers, funding union healthcare and earning profits – none of them easy tasks – before even starting to think once more about global domination. “Going forward, General Motors needs strong, stable leadership that assures the American public that the company will remain on track,” she says simply. That should be more than enough to keep Whitacre and his team occupied in the short-term, at least. Both GM and the Obama administration are keen to see a return to public ownership sooner rather than later, and the recent profit statements are likely to lead to rising political pressure to push an IPO through before the close of the year – particularly with mid-term elections coming up in the fall. But a recent GAO report suggests that to buy back just the government’s 61 percent stake, the company would have to achieve a minimum market capitalization of $66.9 billion; given that the most GM was ever estimated to be worth was $57 billion – and that in

2000, when GM had eight marketing divisions, controlled considerably more market share and sold more than 17 million vehicles in the US alone – such a figure would seem unlikely. Nonetheless, sources believe the vehicle maker is more likely to cut the valuation on the IPO than delay it, and as such any deal could come as early as August. The important thing, says Cole, is not to lose focus on the important thing: maintaining the business fundamentals. “Look at the Toyota situation and how quickly they went from the top of the mountain to the valley,” he says. “The reality is that if you get too comfortable, the risk of a catastrophe becomes that much greater. Th ings happen very quickly in this business, and there is no room for overconfidence or complacency in a world moving as fast as this one is today. Th is applies to Ford, GM, Chrysler, anybody.” Not that this is likely for the Ridgeway Chevrolet team who, along with 600 other GM dealerships, were able to persuade the auto giant of their strategic importance and avoid closure earlier this year. And while cynics called the U-turn the “lesser of the two evils” versus the costs of litigating their termination, others chose to take a more charitable view. Cole, for one, believes reversing the decision on widespread dealership closure was overwhelmingly

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What we said Back in October 2008, our cover feature focused on the demise of the American auto industry, and imagined what bankruptcy would mean for the big three. We didn’t call everything right (our prediction that Ford would quickly follow GM into bankruptcy has not, as yet, materialized) but the central contention – that bankruptcy would do wonders for a dying industry – still looks sound. Here’s what we thought back then… “If anything, bankruptcy would do the carmakers some favors, affording them protection from creditors and allowing them to restructure without the straightjacket of prohibitive labor and supplier contracts. As to the argument that entering into Chapter 11 would hurt sales and stigmatize that company, one need only look at the example set by the airlines a few years back to see how such a situation would most likely pan out: once one firm declares, others would soon follow in order to share in the cost savings and leaner operating profile, and prevent any one company from gaining a competitive advantage. Sure, it felt odd to fly a bankrupt airline at first, but once practically the entire industry had followed suit no one gave it a second thought. If

positive. “Maintaining a positive relationship with the dealers is essential,” he says, “not least because in most cases, they’re the customerfacing arm of your business and a key part of your brand message and marketing.” Ridgeway provides an all too rare tale of success against the odds in the auto industry: February was the best month ever for the dealership in terms of the used car sales and vehicle service departments. “We should not be doing the numbers we’re doing based on the sector,” says Sales Manager David Crutchfield. “In some ways, GM did us a favor by putting our backs against the wall to fine tune our process. We’re very quick to give God the glory.” GM has certainly made significant changes over the last year. But if it fails to learn the lessons of the past, it’s unlikely that even God will be able to save it a second time around.

GM were to file, you can bet your bottom dollar that Ford and Chrysler would not be far behind. “Tired brands and unprofitable dealers would disappear and the companies’ remaining resources could be focused on those products and dealers with the greatest strength and staying power. They might even emerge from the experience as efficient, competitive organizations. “Failure is only the opportunity to begin again more intelligently,” Henry Ford once said, and there’s a good deal of truth in that statement.

“Finally, any government funding – rather than being poured into prolonging the death throes of an industry in terminal decline – could then be used as seed money for innovative ideas on how to take the industry forward, not merely as sawdust on the oil spills. This could be the start of a new age of American innovation, and a domestic auto industry that offers scope for emerging players with pioneering ideas. The future belongs to firms with greener vehicles, cleaner technologies and more efficient solutions; given a level playing field, none of the current Big Three would survive.”

One of Whitacre’s most signiﬁcant moves as General Motors CEO was to halt the planned sale of European operating arm Opel, seen as a key source of intellectual property and a development test-bed

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REVOLUTION ANALYTICS AD.indd 1

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DUKE ENERGY_june10 09/07/2010 15:42 Page 76

CTO FOCUS

Powering the technology generation Today, technology is playing a pivotal role in the utility industry. David Mohler, CTO of power giant Duke Energy talks to Business Management about how technology is driving energy management into a new age.

he utility industry is in a state of transition. Society’s desire for cleaner, greener energy is driving a transformation for traditional power suppliers, both in terms of their operations and their product. In order to enable that change, technology has played a greater role in energy distribution in recent years than it ever has before. “The electric utility industry is essentially a 100 year-old technology business,” explains CTO of utility giant Duke Energy, David Mohler, which is ironic considering that in 2006, when Mohler first took up the role as CTO, he was one of the first C-level technology executives in the industry. Indeed, the increasing demands on the utilities industry to create innovative and efficient low-carbon energy strategies has made the CTO an integral role to the modern utilities company operating in today’s market. Despite the hitherto limited duration of his role, Mohler has already witnessed a number of changes, and expects a lot more to come. “As time continues to roll forward the pace of technological change continues to accelerate,” he says, “but we are now at a point where we have to make some true advances in the technology we deploy. We’re going to see some truly significant changes, and what we’ve really had to do recently is broaden our view, so that now we look at what those truly transformational changes could be.” In terms of his responsibilities as CTO, Mohler’s role is fairly straightforward, taking charge of sourcing innovative advances in technology from research institutes, filtering through those technologies to ascertain which make commercial sense for Duke Energy, and integrating them into the business model. He reveals that implementing the transformational technologies that are needed to push the company forward is not always easy, and one of the biggest challenges of his job is to get all personnel on board with a change. “The more transformational the technology is, the more difficult it is [to implement] because if you are going to fundamentally change the way you do something, that’s usually a big pill for an organization to swallow.” Mohler’s solution to tackle this problem is to maintain a constant flow of communication across the company. “We’ve attempted to set up a kind of internal governance and communications structure so that on a periodic basis, if there’s something really major we’re doing, we put together

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“We are now at a point where we have to make some true advances in the technology we deploy”

a group from across our company and we include those people in our decision process.” He explains how he also conducts quarterly conversations with subject matter experts as standard, to discuss what his division has achieved in technology development, what the plans are for the imminent future and get an assessment from other sectors of the business about what is working for them and what is not. This process can raise its own challenges, Mohler says, as one practice that may be successful for one division may not be what is really needed to take technology and performance to the next level across the whole business. Still, Mohler recognizes that continued internal communication is the most effective way to move the company forward, and he tries to reﬂect this in his management style. “The leadership style I aspire to,” he explains, “is one where we have continuing conversations that are productive and that are robust and that help everybody, including me, really get their heads around all the issues that we confront as we try to develop new technologies.” This style of leadership is clearly effective. As well as being one of the country’s leading utility providers, Duke Energy is something of a pioneer in the low-carbon energy sector. The ﬁrm has been working for a number of years now on various strategies to advance in this market, investing a

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considerable amount of research time and resources into energy efficiency schemes based largely around the wide-scale use of smart grid technology. This, Mohler explains, is all part of the company vision to make the communities Duke serves the most energy efficient in the world. He is modest about the company’s leading position, and points out that Duke’s competitors are never far behind. Still, he concedes, “I’d say we’re making giant steps in developing advanced forms of energy management.” The smart grid is an integral feature of Duke Energy’s technological development. As a piece of technology it is revolutionizing the utilities industry, with specialists likening it to the internet in terms of its potential for energy distribution. Mohler explains that one of his primary objectives is to ensure the grid itself will be capable of sustaining the technological advancements that will emerge in the future. “I don’t think any of us knows what the grid is actually going to be capable of in 10 years,” he explains. “We want to build our smart grid out so that it can incorporate that continuing technology development, even in areas that will surprise us in the future. Where we differ a lot from our peers is we did not approach the smart grid as a metering exercise. We saw

$1 billion has been invested in smart grid technology

it as one device in a network of devices and we really focused on the network rather than any single device.” Mohler points out that while technology innovation is an integral part of the business strategy, operating in the utility industry presents a very particular challenge. “People do not want their lights to go out,” he explains. “There is and there needs to continue to be a real focus on reliability. We are risk averse when we look at things that could impact reliability negatively.” In addition, Mohler explains, sometimes knowing when to hold back on developing new technologies can be just as efficient, and he is not one to ignore the advances already available. “We don’t want to reinvent the wheel,” he says, explaining how Internet Protocol is a perfectly efficient network communication device. “In my mind, and I’ve been pretty vocal about this in my industry, there is no need for us to go out and invent a new network protocol for the utility industry. Let’s use what’s out there and what’s already got a lot of years of development behind it. “Frankly the utility industry has been kind of parochial in its history and every utility wants to invent its own kind of thing, and I think we’ve got to move beyond that if we really want to have the optimum value for us going forward” n

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PROJECT FOCUS

Self-service business intelligence Tableau Software’s Ellie Fields demonstrates how business users can improve efﬁciency through self-service dashboards.

BC Wealth Management US is a national full-service brokerage fi rm with over 2200 registered representatives, over $170 billion in assets and a lot of data. Shawn Spott, VP and Manager of Marketing Research, is responsible for the strategic analysis of that data. “I’ve worked with many BI tools that claim to put the power in the users’ hands and simplify BI. And it’s never ever happened.” Then Spott and his team discovered Tableau. RBC Wealth Management is now using Tableau desktop and server services to deliver KPI and trend information to business lines, sales development and marketing groups. RBC leverages dashboards, tactical reporting and direct data access while providing over 80 users, from executives to line managers to field salespeople, with decision support information. The platform spans the entire retail database, integrating multiple data sources with a total reach of about 1.25TB. “I had spent 15 years in BI and I banged my head against the wall repeatedly trying to convey information to people through sheer volume. I came to the conclusion that providing people with lots of data was pointless. They couldn’t consume it, digest it, synthesize it,” said Spott. Spott’s team partnered with IT to design a pilot program on Tableau. “We created a suite of a dozen reports and took it out to the field. It had an amazingly positive response from the users.” Spott’s team was also impressed with the speed of the pilot rollout. “In August we had an idea to implement Tableau Server; by the end of September we were live in production and users were already asking for more.”

Efﬁciency The workload of Spott’s team to support the field dropped dramatically because Tableau allows users a self-service model to get information. “The efficiency of my group has gone through the roof. I’ve got more clients than we’ve ever had, I’ve got more reports and we’re still doing new development. Because Tableau Server provides us with the self-service model, we’re able to continue to keep projects moving through the

pipeline. The maintenance impact is so small, we just load and go. We spend three weeks of the month solving new problems and doing new development. It’s been offthe-charts successful.” Spott continues, “After the pilot we realized there was no reason to look beyond Tableau for our distribution portal.” What started as a plan to support 40 primary users has already expanded two-fold, with 80 current users. With even more expansion coming, RBC Wealth Management has increased the Tableau platform with the addition of the core license product. “We’re serving groups we never thought we would serve.” With the flexibility of the platform, a wide range of specific topics can be bundled in workbooks and projects. Th is allows multi-dimensional access with the specificity and relevance needed by the users.

“With the flexibility of the platform, a wide range of specific topics can be bundled in workbooks and projects” Expectations Spott believes that Tableau Server will continue to grow in value for RBC Wealth Management. “Given where I see this going, I’d expect we’ll be between 200 and 300 users by this time next year. It’s a grassroots effort that is putting successful BI in groups where historically BI was not readily available. Everyone who sees it, wants it.” Spott is also expecting to save real dollars with the Tableau implementation. One area of savings will come from migrating to Tableau for mapping. “We’re migrating all our geospatial analysis and mapping to Tableau,” he says. “I’m saving in the region of $100,000 over the next three years by migrating our mapping services.” For RBC Wealth Management, Tableau is a way to deliver business-critical information to users while giving users the ability to slice and dice data to answer their own questions, all with self-service BI.

Ellie Fields is the Director of Product Marketing at Tableau Software. Prior to working at Tableau, she worked in industry strategy and product management at Microsoft Dynamics. Fields is a graduate of Rice University and the Stanford Graduate School of Business.

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09/07/2010 14:23

Deliver actionable insight through interactive dashboards

Our award-winning products integrate visual data exploration and interactive dashboards to make BI analytics fast, easy and fun. Create interactive reporting dashboards with drag and drop ease. • Combine different databases into a single view • Publish interactive dashboards to the web • Link and ﬁlter all of the charts simultaneously • Create reporting dashboards based on live data

Tableau is changing the way companies are analyzing and sharing their data. Learn more at http://www.tableausoftware.com/bmus

TABLEAU AD.indd 1

28/06/2010 14:00

BUSINESS INTELLIGENCE

Doing business the intelligent way Ovum analyst Helena Schwenk explains why BI remains a top priority for CIOs and how they can employ the technology as a recession-busting tool.

T budgets are coming under increased scrutiny and pressure especially if the economic downturn continues. But, while a recession might well force companies to pull back on some IT investments, Ovum believes that any new initiatives will address specific business pain-points and offer quick and visible payback. BI fits into this category – focusing on key issues like securing and increasing revenue from profitable customers, rationalizing and reducing operational costs, providing greater visibility into cross-selling opportunities and improving customer satisfaction. Hence, Ovum believes that BI will continue to rank among the top three priorities for CIOs this year.

Recession busting technology While many companies will instinctively use BI as a cost-cutting tool, smart companies will continue to invest in BI solutions to intelligently scale back operations and maximize efficiencies from business processes they already have in place. In a recession, BI allows companies to take a more calculated and informed approach to

tightening their belts, making sure that any cost cutting measures don’t cut across their top business priorities or cut out the valuable Brazilian rosewood with the deadwood. Moreover, they will increasingly focus on using BI to maximize revenues, optimize operations and grasp new and lucrative business opportunities before their competitors do. While a recession might well force companies to pull back on some IT investments, there’s rarely any question of a BI project being pulled or cancelled due to a cut in costs. If anything, an economic downturn could in fact speed up its deployment from a piecemeal departmental deployment to deployment across the wider enterprise. Ovum expects the riskaverse fi nancial services sector to lead the charge in new BI projects over the coming year as they realize the need to analyse their businesses and the market in order to boost revenue performance and to segment (profitable) customers more clearly. However, BI customers are also becoming increasingly cost-conscious. Companies are insisting they do more and more sophisticated types of BI with less money

“In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts”

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and IT staff. Ovum believes that’s a good thing – it will make BI more focused and efficient, which in turn has a better chance of returning tangible benefits. It will also continue to force BI vendors away from their traditional premium pricing models, resulting in broader adoption of BI beyond an elite group of executives and analysts to front-line business users.

New models As a result of the economic downturn customers are becoming more risk averse and are looking for more costeffective ways of implementing BI. Th is will challenge traditional BI and data warehousing implementation approaches and put new development, deployment and packaging models like open source, soft ware-as-a-service (SaaS) and pre-packaged appliances on the radar screens of more BI customers in 2010, particularly SMBs. Additionally Microsoft’s market entry and BI strategy aim to make BI a commodity technology that customers will expect to implement easier and for a lot less than the complex, premium-priced solutions of the past. These are some of the key BI technology trends that are developing: Open source: Open source BI is still a fledgling market and its evolution is still a far cry from its evolution to free solutions that are advanced by the developer community around the globe. However, it is no coincidence that Linux is now the fastest growing platform for new BI projects. The continued interest in open source BI in 2009 is a clear counter-reaction against the market dominance of a few vendors due to consolidation. Open source BI pioneers like JasperSoft and Pentaho, which were once considered temporary illegal aliens in the BI market, are establishing themselves as permanent residents, getting funding, issuing new code releases and starting to win over larger non-traditional enterprise customers. Economic forces are also playing directly to open source, particularly for fi rst-time BI buyers. These companies are looking for a cost-effective way to deploy BI without having to fork out a heft y upfront fee for a packaged commercial offering. First-time open source implementations will always be prototypes. But if successful they will evolve into fully productive BI systems that are backed by commercially licensed support services from open source BI vendors. SaaS BI: Providing BI as a hosted online service is gaining increased market acceptance, especially among smaller, cost-conscious businesses. 2010 will be a decisive make-or-break year for SaaS BI adoption, especially as seemingly similar cloud infrastructure models start to take root. Most of the early adoption thus far has been among SMBs or departments of large organizations. The real test for SaaS BI will be to break into the enterprise market. When SaaS starts to uproot complex enterprise

applications, including BI, it will truly have broken into the mainstream. But vendors will start to demonstrate how a small and simple SaaS solution can quickly kickstart an actionable enterprise-wide BI strategy without having to undergo a big and complex customized enterprise data warehouse (EDW) project fi rst. In large enterprises, Ovum expects these SaaS deployments to proliferate by first complementing existing BI tools, applications and infrastructure. Ultimately any spike of SaaS BI adoption rests on the success of SaaS’s poster-child application, namely Salesforce and whether it can withstand the economic pressures being put on its slim margins model. However, Ovum expects at least one major breakthrough this year – the on-demand model will also (fi nally) enable BI vendors and partner channels to offer functionally focused or vertically oriented analytic solutions, without the pain of conventional BI deployment approaches. Ovum believes there is an untapped opportunity for vendors to offer vertically focused SaaS that can quickly plug skill-gaps in organizations that are restricting them from doing specialized and advanced analytics like pipeline analysis, predictive analysis and fraud loss prevention. BI in the cloud will also ride on the coattails of steady SaaS BI adoption. Even though the definition of cloud computing continues to shift like the clouds in the skies, the notion of hosting BI infrastructure and using BI services will start to gain the attention of CIOs and IT directors. Much of that is due to the noise that major cloud platform players – Google, Microsoft, Amazon, Salesforce.com and others – have made in 2008. Application form factors: The emergence of new competition from influential vendors like IBM, Oracle, HP, Microsoft and Teradata is helping to reinforce the value of data warehouse appliances and is bringing it into the BI mainstream as an alternative model. The appliance form factor – which gives companies the operational ability to plug and play BI technology without wasting time and money on assembling the hardware and software infrastructure – is catching on fast and threatens to break the traditionally high price-entry barriers for BI. Significantly, it offers mid-sized firms a chance to engage in complex and high-end BI, which can be deployed at a fraction of the cost and time compared to traditional enterprise data warehousing. In the coming year, Ovum expects more BI tools and applications will be increasingly bundled with data warehouse appliances. More data warehouse vendors will also pre-integrate BI tools and applications – either their own and/or those of their partners – into their appliance bundles. These data warehouse/ BI appliances will also be increasingly tailored, packaged and priced for specific vertical market segments and even specific functional applications.

Helena Schwenk is a Senior Analyst within Ovum’s software application team and is based in the UK. She has over 15 years’ experience working within the IT industry as both an analyst and IT practitioner. Her areas of focus include business Intelligence, performance management and data warehousing. Schwenk holds a BA (Hons) in Computing and Information Systems.

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BOARD VANTAGE_june10 09/07/2010 15:44 Page 82

EXECUTIVE INTERVIEW

Security board Joe Ruck explains why a secure and stable board portal is important for today’s business leaders.

Please give us an overview of your company and products? Joe Ruck. BoardVantage is the leader in board portals. Of our customers 25 percent are Fortune100, but we also have plenty of smaller organizations including not-for-profits. We replace mailings of large board books with 24x7 secure online access, giving directors access to more information in a more timely fashion. The board portal is more than a document repository though; we support a full range of board processes including consents, approvals and director questionnaires. We also improve the efficiency of the Corporate Secretary’s office – the people who support the board process. Regulatory changes have dramatically increased the workloads of boards and a lot of this has fallen on the Corporate Secretary’s office, who are very much deadline driven in preparing material. By streamlining board communications we get them back time on deadline when it matters most. We also provide implementation of our board portal as a service, which reduces costs involved for the client. What is unique about the board portal market? JR. I think our catch phrase, ‘security with simplicity’ sums it up pretty well. Events such as confidential merger and acquisition discussions, company strategy or CEO evaluations would all be market moving if they ever became prematurely or inadvertently public. Security is non-negotiable. At the same time, many board directors are starting to use computers for the first time, so ease of use is critical. Since companies take the security of board materials so seriously, we undergo in-depth third party audits and security reviews regularly. Very few commercial applications will

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tent is still accessible by system administrators. Executives are nervous about that. Then of course there’s the iPad, which shows all the signs of becoming the preferred director platform. We moved up our support timetable as a result. Much board work is review focused, so a device aimed at content consumption is ideal for that, and the iPad may be easy enough for traditional directors who still struggle with laptops to use.

“Events such as confidential merger and acquisition discussions, company strategy or CEO evaluations would all be market moving if they ever became prematurely or inadvertently public” have had its security tested as thoroughly as BoardVantage’s. What are some of the emerging trends you are seeing in your market? JR. Lately demand outside the boardroom has begun to outstrip demand inside the boardroom. Senior leadership teams need to collaborate around a variety of confidential issues such as new product launches, HR matters and company strategy. Email is risky since the con-

What business drivers for growth do you see for the future? JR. BoardVantage is 100 percent committed to the board portal business and will continue investments to maintain the leading market position. We see collaboration for leadership and project teams as a major growth area. There is a growing awareness of the need for collaboration tools and uneasiness about the weak or absent security of the consumer tools and social networks, whose business models are based on advertising. We have no idea what our customer’s content is, as our security model has been based on the design premise that no BoardVantage employee can view any customer content. It’s my belief that an increasing amount of commercial content will need to be stored in systems like BoardVantage to maintain privacy. So far, in our conversations with existing customers, we’ve seen a lot of shared enthusiasm for this premise. This coupled with businesses’ renewed appetite to deploy next generation collaboration applications is going to fuel our growth in the future. We’ll be introducing some very exciting new products into the marketplace this year. n Joe Ruck is president and CEO of BoardVantage. Previously the senior vice president of marketing at Interwoven, Ruck has held sales, marketing, and executive positions at Sun Microsystems, Network Appliance, and Genesys Telecommunications, subsequently acquired by Alcatel. Ruck holds a BS in engineering from Oregon State University and an MBA from Santa Clara University.

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HEALTHCARE FOCUS

This legislation will not fix everything that ails our healthcare system, but it moves us decidedly in the right direction. This is what change looks like Barack Obama

Obamacare: looking after your business? Following the passing of the highly controversial healthcare reform legislation, Business Management takes a look at the story so far. What does the reform mean for the industry, how will it affect your business and how can a healthy work force improve your bottom line? By Lucy Douglas

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Peop are thinking more People about accountability abou ity and responsibility Lillian Petty

ack in March, the President achieved the goal that had eluded a string of his Democratic predecessors and successfully passed legislation to overhaul the country’s healthcare system. In one of the most rigorous pieces of reformatory legislation this country has seen, the Affordable Care Act will bring medical care to a vast majority of the 47 million uninsured American citizens – a luxury that had hitherto passed them by. Following the close triumph of his bill with 219 votes to 212, the President said: “Th is legislation will not fi x everything that ails our healthcare system, but it moves us decidedly in the right direction. Th is is what change looks like.” However, critics of the legislation – and they come in scores – fear that the reform will mean increased taxes and compromised healthcare standards. For many in the

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multibillion-dollar healthcare industry, the legislation represents a social transformation that would bring care to the masses at considerable cost to higher earners and lucrative businesses. Insurers will be obliged to offer care to all patients, regardless of pre-existing conditions. Some prescription drugs will be subsidized, and four million senior citizens previously falling into the socalled Medicare “donut hole” can expect fi nancial relief for prescription drugs. The list of changes goes on, and will continue to grow until at least 2015, when the fi nal provisions of the legislation as it currently stands will come into play. There is no doubt that Obamacare will benefit the individual. An estimated 95 percent of the total population will be able to access medical care under the reform law, which equates to 32 million citizens who had previously gone without health insurance. But what will be the wider implications on America’s private sector and its host of healthcare heavyweights? According to a report by Reuters back in March, the country’s health insurers stand to lose out the most under the provisions of the legislation. Consumer protection regulations will prevent insurers from discriminating against consumers with pre-existing conditions, from capping the amount of funding consumers can receive

HEALTHCARE AROUND THE WORLD USA Private healthcare system Funded by the private sector with citizens taking health insurance from employers, the government or private schemes. The largest health insurer is the Federal government, with two funded schemes, Medicaid and Medicare, that provide health cover to certain low income groups, such as children or the elderly, and groups in need of continuing medical care, such as people with a disability.

Business impact: 76% Offering healthcare insurance as an employee benefit is commonplace. The majority of large corporations offer employees some healthcare benefits, however according to a survey conducted in 2008, only 38 percent of the small businesses asked were in a position to offer health insurance. Expensive premiums that can rise without warning make insuring difficult for businesses. However employees can come to depend on health insurance benefits and can take or leave jobs because of it. Employers in America assign 13 percent of their payroll to health insurance.

Republican representatives hold a rally to oppose health care reform

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The USA Spent annually and from rescinding coverage to consumers. In addition, Medicare will be required to ensure that at least 85 cents of every dollar spent on a private plan goes directly on medical care, leaving only 15 cents for company overheads, salaries and profit. While there are some benefits for insurance companies – fi rms such as UnitedHealth Group and WellPoint have seen a $67 million tax delayed until 2014 – the legislation will bring stringent regulations and huge transitions in the way these companies operate. In a letter to Congress in March, David Cordani, CEO of Cigna Corp., expressed concerns about the sustainability of the bill. Cigna Corp clearly states that it is in support of increasing access to healthcare; however, Cordani’s letter highlighted a concern that the legislation would in fact have the adverse effect on the system. “I strongly believe that costs of healthcare will increase, not decrease, for the country as a whole and these costs will further challenge job security and economic growth,” he wrote. For America’s businesses too, the implications are vast. Insight from industry specialists states that those most likely to feel the effects are businesses who employ lower-income workers. According to a report carried out in January by Tower Watson and the National Business Group on Health, 71 percent of employers believe that healthcare reform will increase the overall cost of services in America and 69 percent thought their benefit programs would rise in price. These concerns are hardly surprising, given the extent of anti-reformist lobbying that has taken place over the last year. Between the vehement Republican politicians, who remained unanimously against the legislation throughout the process, and the outraged, often violent, demonstrators in Washington, little has been done so far to put the anxieties of concerned employers at ease. “Of course US healthcare costs remain a big concern and it is likely that healthcare reform will be the subject of continued debate in the country for years to come,” says Richard Buino, a spokesperson at Kraft Foods. “We’re hopeful that the recent reform legislation will contribute to a stabilization of these costs.” While more people are getting used to the changes since the legislation was passed four months ago, antireform protesting has by no means disappeared. Will the reform succeed in stabilizing the expensive and volatile system, making healthcare accessible to millions more Americans, or will Cordani’s concerns materialize, and the legislation only send the costs higher and further hinder the economy from recovery? Perhaps it is still too early to tell, but one thing is for sure: industries and businesses across America are going to be feeling the effects of the shake-up for many years to come.

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$2.4 Trillion on healthcare in 2008

Premiums rise by up to

25%

each year

HEALTHCARE AROUND THE WORLD

JAPAN Combination system This system is funded partly by job-based insurance premiums and public taxes, making payments mandatory but healthcare is universal and no one can be denied care. The system consumes about eight percent of the country’s GDP, roughly half than in the US, however some think the system is unsustainable.

Business impact: 40% Employer insurance programs have suffered as the economic dip has meant that many employers are unable to offer insurance.

TAKING CARE OF THE LITTLE GUY

t has been a tough couple of years for small businesses. Only the very good or the very lucky have managed to weather the financial storm that swept across the nation. While there were reports that recovery was under way in the early part of this year, business taxes and unemployment rates remained high, capital and financial products were increasingly harder to come by and both businesses and consumers continued to spend less. And these factors impeding income all came in addition to the financial burden that small businesses have been carrying for as long as they can remember: health insurance benefits for employees. According to the US Small Business Administration (SBA), small businesses were paying as much as 18 percent more for the same health coverage as larger companies prior to reform. This was largely because they were unable to pool their risks in the same way that large corporations could, meaning a single employee with a health problem could bump up premiums for the whole company. The premiums were also volatile; reports have shown premiums rising by as much as 25 percent year on year, meaning that an employer able to offer its staff health benefits could potentially have that luxury taken away within weeks. And in addition to the costly premiums, smaller companies were incurring higher charges for costs such as administrative fees. For a firm turning over less than a million dollars a year, picking up a health insurance bill for tens of thousands of dollars in times of such economic uncertainty could potentially be crippling. Given these figures, it hardly comes as a surprise that 13 million of the uninsured working people in America today work for businesses with 100 employees or less. Despite these numbers, however, offering health insurance benefits is a main concern for small employers. “We know from surveys that healthcare was actually a number one priority for small businesses overall,” says Christine Koronides, a Senior Policy Advisor at the SBA. “And it’s polled that way since 1986.” And while 96 percent of business remain exempt from any responsibility mandates the reform legislation will bring, not offering insurance can prove more detrimental to the business in the long term. Koronides and her colleague, Hayley Matz, believe small businesses are liable to lose strong, hard working employees purely because

09/07/2010 14:33

they cannot afford to pay for healthcare. “We met a small business owner in Connecticut,” Matz says, “who lost an employee who had been there for seven years. The job that the employee took was actually a lower paying job, but it provided healthcare. The employee had a son who needed treatment for an illness, so he couldn’t afford not to have healthcare.” Such scenarios provide something of a catch 22 situation. Without being able to offer this crucial benefit, small businesses find it difficult to attract and retain good employees, making it increasingly hard for them to compete with large firms when it comes to taking on new talent. However, without the best team it is impossible to generate the profits required to offer employees healthcare benefits. As such, so-called Obamacare could not have come at a better time for small businesses. Mass job loss and internal budget cuts in both the public and private sectors across the country mean that the number of uninsured Americans rose significantly as a result of the recession. Following a tense year for the new President and his cherished reform proposals – which dominated his manifesto during the election campaign back in 2008 – the legislation has brought some welcome relief for businesses looking to regenerate. Small businesses that have been offering their employees healthcare can benefit from tax credits, a provision that has taken immediate effect to bring a financial reward to such firms. Matz says that there are about four million businesses that will be eligible for some form of tax credit this year, based on the insurance that they already provide. “Depending on the size and the wages of employees, [the tax credits] can cover anything from 35 to 50 percent of the costs that an employer is paying for an employee’s benefits,” adds Koronides. Indeed, these are impressive deductions for businesses, with a sizeable government budget to back them up; according to reports, there is over $40 billion in tax credits available that these four million businesses can access. This remarkable allowance marks just a fraction of the fiscal budget that has been put aside for healthcare since the reform. An estimated $938 billion in funding will be spent on the sector over the next 10 years, and according to the Congressional Budget Office, that boost to the sector will result in a projected $138 billion reduction in fiscal deficit during that same period. Critics of the legislation largely object to this budget, claiming that it is unsustainable, but Matz explains that the Affordable Care Act is based on incentive. “It takes the approach that if the costs are lower and the benefits of health

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32 Million uninsured people can now access care

$938 Billion to spend on healthcare

95% of the population will be covered

insurance are so great, small businesses should be able to, and continue to want to, provide health insurance for their employees.” The tax credits are not the only benefit small business can expect to see this year. The new regulations on health insurance companies that prevent discriminatory practices will allow employers greater access to policies for their workforce. However some of the biggest changes are still to come. In 2014, Matz says, the state run exchanges will come into place, providing a whole new level of benefits to small employers. “It’s going to allow small businesses to pool their risks together and have a larger economy of scale to provide more options and lower-cost insurance to their employees.” With businesses of all sizes across the country looking to return to a state of growth post-recession, traditional methods of healthcare provision and the crippling costs they brought were proving more an obstacle for employers than a benefit for employees. Research suggests that had healthcare costs continued to rise at the same rates seen in recent years, the number of uninsured citizens in America would have grown to 72 million by 2040, leaving no doubt that a major reform of the system was essential in order to ensure medical care for the nation and a much needed boost for the business economy. As such, small-to-midsize businesses have largely been in favor of the reforms. “Overwhelmingly,” says Koronides, “what we’ve seen in talking to small businesses is that they want to offer health insurance and with these measures, like the exchanges that will help them access affordable quality plan, they’re going to do it. They’re jumping at it. They want to do it.

HEALTHCARE AROUND THE WORLD

FRANCE Social insurance National citizens are covered by public health insurance funded by mandatory health insurance contributions from employers and employees. Patients pay doctor’s bill but are reimbursed by the public insurance. Many people take out extra insurance policies to cover eventualities that are not covered by the public insurance.

Business impact: 27% Less competitive because the public insurance contributions are set as mandatory, however they do contribute to employers overheads.

09/07/2010 14:33

PREVENTING THE HIT

ellness and preventative healthcare is becoming a hot topic. For a number of years now healthy living campaigns have gathered force, but with the healthcare industry in a state of transition, preventative measures are taking place as a form of healthcare in their own right. And for Lillian Petty and the Alliance for Wellness Return on Investment, this is the ideal time to promote the benefits of preventative care. “What we’re doing right now is continuing the thrust,” says Petty when I caught up with her after the Alliance’s annual planning meeting. “We’re trying to reach out and partner with some other national groups that are focusing on health and health initiatives, until we see how the regulations are going to help or hinder corporate America.” Two years ago, America was spending an overwhelming $2.4 trillion on healthcare, equalling 17 percent of the GDP. Th is is an alarming statistic, especially when we consider that many of the leading causes of illness, disability and death are preventable. Moreover, the Journal of Occupational and Environmental Medicine estimated the overall annual costs of poor health in the workplace to be around $1.8 trillion. With these figures in mind, the wellness provisions in the newly instated legislation seem long overdue. The President’s Recovery and Reinvestment Act, which provides a $1 billion investment for prevention and wellness strategies that are designed to improve the country’s health and reduce the costs of healthcare in the future, is undoubtedly a step in the right direction, but it seems a paltry effort when considering the amounts of cash that the nation’s businesses have been hemorrhaging on healthcare for perfectly preventable illnesses. “We’ve got to continue the whole measurement of population engagement,” explains Petty, “getting people involved, getting corporations to not wait on the government, but to go on taking care of the health of your population.” Petty and the Alliance recognized that the growing costs of healthcare were unsustainable for businesses long before the government did, and have been working on various strategies to demonstrate the business benefits of an employee wellness program. “The data repository of the Alliance captures all the health claims by each person,” she tells me, “and that’s medical, prescription drug or whatever, and we fi nancially impact that through our analytics as an off-set to people participating in our wellness programs. And from that we get a fi nancial result for each individual company’s measure of wellness, and we can get an aggregate result.”

HEALTHCARE AROUND THE WORLD

UK Tax-funded ed system The National Health Service is government funded with tax-payers money and covers all aspects of healthcare from primary care physicians to specialists to emergency services. Some charges are imposed on prescriptions, however a number of social groups are exempt from these charges, including children, elderly and unemployed. There is also a private health system in the UK, funded by insurance in the same way as the US.

Business impact: 9% A tiny proportion of businesses offer their employees private health cover. This is largely uncommon and not expected by employees. Aside from this the business impact of healthcare is minimal.

Finding a way to measure the fi nancial return on investment of wellness programs for a business had proved the biggest challenge, as the success of the investment is measured by an outcome not occurring. Fortunately for the Alliance, the erratic rising costs of insurance became enough of a reason for businesses to get on board with wellness and preventative care for employees. At Kraft Foods, Richard Buino explains how pleased the fi rm is that wellness incentives had been included in the new legislation. “Our prevention efforts include a 100 percent coverage for annual physicals and health screenings, education, disease management and assistance to support well-being and to identify and manage risks,” he says, highlighting that many of Kraft’s US employees can also benefit from on-site fitness centers and access to an on-call nurse. It’s not just global corporate employers like Kraft who have been caught up with the wellness and prevention movement. Health insurers themselves are starting to see the opportunity for this new concept in healthcare. David Cordani, CEO of Cigna Corp, outlined preventative care as a key concern for the fi rm, stating that: “True healthcare reform must focus on prevention, encourage and reward healthy behaviors and ensure access to routine preventative care.” Cigna have since expanded in this market and now provide onsite health services to their clients. Petty explains, however, that incentives from insurers only represent one part of wellness as a business strategy. It’s a focus on the long-term, she says. “It’s not just implementing an incentive program alone and thinking that’s it,” she says. “Behavior is such that you don’t know what’s going to cause people to act and to continue to stay engaged to make a difference.” She goes on to explain that the impact of wellness programs for a company should be looked at over a three to five year period, but they must be implemented in a tactical way because the population is always changing. Ultimately, it is becoming increasingly clear that a healthy workforce equates to a healthy bottom line. While the reform legislation is making healthcare more fi nancially accessible, cutting down on employees’ need for healthcare in the first place is surely the most effective way to see a reduction in the costly yet indispensable expense. Slowly but surely, corporate America is starting to get on board with this; as Petty says: “People are thinking more about accountability and responsibility. Companies have to look strategically at this and not just look at buying one program; they need to think about all the different aspects that they can put around this whole issue to make it a long-term part of their business strategy, and not just a temporary fi x.”

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HEALTHCARE FOCUS

The future of modern medicine Kaiser Permanente has a lot on its plate at the moment. As the country’s largest non-proﬁt health provider, it takes care of 8.6 million people across nine states. CEO Robert Pearl reveals to Business Management how technology is helping to revolutionize 21st century healthcare.

aking time out from the demands of daily life for simple activities is not a luxury many people can afford. Fortunately a few years ago the internet came along and made it possible for us to buy clothes or groceries, compare insurance packages or get a credit card without ever having to leave the office. But while we can click our way to a new suit or next year’s holiday from the comfort of our desks there are some appointments that continue to require face-to-face communication. Despite living in an era of video conferencing, smart phones and Skype, the

demands of medical care, whether an emergency procedure or routine examination, still necessitate accurate and personal interaction between an individual and a physician. So how can today’s technological advancements that have streamlined so many industries be used to improve our healthcare system? Dr. Robert Pearl, CEO of Permanente Medical Group, one half of healthcare giant Kaiser Permanente, recognizes the importance of a high level of communication technology in healthcare. “I just don’t think,” he says, “that people are going to be willing to accept that healthcare will be a century behind the rest of their lives.” Pearl, who firmly believes that “medicine demands convenience and productivity,” has been a key force behind developing and implementing innovative communication technology into Permanente’s operations. He understands that this technology not only improves ef-

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ficiency at Permanente from a business perspective, but it also directly improves patient care. “I do not believe that quality medical care can be provided without the advanced information technology systems in the 21st century,” says Pearl. “Without having all the information, one cannot make the proper diagnoses, one cannot provide the proper treatment. Without the online tools, people can’t get the convenience that they expect in so much of their life.”

in the surrounding communities. He explains how KP’s telecommunications have had an influence over such figures, using a stroke patient by way of an example. For an emergency patient who presents with the symptoms of a stroke, an immediate consultation with the neurologist is paramount; faster administration of powerful stroke medication directly determines recovery and long-term brain function, however can have dangerous side effects if used inappropriately. KP’s technology can now link the patient and the emergency room physician with the neurologist, who may be some way away, in order to make a fast and accurate diagnosis.

Paperless productivity Kaiser Permanente are at the cutting edge of technology innovation in the healthcare sector, having implemented three advanced IT systems into the business that have helped to revolutionize patient care. Pearl highlights that these innovations were developed from the belief that “technology in healthcare should allow us to eliminate distance.” The first, he explains, is the foundation of Kaiser Permanente’s electronic healthcare technologies, the electronic medical record, KP HealthConnect. Th is system has all patients’ records on one fully integrated database and allows any physician that consults a particular patient to gain complete and thorough access to that patient’s history so as to make a comprehensive assessment in a more timely manner. Updates to a patient’s records, such a new X-ray scan, will instantly appear on the HealthConnect system, so as a patient consults a variety of physicians, each one will be able to access the most current records for that patient. Pearl claims that we should expect to see more of this kind of technology in the healthcare world in the coming years, predicting that in the future electronic management systems will be required as standard by both the federal government and the patients themselves. “I believe that [this system] will require the patient to demand the same level of convenience in healthcare that they demand in the rest of their lives,” explains Pearl, and likens the system to an ATM, highlighting how when a person travels to another country and withdraws money, the ATM can inform that person exactly how much money is in their bank account, in whatever country they come from. Beyond the database, Kaiser Permanente has implemented video communication systems that create swift communication links between physicians and their patients, the research center and other physicians. This allows specialists to decide on a course of treatment for a patient without even being in the same hospital, a potentially life-saving device. Pearl’s assertion that these advanced technology systems are integral to patient care is certainly accurate; the chance of Kaiser Permanente’s patients dying from heart attacks and strokes is 30 percent less than patients at other hospitals

Convenient care

FAST FACTS • Kasier Permanente patients are 30 percent less likely to die from a heart attack or stroke than other patients in the surrounding communities. • At the Garﬁeld Center, KP has the largest human genomic database in the country, with 100,000 specimens. • 93 percent of dermatology cases can be diagnosed at the ﬁrst visit to the primary care physician. • If every American got the same care that KP provide, there would be 200,000 fewer heart attacks and strokes.

The third element of Kaiser Permanente’s technology scheme is the national website, kp.org, which contains a homepage for each physician, as well as tools for patients to manage their own healthcare. By utilizing the technology on the website patients can make appointments, check laboratory data or order repeat prescriptions, and in addition can start to manage illness ranging from head aches or back pain, right through to complex diseases such as heart failure. Pearl is keen to emphasize the convenience aspect that this technology brings to the lives of KP’s patients, for example people who need to visit their doctor regularly for a particular medication. “That’s the kind of convenience people want. They want to be able to get their care wherever they are, whenever it may be, and they’d like to have more control.” He once again draws on an experience from within the company to highlight the potential benefits that these advances in technology can have on individuals. Accutane, he explains, is a very powerful treatment for people with acne, particularly teenagers and people in their early twenties. It is necessary to evaluate patients using Accutane once a month, to make sure the treatment is working and the patient is not suffering from side effects, such as depression. “It can be quite disrupting to have to come to the doctor every single month in order to be checked,” explains Pearl. “We’re now using video to do that. And the advantage also is that quite a number of people on the medication can go off to college, now we can do it even though it’s a large distance away.” The knock-on effects of these new efficiencies in patient care on a patient’s business or employer are equally invaluable. In the same way that the internet made it possible for us to go about the mundane tasks of every day life without leaving our desks, so these new systems in healthcare have made it possible to consult with your physician without necessarily having a face-to-face consultation. “In Northern California,” Pearl explains, “we take care of about 3 million people. We offer secure

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CONSULTATION TIME LINE

messaging – what most people think of as email, but it’s done through the same secure servers that a fi nancial institution would use, so its fully protected in terms of patient confidentiality.” Pearl goes on to explain that in the North California region around 5 million emails were sent between patients and doctors last year. He reveals that if just 20 percent of that figure had been an actual visit to the doctor, that would represent 2000 years of patient time. With the average KP customer earning $70,000 a year, that represents an $80 million productivity saving. “I think that’s what people want,” Pearl says. “We should be able to give care wherever you are. It’ll also allow us to get rid of time, whenever you want it, and it should offer you a series of choices about how you want to obtain it.”

Research and development

Patient X visits her doctor complaining of lung problems

By the time Patient X returns to her doctor, the x-ray has been assessed by the radiologist and the report has been sent back to her doctor using voice recognition software

Together, the doctors reach a diagnosis and decide on a course of treatment

The time from ﬁrst consulting her primary care physician to receiving her medication is two hours

Doctor sends Patient X for an X-ray

Patient X’s doctor is concerned, so he contacts the pulmonologist at another hospital via video communication and they examine the digital X-ray that is now on the database

By the time Patient X reaches the pharmacy, her medication is ready to be collected

If every American got the same care that we provide today, next year there would be 200,000 fewer heart attacks and strokes

Behind Permanente’s technology innovation is the Sidney Garfield Center, the headquarters of the company’s technology research and development program. To demonstrate the center’s capacity for technological innovation, Pearl explains the time it takes for a development to be integrated into the Permanente system. “If you read the literature on innovation in healthcare, it’s about a 17 year time cycle between a new idea coming in place and it actually being broadly implemented. I think as a consequence of both the Garfield Center and other Robert Pearl innovative parts of our program and the integrated care we have, we’ve taken that 17 year cycle and squashed it down to two or three years.” What the center does, Pearl explains, is to create some foundational technology, such as the video technology, and integrate that across all of Permanente’s operations. “That same technology could be used in 30, 40, 50 other ways, and we’re trying that right now,” he says, once again pulling from his abundant experience of technology improving healthcare. In dermatology, he reveals, the US suffers from a national shortage of specialists and consequently patients often have to wait weeks of months to see a dermatologist but at Kaiser Permanente, 93 percent of dermatology cases can be resolved the same day through the tele-dermatology scheme. “What we do is, while you’re in the primary care physician’s office, we take an image, sometimes digitally, sometimes with video technology, and the dermatologist looks at it. Very often we can make a defi nitive diagnosis and save you time and get you the treatment to begin very quickly.” All of the technology developments are integral to Pearl’s aim to drive the healthcare sector, which he describes as 19th century cottage industry, into the 21st century. “We should be able to truly understand healthcare at an exponentially greater level in the future than we have in the past,” he says, reiterating the cost benefits, the greater levels of efficiency and the preventative power of technology advancements. “If every American got the same care that we provide today, next year there would be 200,000 fewer heart attacks and strokes.” He could continue providing anecdotes from his experience as CEO at one of the country’s leading health providers, but there is no need. Pearl’s examples all point to one simple fact: technology has infi nitely improved patient care.

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OUTSOURCING

Mastering multi-sourcing With outsourcing on the rise, how can ﬁrms effectively manage multiple sourcing partners and relationships?

nalyst firm Gartner, Inc. has identified three major pitfalls that many organizations experience when striving for an efficient and effective multi-sourcing environment. To overcome these challenges, CIOs and sourcing managers need to develop specific competencies to master multi-sourcing. “Many organizations struggle to develop an effective and efficient sourcing environment, which is necessary to achieve positive sourcing outcomes,” says Frank Ridder, Research Director at Gartner. “A recent Gartner benchmark study found that 55 percent of global organizations manage their sourcing activities tactically and at an operational level, failing to add a strategic management layer and invest enough in developing critical multi-sourcing competencies.” In addition, Gartner predicts that through 2012, inflexibility caused by excessive cost reduction focus will result in business disruption in 30 percent of outsourcing deals, including the inability of the buyer to compete effectively. Outsourcing deals are difficult to manage for four main reasons. First, many organizations lack the experience to properly oversee and estimate the end-to-end effort that outsourcing requires. Second, a project team often centrally plans and executes sourcing projects amid emotionally charged political agendas. Th ird, new options, such as alternative delivery and acquisition models, change the way the sourcing lifecycle drives activities, and increases the complexity of the sourcing environment and the decision-making process. Finally, the service provider landscape is dynamic, which makes it frequently challenging to fi nd the right one with which to build a long-lasting relationship. Furthermore, once an organization has established an outsourcing relationship, it often faces further difficulties because an outsourcing relationship frequently promises more than it delivers. Some challenges can arise such as, low end-user satisfaction, poorly defi ned business benefits and immeasurable deal benefits, complex governance and strained relationships. As a result, organizations are frequently disappointed because their outsourcing contracts failed to deliver the innovation they had anticipated. In addition, outsourcing deals often aren’t structured to provide the flexibility needed to enable the deal to adapt quickly to changes in the market and organization. They don’t always evolve due to factors on the client side such as organizations often failing to describe what evolution and innovation mean to them, and on the service provider side such as changes that may disrupt their businesses and jeopardize their margins. Organizations can manage these challenges by building a successful, outcome-oriented sourcing environment. “Organizations that excel in sourcing have seamlessly integrated all providers, aligned all parties behind one goal, developed an agile sourcing environment and achieved

business impact through targeted IT spending. Others who lack the right competencies are more likely to experience sourcing inefficiencies caused by misalignment, idle resources, unnecessary processes, overloaded operations, a heavy inventory or a lack of focus,” concludes Ridder.

THE HEART OF THE MATTER Gartner has identified 10 key competencies to help organizations move toward efficient and effective multisourcing. Strategy management: It aligns sourcing actions with the business goals, strategy, frameworks and governance to ensure optimal ongoing business support. Risk management: It prevents, detects and mitigates sourcing risks to substantially reduce the levels of risk across all deals. Financial management: It formulates financial targets with the business (for example, reduce total cost of sourcing by 15 percent in two years) to establish a clear guideline for all sourcing activities. Demand management: It oversees and prioritizes IT services based on demand to optimize resources and skills across all sourcing activities. Service management: It aligns the services across internal and external service providers to achieve seamless, end-toend service delivery. Program management: It aligns portfolio and sourcing strategies so that projects achieve desired outcomes. Relationship management: It maintains the relationships with all internal and external service providers. It sets performance expectations with service providers, collects performance metrics for each and provides feedback. HR management: It helps to forecast and fulfill staffing needs relative to sourcing needs to ensure an optimal level of skills and resources. Performance management: It helps to optimize external service provider’s costs and ensure that new or revised business goals are always attained. Contract management: It manages the contracting process to meet the organization’s needs. It includes keeping internal contracts and industry best-practice contract templates for future use.

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ASK THE EXPERT

Enterprise data quality governance Srinivas Durvasula of Virusa Corporation gives some insight into the importance of quality data for businesses today.

arge organizations operating on diversified IT landscapes often experience the ill effects of poorly organized master data and inaccurate, redundant data flows. An inability to enforce and maintain data quality impacts critical functional areas across the enterprise such as call centers, service assurance and revenue management. Lacking a complete 360 degree customer view results in ineffective customer issue resolution, campaigns designed for the wrong target audience or poor vendor consolidation strategies. These issues can be attributed to poor data quality resulting from distributed data entry points and associated duplication of data in multiple systems, along with the lack of a single-source of master data. In such a landscape, there is a growing need for businesses to adopt a strategic architecture to solve critical enterprise data management issues by managing master business data centrally and automatically publishing it to all transactional and analytical systems. Such a strategic data governance model will also allow businesses to consolidate and harmonize master data, develop a single, effective way to maintain and author master data and, fi nally, commission solutions to ensure the quality of data. Such master data changes are often complex activities involving long project durations and high costs and require organizations to engage in a focused data quality governance initiative to ensure that their enterprise data can be leveraged to support their critical business objectives.

A structured approach Customer service management relies on information from sales automation and CRM systems to manage and track transactions and for identifying new revenue opportu-

nities. An accurate 360 degree view of the consolidation and mapping may yield lower customer is necessary to quickly respond to returns as the spend value diminishes. inquiries and identify potential sales opporThird, enhance the data governance model. tunities. Inconsistent master data contributes The analysis of customer data flow variance to poor campaign management, ineffective across the enterprise will expose complaints issue resolution and product/service line reand improvement areas within certain product/ mediation failures. service lines, while also providing mechanisms But data quality needs are specific to the to optimize the data governance model. This business objectives of individual organizawill help in enhancing or developing data intions. Here is a four-step process building the tegration and gradual integration into Master business case for addressing organizational Data Management (MDM) initiatives. data quality needs, which is a pre-requisite Fourth, develop a data quality monitoring for devising a data quality implementation framework. Ongoing master data monitoring roadmap. requires a pre-defi ned mechanism for moniFirst, assess data qualtoring business processes asity. Data quality within sales sociated with master data. Such automation and CRM systems monitoring will provide smooth should be assessed to identify support for reporting and alerts master data requirements assorelating to changes to the cusciated with customer master intomer/product/organizational formation and product/service master data repository. lines availed. Th is assessment Businesses that implement will help identify risks posed these steps can enjoy a number by “AS-IS” data quality level to of key benefits such as the apachieving business outcomes plication of organization or Srinivas Durvasula is Senior such as reducing customer industry standard master data Manager of Business attrition or growing revenue such as D&B, UNSPSC, etc. for Intelligence Practice at Virtusa Corporation. With about from an existing customer base. identification of key master data 12 years of experience in information technologies and Second, evaluate data qualelements, or cost reduction due manufacturing management ity requirements. The next step to improved process efficiencies information systems, Durvasula is responsible is an evaluation of master data such as improved customer and for business intelligence solution consulting and quality and its variance with other third party interactions implementation, program key organization standards. and effective compliance. Furmanagement for development and incubation of business Business objectives should ther benefits include enhanced intelligence and data management technologies and defi ne the standard of the data data governance models based solutions. quality solution. For example, on pragmatic business connew revenue through targeted siderations such as immediate campaign management will need granular goals of customer retention and long terms analysis of demographic profi le and customgoals such as improving market share and a ers’ needs to arrive at expected conversion mechanism to monitor business process and ratio. However, in procurement spend analyinformation alignment with business objecsis, the benefits of commodity and vendor tives and goals.

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CLARIZEN_june10 09/07/2010 15:23 Page 98

INDUSTRY INSIGHT

Evolution of modern enterprise Clarizen’s Avinoam Nowogrodski tells Business Management how real-time enterprise can streamline communication and increase efﬁciency.

any companies today view themselves as embracing the future by adopting modern business practices and technologies, however their processes and corporate cultures can expose them as seriously in need of a major introduction to the modern world of the real-time enterprise. It used to be rather easy to pinpoint what defined a company. Companies had tangible products, a clear hierarchy and employees that you could supervise and communicate with in person. A company’s intellectual property was the products they produced, and it was less important how they produced them and at what cost. Globalization has forced companies to think differently and become more agile and dynamic. With the ability to speak the same language and use the same tools (such as Microsoft Word) and with the improved infrastructure of the internet as a solid platform for business execution, the new demands and expectations of global organizations have created new challenges and introduced great opportunities. A company can now differentiate itself by being more agile and responsive to change by being one step ahead of the game. The focus has shifted from what to how. When companies were centralized and local, management styles tended towards a ‘command and control’ ap-

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Avinoam Nowogrodski is a serial entrepreneur with over 20 years of experience in founding and managing software companies. Avinoam brings insight and expertise to Clarizen's vision of bringing work management to every business. Avinoam successfully founded and managed several companies, the most recent of which, SmarTeam Corporation.

proach, where all decisions were centralized at the top and dictated down the command chain. There were lower expectations for real-time responses and reactions because the infrastructure was simply not there to support it. For companies to succeed in the new world of globalization and the culture of Web 2.0 immediacy, managers now understand that success can be achieved only through delegation, distribution and communication. Using tools available on the Cloud, access to real-time information across the corporate landscape gives managers the ability to sense internal and external challenges and respond accurately, effectively and immediately. A key factor in successfully managing globally distributed organizations today is the ability to delegate the power to make decisions. We no longer have the luxury of passing the buck, and we don’t have the time to refer decisions up the hierarchy and wait for responses. Truly agile companies have given their managers the authority to sense and respond to their own challenges. But responsible senior managers can only have the confidence to delegate if the right tools and infrastructure are in place to provide a real-time, accurate and specific information about their organizational workings. The next level of work place optimization and modernization is the ability to give a voice to each and every employee and to give them the tools they need to contribute and react to the day-to-day challenges they encounter on the job. With the socialization of work management, end users now get a voice within the organization; now they become a unique and critical contributor to the work process. For the first time, the human need to communicate is being facilitated in the most relevant forum, in day-to-day work, where good and timely communications are a critical factor for success. Now, for the first time, management can hear the voice of each and every employee in ways that are relevant and effective for critical business decisions. With the ability to make real-time decisions, workers are more involved, accountable and empowered to perform and deliver, making the whole organization more productive. With the emergence of enterprise-ready Software as a Service (SaaS) tools on the Cloud, management now has access to information across the globe, across the hierarchy and across cultures giving them the ability to make the right decisions at the right time. n

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Driving design forward What happens when you take California car culture, mash it up with German precision engineering, and let the result loose on everything from yachts to mobile telephones? You get the most innovative company in the world. Laurenz Schaffer, President of DesignworksUSA, lifts the hood on a creativity engine.

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he logo is certainly ubiquitous enough. Look around the crowded streets, driveways and parking lots of any city in the world and there it will be, a small circle divided into blue and white quarters, encased by a black ring bearing the letters BMW – a symbol of engineering superiority that is recognized, celebrated and lusted after by millions of people around the world. The brand has become synonymous with automotive excellence, its cars a byword for quality and great design. But peel back the layers of today’s urban landscape and the company’s influence extends even further. Because from marinas to airports, hospitals to the home, BMW is increasingly redefining the way products with a host of uses and in a variety of different industries are designed.

The catalyst for this expansion was the 1995 purchase of a small but influential creative studio located in Malibu, California founded in 1972 by legendary designer Charles W. Pelly. DesignworksUSA had already built up a significant reputation for innovation amongst engineering fi rms as diverse as Polaris, Hughes, Nokia and Compaq, and having experienced the quality of its designs fi rsthand (initially via the studio’s pioneering work on the BMW 850 seat in 1986, but also through a series of subsequent collaborations), BMW was quick to acquire the firm’s deep well of creative expertise when the opportunity arose. The acquisition enabled the car giant to tap DesignworksUSA’s unparalleled understanding of consumers and the world of design that surrounds them, and explore new opportunities outside of its traditional automotive background. Earlier this year, in a reflection of this subtle shift in emphasis from being a company that merely designs cars to one that wants to be thought of as a design pioneer across multiple sectors, BMW changed its advertising tag line from “the ultimate driving machine” – one of the most successful marketing slogans ever – to “a company of ideas”.

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Since December 2009, President Laurenz Schaffer has led strategy and operations for DesignworksUSA, which incorporates studios in Los Angeles, Munich, and Singapore. He believes that with global resources and clients across a spectrum of forwardthinking industries, the studio is able to leverage the lateral transfer of ideas across multiple verticals. “Challenging the status quo by creating new brand and product experiences that deliver better solutions for a changing world is what drives innovation at DesignworksUSA,” he explains. Indeed, the fi rm’s ability to innovate across so many different industries is remarkable. The fi rm’s culture brings together the vibrant interaction of a creative studio atmosphere with the quality and precision that distin-

Culture club Laurenz Schaffer’s top tips for creating a more collaborative culture. You need company vision. “Innovation needs to be embedded in a vision, in a strategy, and that’s a top-down thing, certainly. If there is no vision for innovation and if that is not embedded in the company strategy, then there is no operational means to do something about it.” Avoid silos of interest. “These can be found in rigid structures with a departmental orientation, and is something that is very counterproductive in our experience. We have installed cross-functions that have the assignment to foster greater collaboration across silos, and these are important elements for us.” Have passion for what you do. “This is probably the most important element. Everything that’s new and that shapes the future of the world around us; this is essentially what we are about. We’re really good at understanding what the future can look like and why, and I think that keeps us spiritually healthy.” Education is a key aspect. “We collaborate with academic, technical and artistic institutions to spur exciting exchanges of design, technology and business knowledge. In the process, both sides gain new technical opportunities, intellectual horizons and artistic insights – and our clients beneﬁt as a result.”

guishes BMW. It’s an energetic environment that fosters creativity, artisanship, responsibility, collaboration and inventiveness, both for individual designers and design teams – as evidenced by the large plaque on the wall of the studio bearing the legend, “Great projects, great work, great fun”. The fi rm certainly encourages its staff to think creatively, and it’s a strategy that seems to be paying off : the studio was recently honored as the Most Innovative Company in Design by Fast Company magazine, and has won a host of awards for its projects. So what’s the secret? “We have a set of values that are very much based around addressing the individual spirit of our employees,” he explains. “One is creating a collaborative culture, another is that we cherish creative human capital – the real asset of the company, obviously, is not materials or hardware, but our creative people. Our true differentiator is cross-fertilization, which is basically a belief that working across different disciplines is what drives good ideas. And then, of course, as we move forward, we want to be a sustainable company in everything we do.” Schaffer believes that the diversity of projects the company is involved in encourages people to think outside of the box. “It generates a certain excitement – one day you are working on an airplane interior, the next day on a coffeemaker and the next on a car,” he says. “I think that diversity really keeps up the spirit and maintains the fun aspect of work. There’s a lot of change in terms of the project landscape that every designer here experiences, working across different industries, across different clients. As a designer, you always have a very strong motive to innovate and to work towards the next level. If you can do that across different disciplines, across different industries, this is probably the driving aspect there. “Okay, there’s a product design department, there’s an automotive design department, there’s a transportation design department. However, while our people might have a particular department they call home, they need to collaborate and work on diverse different projects. A transportation designer needs to work on product designs as well, and vice versa.”

Finding the right ﬁt Fundamental to the fi rm’s success is its deep belief that no problem has a single solution; there needs to be what Schaffer calls “a certain bandwidth of options”. He feels such an approach has been invaluable this in economic climate that has forced fi rms to be better at measuring the value of everything they do. “Th is is a good portion of our process: that we create multiple solutions, multiple options that our clients can choose

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their aesthetic requirements or their functional requirements, whatever those might be,” explains Schaffer, adding that successful design is rarely an achievement of just one area working alone. “It’s really a collaborative aspect, where design speaks to a marketing goal, and where a marketing goal speaks to a business goal and a strategy in general. “Designers certainly need their window of freedom where they’re not disturbed, where they’re not influenced, and where they can play with their understanding of the parameters and create a superb design,” he continues. “But then, of course, we also want to do intense workshops with our clients or hold decision-making meet-

from. We also back up different design solutions with the proper rationale as to their impact on a business case, strategy or plan. There is always target-setting, but the different design options often achieve the target in very different ways.” Making the right decision on which of those design options is the right fit always starts with a measurable outcome – either the volume turnover that the client wants to achieve with a new product, or the revenue increase, or an increase in brand value. “The way that we make decisions on what is wrong and right is always based on criteria, fi rst and foremost – and these need to be set not on the fly but at the beginning of the project, certainly in terms of any fundamental decisions around taking a particular design direction versus another,” says Schaffer. “Th is decision needs to be evaluated by criteria that were set in the very beginning; not by us, but by our clients. We need to understand why we are making a decision at all and what the different aspects of that are.” An additional, critical aspect is how well a design solution fits consumer needs. “We put designs in front of customers and ask them whether it fits in terms of either

ings, or ask the customers that ultimately will buy the product certain questions. So, we’re involving different parties, different people, at certain points in time.” Schaffer maintains that managing creativity and innovation is all about people management, with a good awareness of the make-up of each project team – fi rst of all from a hiring/selection standpoint, and then from a development standpoint – being essential. “Selecting the right teams is key,” he says. “There are personalities that need to click, people need to brainstorm, to build on each other’s ideas, to basically push boundaries in teams. Managing that process is a very important aspect.” Keeping people grounded in reality is also an important element: designing for the realities of the world, as Schaffer calls it. “The only way to do this is to send them out in the world,” he laughs. “We make them understand what consumers really want and need. There are research techniques to do that, ethnographic research for example, simple observation. And there is, obviously, also information that our designers are utilizing, data around target groups, customer mindsets, values, and so on, and this all needs to be understood. The transformation process of all of that information into a creative idea and the result is the essential part of it, but it’s not that this is only based on individual imagination. It’s really about understanding the premises and the framework before you start to create an idea.” In the end, it all comes down to having the right processes in place to manage the development of a particular

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idea. “The design process itself has a couple of aspects around fostering innovation. Many of our projects have a very deep strategy phase and a research phase where we create the right understanding of the framework – basically, the knowledge fundaments, either when it comes to trends, technologies, demographics, all sorts of areas that need to be known as a starting point for new ideas. And then, within the consequent project, there are a couple of milestones where we make sure that the innovation level is properly achieved.”

Ideas for living One of the fi rm’s most recognizable innovations is the pioneering work it did on BMW’s GINA Light Visionary car concept, which showcases the direction that BMW designs may take and the new materials and technologies that it plans to adopt in the future. The GINA Light Visionary has an almost seamless outer skin, a flexible textile cover that stretches across a moveable substructure. Individual functions are only revealed if and when they are needed. As such, the car can change its shape as many times as the person behind the wheel decides to do so. Fancy a rear spoiler? It’s yours at the flick of a switch. Want a low-slung skirt? You got it. The headlights are revealed when the fabric moves apart, and the engine is accessed when the bonnet seemingly splits to reveal its innards. It’s a revolutionary concept that has petrol-heads and design aficionados alike purring. “I think big ideas must be seen, and they must be put in the right spot,” says Schaffer. “It needs a management mandate so that these ideas are picked up, and a vision that has been formulated to develop the idea to a greater extent. Th is was exactly the case with this car concept, where the original idea was more about moving structures with a construction principle around bones and skin, very much like a body part, for example. And that was then transferred to the area of car design, where the idea of replacing sheet metal with fabrics and replacing rigid structures with something that can move to provide new functions and new aerodynamics was really paradigm shift ing.” In the case of the GINA Light Visionary Model, BMW DesignworksUSA is not just interested in answering the question of how the car of the future will look, but primarily wishes to explore the creative freedom it has to offer. All ideas that the GINA Light Visionary Model presents are therefore derived from the needs and demands of customers concerning the aesthetic and functional characteristics of the car and their desire to express individuality and lifestyle. “I think understanding the future is something that all of our projects somehow incorporate,” says Schaffer. Together with the BMW internal design depart-

A day in the life Laurenz Schaffer’s working day You’re the president of a collaborative design studio headquartered in the US, with links to a European parent company and offices in Asia, working roughly 50 percent for BMW Group and 50 percent for other clients. I’m guessing that’s a 24-hour working day. It is a 24-hour day. If you look at the time zones, usually when we start it’s late afternoon in Germany, and the middle of the night in Asia. But a lot of the projects that we are doing are across all three studios. Especially in the larger programs, input from different cultural areas is needed, different viewpoints are required, so we just hand over when our day ends. Whenever we finish our working day, the other two studios continue. So, it’s really a 24/7 workday. What kind of communication technologies or processes do you have in place to ensure that smooth handover? Well, classic things, really. There are web meetings that we do, there’s the FTP service, there are certain tools in the design area that allow people to collaborate, to create quick snapshots of status that can be then discussed in a different environment. But we use standard tools. It’s not so sophisticated, actually. It’s more about how we use the tools and how you understand collaboration in general. With a 24-hour working day, how do you turn that off ? How do you say, “I’m not taking that call anymore?” I switch off my Blackberry, that’s the first thing. And then I try to have a program for myself, a point in time where I say work is over, and I create my other life; my life with my family, for example. We do something together, and we have a plan, what we want to do, what we want to enjoy together. And with that, there is a clear understanding on my side that work stops at exactly that point in time. And how do you make time within work itself? First of all, delegation is important. There are more really good people in the company than just me. We have experts that can make decisions in very clear areas, and they take responsibility for those areas. They are made accountable for the decisions as well, and they know what they are doing. My responsibility, overall, is steering the organization. Answering fundamental questions about where we are heading with the company is one area that I’m steering; managing conflicts of interest is another. I’m also heavily involved in making important decisions in terms of client collaboration. There are important milestones in a project, but I don’t need to make decisions on everything; it’s really about having a team that is capable of working together and making decisions themselves. So, what’s left on your to-do list? Is there anything that Laurenz Schaffer would really like to achieve in life? Shaping the future. It’s that simple? It’s that simple. The company is working pretty well. The teams are superb. We’re on a growth path. But shaping that in accordance to a more major strategy is one of my future achievements.

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I think big ideas must be seen, and they must be put in the right spot

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The art of innovation is key for every business savvy company in the world, but few can claim to be quite so innovative as BMW Group DesignworksUSA. Crowned as the “#1 Most Innovative Company in Design” by Fast Company magazine in 2010, the company simply brings a unique approach to design.

Founded in 1972 by designer Charles Pelly, the firm opened in Malibu Canyon with only three designers. Early customers included Hyster and the Otis Elevator Company. In 1986, it received its first BMW project, the BMW 850 seat. In the same year, the company moved to Agoura. In 1988, DesignworksUSA moved to Newbury Park, and began designing for Nokia and Siemens. In 1991 BMW acquired a large percentage of the company, by May 1995 BMW AG purchased the remaining percentage of DesignworksUSA.

The World’s Most Innovative Design Company Fast Company 2010 List

BMW Z4

BMW 3 Series

PRODUCTS

Rolls-Royce Phantom

Bavaria Deep Blue

K2 Black Hank One

Remington Shavers

Bavaria’s first “premium motorboat” with a wider bow and deck areas dedicated to BBQ, seating, and social gathering.

BMW X5

John Deere: X series Lawn & Garden Tractor

Embraer : Legacy 500 Designed to bring simplicity, transparency, light, and serenity.

PROCESS

Future Context

Direction

Design

To Understand

Saceo Coffee A design statement that expresses Saeco’s passion for coffee. Elegant contour lines symbolize the flow of coffee to create unmistakable brand continuity.

To Believe

APPROACH

2004 winner

Technical Opportunity

Brand Attitudes

HP Officejet All-in-One 8500

Hydrogen-Powered Salt Flat Racer

Development

Made from recycled BBQ grills (the wheels) and an oil drum (the body), this concept car uses hydrogen that's extracted from a fin-shaped fish tank.

To See

Whitestar Signature A surgical platform uses ultrasound to remove cataracts. By loading it with an simple touch-screen and stacking its components vertically, saves time and space in the OR.

2003 winner Motorola Iden

AeroVironments: AVX400 A small turbine generator that can be attached to the parapet wall of low-profile commercial buildings, especially “big box” retail stores and warehouse distribution centers.

Cutting-edge goggle ventilation with a net fit seam between goggle and helmet

BMW AG Blue Eyes

Villeroy & Boch: Hype All-new design language for bathroom equipment, for the first time, lever and spout form a compact integrated whole.

2003 winner

A phone is designed for long life and durability. With immediate results Motorola’s entire annual sales projection being surpassed within two quarters.

World’s first motorcycle head-up display.

Ecopod: E1 Series A compact recycler for home or small office use.

PRODUCTS PROCESS APPROACH

CLIENTS INCLUDE

KEY GOOD DESIGN AWARD REDDOT DESIGN AWARD INTERNATIONAL FORUM DESIGN AWARD INTERNATIONAL DESIGN EXCELLENCE AWARD

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ment, the three DesignworksUSA studios participate in an internally competitive process for the design of new BMW Group products, and are credited with a number of successful projects, including the interior of the 2009 BMW Z4 Roadster and the trendsetting X5 sports utility vehicle. External clients include Boeing Business Jets, HEAD, Hewlett Packard, Microsoft , Saeco and Sony. For Bavaria Yachts, the fi rm created the Cruiser 55, which redefi ned the sailing experience for the renowned shipyard, as well as the iconic Deep Blue 46, which offers the ideal combination of space and form. The Landscape Forms Metro40 collection, a range of essential furnishing elements for urban transit cores, brings comfort and dynamic design to city streets. The Legacy 500 for Embraer, the world-leading jet manufacturer, exudes a meticulous eye for detail with elegant forms rendered with premium fabrications. And its range of headphones for Sennheiser offer an exceptional audio experience for a range of applications, including water-immersible sport variants as well as high-end options crafted in aluminum. “Some of these projects serve as internal benchmarks,” explains Schaffer. “They are used to help us understand how the success came about: why someone came up with the idea at all in the fi rst place, and what the path was to a fully developed product. It is about how the idea was developed, and what the process was behind it. Th is is something that we can then either try to replicate, or adapt to another type of project with different goals.” Of course, innovation itself takes many forms – from brand new, game-changing innovation to more subtle innovation that builds upon and refi nes existing ideas. At BMW DesignworksUSA, Schaffer and his team are fascinated by both. “It’s a matter of the project specifics,” he enthuses. “Not all of our clients want us to innovate completely, while there are a couple of projects where the clear goal is to make the next leap ahead, and if that is the case then we try to understand what the possible solutions are to do that in a design manner. So it’s really a matter of the client, the project type and the individual requirements of the company. We really want to understand every single project in and of itself and what need it serves and why we need to create individual solutions for that project, versus another project that has very different goals.”

Building the future Diversity of thought and perspective is critical to a company such as Schaffer’s that caters to global clients operating in hugely different cultural marketplaces. “I think having different inputs and viewpoints on what is desirable, or where a design fits in to a specific culture or a behavioral need, is one of our strengths,” he

In our world, it’s not so much about me; it’s very much about us. This is a culture that lives off a number of people, a culture of teams that need to work together

says. “Obviously, if you go to Asia then there are different preferences than in Europe and in the US, and this is what we want to understand.” The design teams at BMW DesignworksUSA are incredibly diverse, with 24 different nationalities represented in a company of just 130 people. “Th is defi nitely helps us to understand the different contexts that will be transported into our design solutions.” It’s a close-knit, team-oriented environment – a culture that Schaffer is keen to nurture. “In our world, it’s not so much about me; it’s very much about us. Th is is a culture that lives off a number of people, a culture of teams that need to work together.” As a trained designer himself as opposed to just a businessman, Schaffer feels it’s easier for him to motivate his staff and connect with them on a creative level; there is mutual professional respect there. “You always feel connected to the profession deeply, and it’s very enjoyable to watch the teams design and to take part in the process and to see how things evolve,” he admits. “I’m a designer at heart. However, I understand that, due to my assignment, I have a different task now. My principles are challenging people while supporting them and providing feedback.” He’s clearly doing something right: as the awards roll in, so does the work. Schaffer believes such client partnerships succeed because they are grounded in collaboration. “We work with our clients to craft strong, enduring brands, helping their businesses thrive where it counts – in the market,” he says. “Our future is very much about understanding new and different markets. We’re also looking into new services. So, our current core competency is about design and design consulting. As we move forward, we want to look into other areas such as branding a little better, the area of research and strategy is something that is certainly growing with that, and that will ultimately create new products that are futureoriented, and that satisfy customers.” What will your product landscape look like in five years’ time? And how will your product prosper best in that landscape? These are the type of questions Schaffer and his team are committed to answering. Of course, even when you’re designing the future, you can’t get everything right; sometimes you have to watch others take the applause. So what does it feel like when another firm delivers a game-changing product or a revolutionary design? “It feels good,” beams Schaffer. “Every innovative idea is good, even if it’s competition. And it also serves as a reference point, of course. As we want to understand our internal successes, we also want to understand the competitive successes and see what we can do about it in regards to our further development. So, it’s important not only that we innovate, but that the world around us does as well.” Amen to that.

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OF A CLOUD

THE COST

It may have been hovering over Europe, but the cloud of volcanic ash that brought air travel to a grinding halt certainly made its presence felt stateside. 108 www.busmanagement.com

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here are plenty of unforeseen factors that could stop us from getting in to work. Maybe there was an accident on your route to the office and the traffic was bad; perhaps there was a problem with the subway and your train was delayed; you might have had a family emergency that called you back for a couple of hours. Or maybe your flight was cancelled due to the cloud of volcanic ash the swept across Europe, grounding flights and closing airspace for weeks at a time. Back in April, an eruption from Iceland’s Eyjafjallajokull volcano resulted in a cloud of ash floating east across Europe, causing all flights into or out of major business destinations such as the UK, France, Germany and Scandinavia to be grounded. Costing airlines billion of dollars, the knock on effects on all industries were felt the world over. A report by the US National Business Travel Association (NBTA) found that 80 percent of the companies surveyed had been affected by the airspace closures. Furthermore, across the 234 major global corporations asked, the average costs of contingency travel arrangements came in at $197,000 per company, with an aggregate 160 personnel from each firm stranded abroad and unable to return to work. “The immediate lesson,” explains Michael McCormick, COO at the NBTA, “is the power of travel management at work.” McCormick went on to highlight additional personal effects felt by business people stranded away from home, explaining that most of the companies who did not have strong travel management programs in place did not in all likelihood meet their duty-of-care responsibilities to their employees. As with crises of any sort, the businesses that came out on top throughout this event were those that had built in a natural redundancy, durability and resilience capability into their operations. Iceland’s ash cloud crisis has highlighted once again that risk mitigation, impact minimization and sustainable contingencies are more important than ever before in today’s culture of unrestricted travel and a mobile workforce. For one industry, however, the ash cloud brought a golden opportunity to boost business. With so many global firms looking to

ensure that an empty seat did not equate to an absent worker, the telecommunications industry was in a prime position to capitalize on business executives’ travel woes. The last 10 years has seen the rise of the internet and a boom in technology, two events that combined have led to a transformation in telecommunications. Where businesses were once reliant on antiquated systems such as fax, advances in communications technology have made it possible to attended meetings, address staff, interact with clients, access company fi les and pass documents around without even being in the same country, let alone the same office. These technologies, when implemented effectively, can minimize the business damage caused by a missing employee. At the cutting edge of telecommunicatory systems is Cisco, a world leading communications firm that enables high-speed and secure communications networks for businesses across a range of platforms. VP of the firm’s Wireless Networking Business Unit, Ray Smet, explains that the work place as we know it is changing. “We are in the middle of a transition to where work is really any place,” says Smet. As a marketing strategy it seems to be working, with the firm boasting better than predicted growth last quarter and net income rising 63 percent from a year earlier. Smet highlights that Cisco’s business customers are now conducting their business on any device, on any network, at any time, and moving from place to place in order to do it. The traditional boundaries of the workplace have been removed. Work is now more an activity, says Smet, than a place to go. Internet telephone company Skype, who made itself a household name by providing a free telecommunications service to consumers via the internet, also enjoyed a boost in interest after the disruption and took advantage of the opportunity by releasing its new Skype Manager tool. With businesses looking to improve their mobile communications this is the ideal time to raise the company’s profi le as a viable business solutions tool and not simply a glorified social media platform. “We looked at how Skype was being used in the workplace,” explains David Gurle, VP and General Manager of Skype for Business. “We specifically designed Skype Manager to make it easier for businesses to centrally manage how Skype is used, managed and paid for by an organization.”

The new technology enables the administrator to analyze the soft ware usage and assign features to users, as well as efficiently manage Skype for SIP. With 37 percent of all Skype users today utilizing the technology for business purposes, an increased focus in this market is a shrewd move. “We want to empower businesses to exploit the full power and value of Skype, so they can receive all the benefits of enhanced collaboration and cost savings,” says Gurle. With the business world reeling from the effects of the volcano’s eruption, more and more executives are caught between a desire to go everywhere and nowhere without compromising on business performance. The disruption to air traffic back in April served as a stark reminder that reliance on air travel can be risky. Th is factor, combined with the expenses that business travel poses on a company and the personal cost involved in long trips away from home, are all serving to encourage more companies to look to alternative solutions. Technologies such virtual events systems and video conferencing platforms are becoming increasingly popular with business. On the other hand, executives operating on the move, whether that’s at a different office, a separate global division or simply working from home, need to be able to access the same quality data systems from whichever platform they have available. Advances in communications platforms are helping to enable the mobile workforce. Apple and Blackberry continue to sit at the forefront of this market with the recently released iPhone 4 and iPad both becoming increasingly popular with corporate clients. Google’s Android technology, emerging on to the market, looks set to overtake the brands, however. In fact, Cisco’s recently revealed business tablet utilizes the Goole operating system; the Cisco Cius implements services including video streaming, multi-party conferencing, browsing as well as the ability to produce, share and content. Tony Bates, a senior vice president at Cisco, explains that this device represents changes in the way that we work and live. “Th is platform can transform how healthcare professionals advance patient care,” says Bates, “how retailers deliver service experiences to consumers, or how universities deliver world-class education to their students.”

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ALTUS_june10 09/07/2010 15:15 Page 110

INDUSTRY INSIGHT

Media, innovation and productivity Tim Hughan of Altus Corp explains how simple, thorough and accurate ﬁle searching devices can improve efﬁciency in today’s technology dependent business world.

espite the millions of dollars spent on document management systems, knowledge workers are still spending too much time looking for information. The simple fact is that the information they are looking for has not been captured. According to U.S Bureau of Labor statistics, most knowledge in any organization is conveyed informally, in meetings and web conferences, making its capture and dissemination difficult. This is especially evident at sales kick-offs or other events where attendees are fed a torrent of information to absorb. By the time the information is needed, most people cannot recall enough of what was said to be useful. Thus starts the endless process of employees searching through various systems for information that is no longer available. The recent economic downturn has encouraged organizations to use more on-line tools such as telepresence, video conferencing and web conferencing systems to share knowledge across the organization. Yet, the content of these meetings is not being captured in a way that can be used by the wider organization. In addition, the growth in the use of MP4 video files in the Fortune 500 suggests that video is becoming a mainstay for enterprise communications, supplementing or even supplanting text as a tool for knowledge sharing. Between 2006 and 2009 there has been a dramatic growth of 739 percent in MP4 files downloaded for internal use in fostering learning, training and sales enablement. To address the problem of lost productivity from employees searching for information, innovative organizations are turning to media management systems to make content rich media accessible to all employees. A leader in this space is Altus Learning Systems, which offers an SaaS-enabled video capture and management platform called vSearch. Altus notes the complexity of deriving value from the use of video data. “Until recently,” says Altus CEO Ted Cocheu, “enterprise users had to wade through an entire video file, and in some cases find that the information they needed wasn’t there. Altus makes it possible to search video files down to the spoken word or phrase, helping users find the nugget of information they need and eliminating the frustration of fruitless searches.” Altus serves over 20 Fortune 500 enterprises including Cisco Systems, NetApp and Oracle. Cisco joined forces with Altus to capture live events, web conferences and conference

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“Between 2006 and 2009 there has been a dramatic growth of 739 percent in MP4 files downloaded for internal use in fostering learning, training and sales enablement”

Tim Hughan, Director of Marketing at Altus Learning Systems, executes the company’s product, services and company vision in all customer and product communications. Hughan brings 15+ years experience delivering successful marketing programs for companies such as Apple, Hyperion (now Oracle), and Schlumberger. Hughan earned a degree in Instructional Design from CSU Chico.

calls and shares the knowledge from those events with its sales force of 16,000 personnel in 87 countries. Recently, NetApp was recognized by CIO Magazine for its deployment of Altus vSearch in its sales and channel enablement efforts, earning praise as one of 100 innovative organizations that use IT effectively. In 2009, Oracle saved $10 million by hosting a virtual sales kickoff rather than bringing in employees and partners from all over the world for a three-day onsite event. Oracle turned to Altus vSearch to capture and share all kickoff video presentations and sales tools. Paul Salinger, Vice President of Marketing at Oracle, commented, “Altus extends the shelf life of our content, making it easy to ﬁnd information and create new assets from it. That’s the advantage their tool provides to the Oracle sales force.” With tens of millions of iPhones, Blackberrys, Android and iPad devices being used in the enterprise, Altus recently introduced vSearch Mobile, which gives mobile users the same ability to browse, search, and play video and slide content as the desktop version, providing continuous and seamless access to corporate knowledge. n

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ASK THE EXPERT

Mobile force Lee Wagner, Vice President of inCode Telecom, explains how companies can utilize today’s advances in mobile technologies to add value to the existing business model.

he promise of ubiquitous mobility has come full circle and corporations today are facing similar questions to these they faced five to seven years ago. However, this time the questions are not just about line of business applications such as field service or field sales, but also about the lion’s share of the work force. According to IDC, the United States has the highest percentage of mobile workers today, and that workforce will grow to an estimated 75 percent of all workers by 2013. This has been caused by two seemingly unrelated outcomes: first, companies’ desire for reduced cost and therefore less physical infrastructure and second, the advent of three key wireless technology advances – faster and wider wireless networks, larger device displays and better technical platforms for applications (capacity and operating systems). This is evident in corporate changes, such as SAP’s purchase of Sybase and their mobility platform iAnywhere. In the past, questions were focused on a specific worker segment. Today’s impending questions are broader and more complex. Corporations are asking, “how do I meet the demands of all my mobile workers, how do I maximize the value of mobility and is there a game changer for me with my customers.” Those questions are inevitably followed by questions such as, “what architecture supports this wide spread adoption, how do I support remote users and how do I control and deliver applications efficiently in an environment whose very premise is to be an open system?”

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If one accepts the fact that there is going to be a set of applications that can exploit the value of the mobility environment, a company must be prepared for four key approaches that are essential to success. 1) A strategy to understand how to achieve the value from mobility. 2) A plan that gathers and prioritizes the mobile opportunities that achieve core value, but does not stifle creativity. 3) A common set of platforms that can address two or three key scenarios, such as messaging, mobile web or native applications on many different types of device. 4) The ability to support those users who may be customers as well as employees. One might say that these are questions that should be asked about all game changers, but the reality in mobility is that those ideas, efforts, and opportunities are as wide and diverse as the network and device choices from which they come. But more importantly the device and application market is moving faster than it has at any another period of network evolution. The iPhone and Android achieved in two years what the first smart phones took many years to achieve. The rate of change is further complicated by the fact that some organizations are adopting an individual liable model as opposed to a corporate liable model for devices and plans. So the question that our clients are asking now and that we are asking our clients is how can a corporation get ahead of the curve with acceptable risk when a technology is evolving so rapidly? There are several ways to embrace the advances now to avoid being frozen by the rate of change. First, cultivate the underlying mobility ideas and people who are bringing them forward, then utilize the capabilities of integrators, software providers and the wireless carries for their tools and knowledge and, finally, build a system that supports open standards and plan for change over the next two years. The simple fact is that mobility is not a single initiative, but by its very nature it has become a strategic and inherent way of doing business. Companies that demonstrate leadership in adopting and leveraging mobile business models will be the winners of their markets, much like those who properly leveraged the last major technology inflection point, eCommerce. n

“The device and application market is moving faster than it has at any another period of network evolution”

Lee Wagner leads the wireless and mobility business unit at inCode Telecom, a privately owned global wireless business and technology systems integration and consulting ﬁrm. He has developed enterprise solutions in mobility, new business process and mobile application implementation for some of the largest mobility implementations in the US. Previously, Wagner was technology leader at Deloitte Consulting.

Combining Business Insights with Technology Foresight to Help Enterprises Realize the Value of Mobility

The inCode Enterprise and Mobility Solutions group specializes in designing, deploying and supporting mobility solutions that deliver real business value to our clients and their customers. With the accelerated pace of smart phone adoption and the proliferation of faster ubiquitous networks, there is no better time to leverage your mobile workers and your enterprise applications to serve your customers better and increase your profitability.

inCode provides the following services; • Mobility strategy & advisory services • Mobile application development and integration for consumer and enterprise apps • Device support for iPhone, Blackberry, Windows Mobile, and Android • Mobile device management and security • Mobile solution support, helpdesk and device lifecycle management

Contact Information; Lee Wagner Ph: 877-399-6026 sales@incodetel.com www.incodetel.com

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CIO STORIES

CONNECTING

PEOPLE

John Clarke of Nokia talks to Business Management about the importance of technology for the handset giant, and what it really means to be the CIO of such a progressive company.

ith popular technology brands dominating the cell phone market, John Clarke, CIO of handset giant Nokia, faces some big challenges. The company is working to re-assert itself as the leader of this competitive and perpetually evolving market, so innovative technology is more important than ever. But for Clarke, ensuring he has happy employees and an efficient production model is just as conducive to success as the technology itself. He explains his HR focused approach to his role as CIO. “My primary role is to enhance business performance,” he says, “so in some ways I’m like a coach. My job is to say, ‘how can we work with you to increase your performance?’” Unsurprisingly given his position, Clarke is keen to outline the importance of technology to the business, describing it as the main weapon he has at his disposal to increase productivity. He points out however that being the head of IT at a ﬁrm that holds technology at its core isn’t as straight-forward

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as it appears. “As a traditionally product-centric company,” he explains, “encouraging people to think about the advantages that can be gained from technology outside how we use it in a device has proved challenging. We’ve expanded our strategy now to say ‘it’s not only technology in a device, it’s how we use technology ourselves that gives us a leading edge.’”

New Nokia This shift in thinking about how the company uses technology is key to Nokia’s new position in today’s market. As major players such as Apple usurp Nokia’s position at the forefront of the handset market, the firm has had to alter its service in order to remain dominant in the increasingly competitive industry. Clarke explains how Nokia’s latest products have been developed by the firm working with IT in different ways; in order to bring the company into its new era, Nokia are going beyond being a product compa-

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ny and becoming more services and software centric, and all it comes down to the way technology is used. “A lot of my latest projects,” he explains, “are collaborative between the devices division or the services divisions.” Naturally, one of the roles of technology in the business, outside how it is used in a device, is its ability to run production in a more cost and time effective way and this all comes under Clarke’s jurisdiction. “We look at our entire operation, more than just the cost of IT itself, and ask ourselves, ‘What generates cost? How can we streamline that and make it more effective by automation?’ Look at our factories for example. They work at an incredible pace, producing 13 devices a second.” Clarke is quick to ensure, however, that his department doesn’t just become a cost-cutting division. “We make sure that we never lose face of the fact around the service we’re offering or the quality of service or the operational benefit,” he says. “We try not to have these ‘just talk about costs’ debates. We say, ‘what are we trying to offer here? What are the benefits? And what could we have achieved if we’d enabled it better?’” Asking these questions of his department seems to have been key to Clarke’s success as a CIO; the firm has increasingly reduced its spending on IT due to the economic downturn, but through its strategic balance of using technology to improve the production model and collaborating effectively with other divisions of the business, Nokia has generated the greatest returns on technology investment it has ever seen.

People power This focus on alignment within the ﬁrm is paramount to Clarke. “We’re trying to encourage an open and collaborative style,” he says. “For innovation to occur, in my personal view, people must want to collaborate. You can’t

force it. We have a lot of very smart people, and getting agreement can sometimes be challenging. “There is an architectural dimension to my role, and as part of that I have been trying to create this kind of seamless eradication of the barriers [between divisions], so there’s far more integration. So, as you go through the life cycle of a project, there’s no need to stop and start.” This HR centric approach is a signature of Clarke’s style as a leader; he describes himself as a warm person and puts strong emphasis on his employees, knowing that in order for the technology upon which Nokia relies to flourish, the staff must be committed to their work. “We have a very engaged work force,” he explains. “We have a lot of people who want to innovate, and because of that engagement with the company emotionally and rationally, they make time for that innovation.” Also, Clarke sees the importance of having a strong working environment that is conducive to technology innovation. “We’re giving our people a chance to step back and learn about other industries,” he explains. “We invest heavily in education, training, in bringing in academic speakers to present the universe from different angles. The desire to learn is a strong part of our culture.” In addition to education about industries, Clarke encourages his employees to learn more about the needs of customers they serve, so as to allow innovation to flourish within the firm. “We have a diversity of input in a diversity of fields,’ says Clarke, “From those fields we get the innovation. We get lots of innovation from Africa and the Middle East – places we see as emerging markets. You’ll see our researchers on the ground in Nairobi, seeing how people communicate. That’s a key part of Nokia’s culture. We like to be in the field with people, seeing what their problems are and bring that back in.” For Clarke, the role of the CIO is about maintaining the effective and thorough integration of technology within the company, so the company is able to realize the extent of its ability. He explains how Nokia’s federated structure and high staff rotation levels ensure that quality IT personnel reach every corner of the business. Ultimately, Clarke says, it all comes down to realizing potential. “I think IT professionals have a lot more to give, actually, when they think about business performance engineering, rather than just technology.” n

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LEAN SIX SIGMA

THE

LEAN SOLUTION

Novartis Pharma Technical Operations tells us about the companyâ&#x20AC;&#x2122;s progress in implementing these processes.

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Carmen Doran of Novartis Pharma Technical Operations explains how the unique combination of Lean and Six Sigma is bringing about signiﬁcant performance improvements through the work of the company’s global and local IQP Champions.

s Global Operational Excellence Champion, Carmen Doran supports all 23 sites for Novartis Pharma’s Technical Operations, as well as the global support functions, by providing a systematic training and certification program across the organization. Th is aims to foster a culture of operational excellence (internally referred to as IQP: Innovation, Quality and Productivity). She comments that operational excellence in Novartis Pharma covers a wide range of topics, tools and techniques, which allow flexibility in identifying the best approach for a specific problem or opportunity. “The philosophies of Lean and Six Sigma represent a way of thinking and looking at a problem, in order to understand the root cause(s) and then solve the problem in a sustainable manner,” she explains. “Th is approach is different to the traditional management styles focusing on short-term ‘quick fi x’ solutions rather than on identifying the problem correctly and ensuring the solution is effective and sustainable longterm. We try to use this approach across all areas of the business.” Initially set out as two different methods, Lean and Six Sigma are very much interlinked and constantly evolving, a development that Doran notes to be present in Novartis Pharma Technical Operations. She explains how previously, projects would solely use Lean and focus on reducing waste, or would apply a Six Sigma approach to reducing variability. “The Lean philosophy is to have flow through the process and to do this, you need to have processes you can rely on. A stable and reliable process is then the foundation for continuous improvement. So Lean and Six Sigma go hand in hand to achieve operational excellence. “We look at the flow of value all the way through our processes down to the customer, whoever the customer may be; in our case, this is ultimately the patient. If we look at some of the supporting functions like human resources, we’ve been applying the Lean and Six Sigma way of thinking to these processes, going through the steps of identifying

“We have a very clear strategic direction for operational excellence, which allows all of the sites to move in the same direction” the problem, understanding the customer needs and root causes of the problem and then fi nding the solution that matches to those. By doing so, we are for instance ensuring the improvement and sustainability for recruitment processes where the benefiting customers are actually both the employee and the business. “We apply the same approach in non-manufacturing environments as we do in production. It’s a natural progression that we need support functions aligned to the new way of working and thinking in manufacturing. Like a lot of companies, Novartis started to apply these method-

Carmen Doran is Global Operational Excellence Champion for Novartis Pharma Technical Operations

ologies and philosophies in the manufacturing area fi rst, and now the ideas are spreading to the rest of the business. In manufacturing it’s very easy to see the processes and to work on the processes because that’s what is right in front of your eyes. In other business areas, some of the work we do focuses on simply making the process transparent,” explains Doran. As a Global IQP Champion at Novartis, Doran explains that she has a number of requests to provide Lean support; these come from people who have heard about Lean through their colleagues or through seeing the benefits themselves. In order to accommodate what Doran explains as a “pull system” for IQP support, Novartis has its IQP Champions across the world, operating different skills in different areas and matching the business needs with the company’s resources. “We often use an external pair of eyes on a process. That external view may come from another internal function, another manufacturing site or a global function. Novartis has a strong network of people across the globe, all with different backgrounds, but all working on Lean and Six Sigma in a rather unified manner. They are capable of implementing various problem-solving tools and methodologies in projects and of linking them together to create a culture leading towards operational excellence,” she explains.

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Pharma Technical Operations has successfully handled some natural resistance to change and to the use of these new processes thanks to strong leadership endorsement, although Doran admits that there are still some people who are coming round to the idea. Enthusiasm for a new project, she points out, is often created upon seeing the results. If a person working on a project has enjoyed it and demonstrated good results, then others can judge for themselves.

Expansion As a global company, Novartis Pharma Technical Operations has sites located across the US, Europe, the Middle East, Latin America and Asia. Prior to taking up her current role, Doran worked in the company’s recently opened Pharmaceutical Operations site in Singapore. She explains that there are variarions in the take-up of Lean Six Sigma across different locations, but not always in the way you might think. “The difference for us in terms of adoption is not necessarily the culture but the maturity of the site. When you have a site that has been around for 50 years where you have people with a lot of history at that site, then it takes a different approach for them to change their way of thinking than if you have a brand new site like Singapore. For them, everything is new. “We can show them results from other sites, and there isn’t that resistance to change because they understand how it works together in the overall business model. So rather than people’s cultural differences, adoption depends on the lifecycle of the site,” says Doran. In order to meet the challenges that often accompany such implementations, she calls upon the company’s network of IQP Champions: each site has a single point of contact for all best practice sharing. “If I have a site in China that needs some input from a site in the US, they can directly contact the local IQP Champion and ask about the results and learnings.” Communication between the multiple sites is essential. Doran places most emphasis on the power of speech and interactions between people, and explains that although Novartis publishes its IQP project results on the internal website and in newsletters, most results are seen from the effects of a strong network. Monthly teleconferences with IQP

The Kotter model

Champion networks, ad hoc teleconferences and regular meetings focus on the challenges facing the site, the successes, their goals and what’s in store for the future. “Although the sites are on the same journey, they’re all at different stages, but they’re all looking for alignment through our Operational Excellence Scorecard. We have a very clear strategic direction for operational excellence in Novartis Pharma Technical Operations, which allows all of the sites to move in the same direction. That’s one of the reasons we’ve been successfully able to turn those challenges along the journey at a site into something that has been enjoyable and rewarding.” Novartis Pharma is certainly not alone in facing these challenges. The pharmaceutical industry has been dogged by pressures to reduce costs in light of the recent economic crisis. “We could focus on cost, but the better way is to focus on the speed and the agility of the processes,” explains Doran. “One of the biggest concerns for all pharmaceutical companies is the speed at which they are able to adapt to change. A lot of our processes can be improved, and maybe we haven’t had the challenge that some of the faster-moving consumer industries have had in terms of reaction to market requirements. Those companies who can respond quickly to the market needs by being flexible and reducing their cycle times, both in manufacturing and in development, will be the ones who can overcome these challenges.” Added pressures come from the highly regulated nature of the industry. “None of us would want to take medicine if it wasn't highly regulated,” says Doran. However, she notes that the pharma industry must also recognize that it is not alone in terms of the level of regulation it must undergo, pointing to the aerospace industry as facing similar challenges. “At the end of the day, what I feel has made the Lean and Six Sigma thinking successful for us is the combination of the technical process improvements, cultural aspects and a clear strategic direction that fosters, for all involved, a passion to strive for operational excellence,” she concludes.

In 1995, Harvard Business School professor and change management guru John Kotter published a book entitled Leading Change, within which he outlined his now well-known eight-step change process:

3. Create a vision

5. Remove obstacles

7. Build on change

Help people see for themselves what you’re trying to achieve

Check continually for barriers to change

Keep looking for improvements

2. Form a guiding coalition

4. Communicate the vision

6. Create short-term wins

8. Anchor change in your culture

Set up strong leadership by gaining support from key people

Talk often about and apply your vision as much as possible

Give your people an early taste of victory

Make sure change is embedded in every aspect of your organization

1. Create a sense of urgency Open an honest dialog about what’s happening in the marketplace

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06/07/2010 15:17

d l r o W leader

Like it’s products, Coca-Cola’s employees are found all over the globe. Huw Thomas speaks to Chief People Ofﬁcer Ceree Eberly about the challenges of directing a truly international workforce.

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espite its domestic image as an American icon on a par with Uncle Sam and apple pie, Coca-Cola is truly an international phenomenon. Walk into a shop or café just about anywhere on Earth – from Azerbaijan to Zambia – and there is a high likelihood that you’ll fi nd a Coke in the fridge. An estimated 94 percent of the world’s population recognize the famous red and white logo, elevating it to the very top tier of global products. In addition to its flagship offering, the company also produces more than 500 other brands, sold in 20 million outlets and consumed by around six billion people. In effect, Coca-Cola is almost as ubiquitous as water, with a consumer base of staggering international diversity. The company’s people are a mirror image of its customers, working in markets and communities dispersed across the globe. It might be reasonable to expect that managing such a varied workforce would be a major headache for the person in charge. Cannily though, Coca-Cola have got around this potential stumbling block by appointing a HR leader whose international credentials are above reproach. Ceree Eberly took up the role of Senior Vice President and Chief People Officer in January 2010, the latest upward move in a 20-year career with the fi rm that has seen her working everywhere from Latin America to Asia to Africa. When we manage to grab a few minutes out of her busy schedule, she is in the process of completing the move back to the US from the UK, where she has been living and working for the past three years. It was the possibility of such a varied and wide-ranging professional life that was one of the key attractors for Eberly when she joined Coca-Cola two decades ago. “When I came to Coke I was actually looking for diversity of experience and an opportunity to build my career, and I’ve always wanted to work and live abroad,” she says. “I saw that as a wonderful opportunity. My fi rst boss with Coke said to me, ‘If you just put your head down and focus on adding value and really contributing to the business, you’re always going to have an opportunity and you’ll never have to want for a job’. “My focus has been really learning about our business, being a contributor to the business, but also, when opportunities came my way, being willing to grab those. As result, I’ve had just a fantastic experience learning our global business. Living and working on three continents, seeing the world in a very diverse and different way I think has really helped prepare me well for this job.” In Eberly, Coca-Cola have a people specialist with an unusually strong devotion to the corporate entity she represents. “It comes naturally because I love our brands and I love our business,” she says. “When I’m in the UK I

spend weekends going into stores like Sainsbury, Tesco, Waitrose and McDonald’s. I go and just look at our consumer purchasing patterns, I look at what’s in the aisle at the grocery store, what people buy, what they drink. I go into the competition and look at that as well.” It’s unlikely that many executives of Eberly’s stature spend their spare time conducting independent market research, but it is all part of her background in the company’s business activities. Unlike some HR professionals who have spent their entire careers in the people function, Eberly’s wider range of business experience has

An employee boxes bottles at the Coca-Cola plant in Atlanta, Georgia

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given her a much more comprehensive view of the organization. Th is in turn allows her to run the company’s people function in a manner that more directly benefits the business. “It’s not just a nice thing, it’s actually essential and crucial to be successful,” she says. “I think that my experience being business focused is kind of the fi rst order of business and really using that as a lens to do the work that I do is probably the greatest enabler for me.”

Business sense Eberly sees this hard business experience as a vital component of any effective people function. “I’m not talking about just Coca-Cola,” she continues. “I think if you really look at successful HR professionals, they’re not what we call personnel administrators. They’re really fully engaged in the business, they truly understand what drives business performance, they work with leadership

“It’s part of one of our ongoing initiatives to continue to build up what we call our business muscle. This involves learning about the business, but also being more effective as professionals in the businesses that we’re engaging with”

teams in how to make the business more effective and efficient. They’re looking at building a strong leadership capability and talent for the future. So yes, I would say it’s probably missing in some industries and in some functions, but I would say with Coca-Cola that’s actually been one of the key focuses that we’ve had in building our capabilities.” Eberly gives the example of a recent trip to Tokyo where she recorded a video with the head of the Japanese business giving an overview of the company’s work in the territory. The video covered topics such as the importance of people, what’s being done to build the pipeline of talent and what’s happening around culture and work environment. “The next day, that was fed live by WebEx to our whole global community,” Eberly explains. “It’s part of one of our ongoing initiatives to continue to build up what we call our business muscle. Th is involves learning about the business, but also being more effective as professionals in the businesses that we’re engaging with.” Eberly’s recent activities in Japan are just one facet in the ongoing challenge of instilling a coherent company culture in an organization as globally dispersed as

Coca-Cola. How do you go about connecting employees who might be separated by massive geographic, cultural and linguistic barriers? “We use the opportunity in the markets that we serve around the world,” Eberly responds. “We’re a diverse culture because we’re global and I think what we’re doing is a better job of building global networks, sharing best practices, using the diversity and experiences in the market really to build a more collaborative and effective result in the market. “As we build culture, I think one of the ways that we’re learning is to take advantage of the things that we’re doing around the world. Knowledge management or knowledge sharing, if you will, is helping to build

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that culture because we’ve got great things going on in our local markets, but if you don’t share that and you don’t share the learning, it’s very hard to actually be successful in the marketplace.” But it is the subject of diversity that provokes perhaps the biggest reaction from Eberly. It is a term that has become increasingly ubiquitous in the corporate lexicon, so much so that there is sometimes the temptation to dismiss it as little more than a checklist item, a piece of business world window dressing. Unsurprisingly, this is not a view supported by Coke’s Chief People Officer. “Oh, my goodness,” she exclaims. “Diversity is at the center of everything we do. And it’s one of our seven core values and basically it’s a very simple defi nition, it’s to be as inclusive as our brand. If you look at that, the defi nition goes across gender, race, it’s how do we actually have inclusion in the workplace and inclusion in our outlets and in our markets that we serve? So by focusing on diversity as a business advantage, I actually think that we are benefiting everyone. It’s really just a core theme of how we do business. If you look at our suppliers and partners, they reflect our diversity initiatives as well. How you see this in the marketplace is really relevant to me – I’m a mom – and 70 percent of the shoppers out there who go into a grocery store or a retail store are women. “They’re the ones that make the purchasing decisions, so if we don’t have women considered in our marketing, considered in the way that we advertise and the way that we go to market we’re going to miss a key opportunity and being a mom, I want someone to talk to me about what’s important to me. So if I just make it very simple in those kind of terms, diversity is reflected in every aspect of what we do.”

Troubled times Though the situation is slowly improving, the last few years have been particularly tricky for businesses everywhere. For many organizations, the hostile conditions have had major implications on the way staffi ng was approached, implications that were not always welcome. Though Coke hasn’t been completely immune to the effects of the downturn, Eberly insists the impact on hiring policies haven’t necessarily been negative. “We’ve been thoughtful in terms of our hiring,” she says. “Where we need to build capability we’ve used it actually as an opportunity to step back and look at the next five to 10 years of growth. If there are capabilities and skills we need, different than what we have today, now is the time to step back and say, ‘Okay, now what are we going to do about that and how do we go about fi nding those?’”

One thing is for certain though; when it comes to a company’s people, even the most difficult conditions are no excuse for retrenchment. “In times of economic turmoil you can’t stop focusing on your talent,” states Eberly. “You still have to continue to build your talent, you also have to continue to look at what is happening in the marketplace and it’s changing faster than most of us can keep up with. We’ve actually used it quite strategically to look at really focusing on development of talent and skills that over the next five to 10 years are going to be really important for our business.” For someone who has only been in position for six months, Eberly seems to have an excellent handle on the challenges she faces. In truth though, the role of Chief People Officer is one she has been building towards for quite some time. “It’s interesting because the person who left the role actually was my mentor,” she explains. “She’s been training me for many, many years, and she actually gave me my first international trip overseas and to Europe. I’ve been preparing myself through a variety of experiences, and the European experience has probably been the best experience for me to prepare me for this role.” It all keeps coming back to that global perspective. An organization like Coca-Cola could very easily become some modern Tower of Babel, a clamor of noise and confusion as disparate elements struggle to communicate. Ensuring this doesn’t happen requires keeping a fi nger on the pulse of all the company’s people and acting quickly to head off any potential problems. As part of Coke’s vision for the year 2020, the company is pursuing what Eberly describes as a ‘best place to work’ strategy, building an engaged and happy workforce in its operations all over the globe. “We’ve been embarking on a journey,” she says. “We measure this through our annual employee insights score; it’s a survey we do globally that we basically use as a temperature gauge to measure the health of the organization.” So what are Eberly’s key priorities as she moves forward in her new role? “We’ve put in a number of initiatives, workplace policies around flexibility for women so that we provide flexible benefits for our associates, that we engage our associates in the workplace,” she replies. “We’ve been enhancing things in the areas of career development, tools and processes. We’ve been continuing to focus on training, more learning and those opportunities to continue to accelerate people’s growth and learning in the workplace.” What’s good for Coca-Cola’s global workforce is also good for the company itself. Employees get opportunities to develop their careers and Coke benefits from more capable and more engaged people. “We’re fi nding that that’s probably the best talent retention tool that you can use,” concludes Eberly. ■

94 percent of the world’s population recognize the Coca-Cola logo

Coca-Cola’s products are consumed by around 6 billion people

In addition to Coke, the company produces 500 other brands

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ADP AD.indd 1

28/06/2010 16:53

INVESTING

MONEY MAKER Dan Greenshields has a vision: to make the often-complicated world of stocks, bonds and other investment vehicles accessible to everyone.

t’s been a confidence-sapping couple of years for the average armchair investor. The fi nancial nightmare on Wall Street not only knocked the self-belief of the big banks; it also dented investor confidence in the ability of traditional brokerage houses to accurately read the markets. The near-collapse of our modern fi nancial system, a severe worldwide recession, unprecedented government stimuli and a historic rebound in fi nancial asset prices from panic-inducing lows was fi nally capped off by the 995-point freefall in the Dow Jones Industrial Average on May 6; all contributed to a sea change in the investing habits of the man on the street. Self-empowerment became the new investing mantra, and while the faint-hearted retreated from the market in search of safety, the canny investor recognized that there were some great opportunities out there – provided you know where to look. “It’s certainly been a wild two years,” acknowledges Dan Greenshields, President of ShareBuilder from ING DIRECT USA, with a wry grin. He’s being disingenuous: the Seattle-based online brokerage service has seen explosive growth in the use of its services over the past 18 months, not least because its user demographic – largely made up of 20 to 40-year-olds with an average balance of between $5000-6000 per account – is both younger and less risk averse than that of many of the firm’s competitors. “A 20-year-old or 30-year-old reacts very differently to a downturn than a 50 or 60-year-old does,” Greenshields explains. “They are very aggressive in their trading habits and are not scared of buying in volatile times. For example, normally our buy-to-sell ratio runs right

around 50/50; but the day after that big 1000-point drop in May we saw that ratio go up by 10 percent. So instead of 50/50 it was more like 62/38 buy-to-sell that next day. What that tells us is that our customers reacted to the volatility in the market by saying, ‘You know what, this is a great time to buy’.” Older investors, he says, typically don’t have that same level of aggression. “The downturn was much more punishing to them because they had more in the market, and it showed up in the transactions we witnessed and the survey work we did.” Greenshields believes the company has also benefited from a change in the way people interact and engage with the investment experience. “Around 50 percent of the people we interviewed for a recent survey told us that they were going to rely less on their advisors in the future and more on their own ability to read the news and pay attention to what’s going on,” he says. “The tools have gotten so much better, it’s really changed the game. The ability for a retail investor to buy stock on the same terms as an institution is better than it ever has been in the last 100 years.” And providing such tools – along with the added transparency

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and empowerment they offer – is what ShareBuilder is all about. The company promises to make investing easy, affordable and accessible for both new and experienced investors, offering a range of services such as automatic investing, real-time trading, options trading and margin borrowing. All transactions occur online and are entirely at the discretion of the account holder, making it an execution only service. And the firm does not have brokerage sales representatives or advisors; instead, account holders can either do their own research or use ShareBuilder’s online research tools to investigate stocks. “Customers are increasingly going to want access to their account on their own terms,” says Greenshields. “They want to access information wherever they are; they don’t want to have to go into an office or a branch, and that’s what’s really important to them.” A prime example of this is the current revolution in mobile devices, with Greenshields citing the emergence of the digital native over the digital immigrant – along with advances being made in mobile technology itself – as the catalyst for the coming transformation in the way investments are made. “I think the mobile revolution and how people transact with their institutions is something that’s going to be pretty interesting over the next few years,” he says. “Those that have grown up with computers and mobile phones and the internet are just coming into their peak earning years, so we think it’s a real positive opportunity for us.” Such a move will demand that fi nancial institutions cater to this changing clientele – or risk extinction. “People are going to want to transact with institutions from their phone, be it their bank or their brokerage, and be able to move money around whenever and however they want to,” continues Greenshields. “And the great thing about the internet is that it allows you to really monitor and get much better real time information about what customers really want. Customers will drive the terms of how they

The ability for a retail investor to buy stock on the same terms as an institution is better than it ever has been in the last 100 years” want to interact with a fi nancial provider. And as a fi nancial service provider, if you don’t meet them on those terms you’re going to lose.” Such a fast-moving environment presents something of a management challenge for Greenshields and his team. For one thing, the market volatility combined with changing patterns of investment from a younger and more aggressive client base meant the company had to add more resources in order to cope. “There was a huge spike in volumes for online players like us,” he says. “We had a big increase in both new customers and general trading, and that forced us to add resources to make sure we were able to meet those needs. It was a big challenge for us.” The other issue has been around providing users with the right tools. “We’re really trying to improve the usability experience,” says Greenshields. “Technology allows us to monitor real time what they want. We can actually ask them what they want and then we can watch how they use the interface and try to improve that. So we’re always trying to make that better.” Ultimately, ShareBuilder is about taking complex fi nancial concepts and making them simple. So what advice does Greenshields have for those looking to get started on an investment strategy? “As an investor you’ve got to be really careful not to get whipsawed; you should have a solid strategy, and what you’re looking to do is just post up solid returns,” he says. “It’s not about hitting the home run. Here in the United States we suffer from a little bit too much of the superstar mentality; everybody wants to be number one. But in investing sometimes it’s okay to be right in the middle of the pack. If you have super-high returns, chances are you’re taking too much risk.”

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TECHNOLOGICAL PHILANTHROPY

PUSHING BACK THE BOUNDARIES

Who says techno-geeks have no heart? Business Management reports on how philanthropy is entering the IT shop through a new initiative.

ollowing in the wake of the worst recession in decades, corporate giving in the United States endured mixed results. Some companies pared back philanthropic efforts in the face of tough times, while a few increased their budgets; practically all predicted a steady 2010. “Companies continue to examine their priorities,” says Charles Moore, Executive Director of the non-profit Committee Encouraging Corporate Philanthropy. “Very few are taking on new kinds of causes, and they are tending to reallocate the funds they do have.” The economic downturn has certainly sparked changes in giving priorities, with sever-

al companies placing more importance on basic needs such as fighting hunger and homelessness and others focusing more on work within their local communities. “There’s great expectation on the part of communities and employees on companies – they expect more,” says Moore. “This is not just giving money anymore. It’s solving problems. These are social issues that we’re addressing.” Of course, corporate giving is nothing new. Bill Gates and Warren Buffet are just two highprofile executive philanthropists of modern times, and with the rise of corporate social responsibility programs there are currently very few big businesses without some form of charitable foundation or community-based project on their books. But what has been lacking in recent years has been active involvement by the IT community itself. Technology helps organizations to achieve business objectives, reduce inefficiencies and solve organizational challenges every single day; what we’ve seen less of is the potential for technology to solve huge societal challenges.

CIOs Without Borders aims to redress that imbalance. The organization is a global non-profit that uses technology to provide education, healthcare and infrastructure services to underserved areas around the world. Formed by two friends and fellow IT professionals – Atti Riazi, CIO of the New York City Housing Authority and former CIO of global advertising agency Ogilvy & Mather, and

“We are always talking about the transformational power of IT” Sunil Verma, CIO of retailer The Children’s Place – the organization hopes to encourage an increasing number of CIOs to use their knowledge and experience of technology to help solve everyday human challenges. “Just as technology can help provide automated business processes cheaper, better, faster, it can also operate services in a non-profit context cheaper, better and faster,” suggests Verma.

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DOCTORS PER POPULATION RATIOS

“The traditional philanthropic methodology has been to throw money at problems such as poverty, hunger, disease and education in order to get as much food, aid and workers there as possible; that’s very admirable, but it’s not that efficient. The idea for CIOs Without Borders was to provide the same kind of service, but leverage the efficiencies that you get out of technology to provide them cheaper, better, faster and more efficiently.” The fledgling group already boasts a membership of 250 that’s ready to volunteer wherever needed, and is overseen by a three-person advisory board and a 12-person volunteer staff of directors. According to Riazi, a little technology can go a long way. “IT people should take on a cause because technology truly has an immense power,” she says. “However, our goal is not to give technology; our goal is to give knowledge.” Indeed, it is this focus on the enabling power of technology that goes to the heart of what the early-stage non-profit is trying to achieve – working to reduce the incidence of preventable disease by sharing medical knowledge with technologically disenfranchised communities around the world. “Many of us routinely use publicly available knowledge – from the internet or elsewhere – to inform our medical decisions, and our actions are often influenced by what we know is harmful to our health,” says Riazi. CIOs Without Borders’ mission is to use technology to make medical knowledge available to communities in which people routinely suffer from preventable or easily curable diseases. The organization is currently focused on its first program in Rwanda, where one of the world’s highest infant mortality rates and the fact that common diseases such as diarrhoea often go undiagnosed combine to take a huge toll on the local population and overwhelm medical resources. Rwanda has just one doctor for every 25,000 people, and medical care in most rural areas is non-existent. But by implementing a revolutionary computerized medical diagnostic system, CIOs Without Borders working in partnership with Stevens Institute and the champion of the program, Edward Friedman – can enable one technican and one nurse to quickly figure out what’s wrong with almost any patient and determine a treatment plan. “Seven out of 10 cases can be handled by

Rwanda 1 per 25,000 people Afghanistan 1 per 5263 people Vietnam 1 per 1886 people US 1 per 435 people Cuba 1 per 169 people Source: Nationmaster.com

a nurse practitioner or someone who can dispense antibiotics,” says Verma. “So in the long run, a system like this could really be useful all over the world.” The computer-assisted diagnostic solution was originally developed by Abraham George of the George Foundation, and has been in use for eight years in rural India, where it has enabled people without extensive medical training to help diagnose illness – resulting in more people being cared for, prioritization of the most serious cases, getting patients most in need to the doctor more quickly and the establishment of an electronic, portable medical record. The group has government approval to deploy such e-health systems at hospitals and clinics throughout the country, essentially training nurses to perform triage and dispense medications for up to 75 percent of the cases that currently go untreated. But making this happen requires money – and that, Riazi says, is proving to be the hardest part. CIOs Without Borders hopes to raise $750,000 for its Rwandan effort during 2010, with a long-term goal of $2.5 million that would allow it to set up the e-health system in 25 villages. Ultimately, Riazi estimates, that investment could save millions of lives over the ensuing decades. “Our partners are helping us focus resourc-

es to modify this system to work in Rwanda, build relationships with the government of Rwanda and put together the infrastructure to open 10 mobile rural healthcare clinics within the next year,” she says. “But we need help with financing this project and mobilizing committed volunteers to help make it self sustaining.” Verma agrees. “Once we get the project in Rwanda up and running, I think – based on what happened in India – it’ll be something that we can very quickly grow to the point where other countries and areas will want to implement it as well,” he says. “And once it gets to that size, then folks at the major foundations and other charitable organizations will want to get involved too. But they really need to see a project that’s well underway before they will commit any resources.” Ultimately, both Riazi and Verma hope that once word gets out about what CIOs Without Borders is doing, the project will not only attract more volunteers, but also serve as a model for other similar efforts. “In business, we are always talking about the transformational power of IT,” says Verma. “We’d like to extend that to address issues of real human concern.” As he is keen to point out, it’s a power that goes far beyond bottom-line business impact. It’s the power to make lives better.

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iStrategy USA Chicago, Il

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TRAVEL & GADGETS & BOOKS & LEISURE & MONEY & TRAVEL & GADGETS & BOOKS & LEISURE & MONEY 131

P.s.

Travel 36 hours in Chicago Gadgets Technology for today’s executive Books The best business reads of Q3 Events What not to miss this summer Final Word Capgemini’s Jeremy Roffe Vidal

Major League Challenge Has the 2010 World Cup solved soccer’s image problem?

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The 2010 World Cup has once again brought the spectacle of soccer into millions of US homes. Business Management asks: can the MLS ride this wave of interest, or will Americans’ innate aversion to the sport continue to hinder its expansion? By Ian Clover

t’s an American marketer’s dream scenario: young, good-looking, ethnically diverse friends attend a sporting event together, dressed in denim and Hilﬁger, slurping Coke and chowing down on hotdogs as the pregame entertainment pumps out the latest US chart blockbuster. Then the whistle blows, and the crowd goes wild. This scenario could happen pretty much anywhere in the world, yet one major difference sets the US apart – the sport the rest of the world will be watching is soccer, while in the States it is most likely to be american football, basketball, baseball or ice hockey. Soccer has never been big business in the USA. For a nation born on a belief that its ‘Manifest Destiny’ has been to expand its boundaries over vast areas, Americans have been quick to capitalize on their postwar political and economic dominance to spread their cultural inﬂuence throughout the world. Yet soccer is the only worldwide phenomenon that has remained immune to the threat of an American rival and has,

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US Star Landon Donovan is mobbed by team mates as his dramatic last minute goal puts his team through to the inal 16 of this year’s World Cup; the crowd goes wild

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in fact, shown signs of pushing against the grain and gaining a stronger foothold in the States. There are a number of reasons for this. With much of America’s cultural dominance coming post-WWII, the US was able to exercise its greater economic strength and more refined marketing techniques in order to gain an ascendant market share in a range of industries, particularly popular music, film and snack food. The world was happy to accept, too; these exciting new products augmented their own lifestyles and, if never fully usurped, often complemented other cultures’ own products, diets and artistic output. However, in a sporting sense, America missed the boat. Soccer was already well established as the world’s most popular sport long before WWII. The first World Cup took place in Uruguay in 1930. Before that, British missionaries were spreading the message of ‘the beautiful game’ to South America, Africa, Australia and the Asian subcontinent before the turn of the 20th century. In effect, the British got there – both culturally and physically – first. “If you look at soccer in the USA, just a mere matter of 20 years ago there really wasn’t any infrastructure around the game,” says Kathryn Carter, Executive Vice President for Soccer United Marketing, a subsidiary of Major League Soccer (MLS) that is responsible for the league’s marketing and promotion. “If you reference Europe, South America and even Mexico, there’s a tradition around the sport that’s generations and generations old.”

Soccer’s image problem American society draws its strength and innate confidence from a level of insularity that is uncommon elsewhere. As the most influential and powerful nation in the world, America is not used to being told what to do, or what to like. But as the iconic silhouette of Michael Jordan grabbing some ‘air’ fades into the memory to be replaced by David Beckham’s tattooed torso, has the US finally faced up to the fact that soccer is never going to be bowed or beaten? “We don’t have to teach people about soccer today,” says Carter. “20 years ago you probably did, but today people understand what offside is; they understand what a great play is. So many people over many generations have played the game, yet before there was no product, other than kids playing the game at school.” Ah yes, those fabled ‘Soccer Moms’ have come to characterize the sport more than any other figure, and perhaps stigmatize it too. Sporting fandom in the US is a very macho, blue-collar realm, so the image of middle-class, SUV-driving moms carting their pre-

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The New Messiah? Landon Donovan was the undoubted hero of the World Cup. But does the MLS need an American superstar on which to hang its hook? If so, here are the potential frontrunners.

Jozy Altidore Currently playing in the English Premiere League for the less-than-glamorous (and recently demoted) Hull City, Altidore actually belongs to the Spanish team Villarreal. A powerful forward, the 20-year old will be hoping for a raised proﬁle after a positive World Cup.

Michael Bradley This 22-year old midﬁelder is the son of the national coach (Bob Bradley) yet it is his dynamism, not nepotism, which has made him the beating heart of the US team. He plays in Germany, but could be headed to the EPL after an impressive World Cup.

Brad Guzan Following in the footsteps of a proud line of US goalkeepers, Guzan is a promising young player who plies his trade for Aston Villa of the EPL, where he is understudy to his compatriot Brad Friedel. Yet to displace Tim Howard, but great potential. And the one that got away…

Freddy Adu Highly-touted at the turn of the Millennium as the player that would put the US ﬁrmly on the soccer map, Freddy’s nascent excellence was all but burnt out by his early 20s, prompting plenty of observers to scoff: ‘much Adu about nothing’.

Jozy Altidore celebrates victory over Algeria with US fans in South Africa

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cious brood off to soccer practice does not sit easily with the traditional sensibilities of the American sports fan. American kids play soccer at school through to college level, at which point it is dropped for one of the traditional ‘Big Four’ – basketball, ice hockey, american football and baseball. This cultural anomaly will take time to evolve, but Carter is conﬁdent the MLS can play a big part in changing attitudes. “We work with a number of youth organizations but, in order to make the MLS work, we recognize that you have to really cater to the soccer fan who probably did play [as a child] and sees fandom as something different to participation. This is our best opportunity for success,” says Carter. The MLS franchise is certainly growing in strength, particularly since the arrival of David Beckham at LA Galaxy in 2007. “There are now 16 MLS teams playing in 15 different markets with billionaire ownership and nine, purpose-built soccer stadiums,” says Carter. “From our perspective, the buzz factor that we see going on right now around MLS, around our teams, around our clubs in their local markets…is at a level that is, quite frankly, at an all-time high.” We have been here before, of course. The ill-fated North American Soccer League (NASL) was ﬁrst conceived in 1968, yet it was not until the mid-1970s that it attracted global recognition, thanks in no small part to the arrival of three aging superstars of the game – Pele, Franz Beckenbauer and George Best. Interest in these alien sporting ‘stars’ peaked at 40,000 fans per game, yet overexpansion of the league and a withering interest in the sport ultimately sounded its death knell in 1984. How, then, is the MLS any different? While it has its aging superstar in David Beckham, it also has a much more sophisticated marketing arm, and instant media beaming the game to a greater number of viewers. But it is also lacking an American hero, and overseas competition from the English Premier League (EPL) and Spain’s La Liga is strong. In such a tough market, how can the MLS be expected to compete?

A new kind of fan Soccer is a simple sport based upon two equal halves of play. It is low scoring, often tense and deeply tribal. Feverish support adds atmosphere to the cauldrons of Europe’s ﬁnest stadiums. There is no need for pre-, mid- or post-game entertainment, the drama is there on the pitch and in the stands, which is something Carter recognizes. “We’ve been looking at how our core fans are consuming the product. They’re really engaging with us at a level that they never did before.

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The MLS in numbers: 110 Price in dollars of a Beckham LA Galaxy jersey 77 Average ticket price for an MLS game 3 The number of ‘overpaid’ players each MLS team can recruit that contravene strict wage caps 10 million Beckham’s annual salary, the highest in the MLS 20,100 The lowest annual salary for a player in the MLS 15,894 Average attendance in 2009 16 Years the MLS has been in existence

“Whether that means they’re coming to the stadiums and painting their faces, or they’re coming up with the chants and cheers you see around the rest of the world, it’s a different type of consumption than what we saw previously; we’re really starting to recognize avid fans that live and die by their team’s performance on Saturday.” This improved relationship between the MLS and the local soccer communities is key to its continued growth and strength. For all the millions of soccer lovers in the States, if they do not believe in and support their own league, there can never be wider acceptance of the sport. “If you’re willing to paint your face and you’re willing to learn the songs to sing on behalf of your team,” concludes Carter, “if you’re willing to be that 12th man, then you’re much more likely to buy a shirt, to buy a season ticket, to come on to the website and read more articles – this is something we can monetize.” The timing could not be better. At the World Cup in South Africa this summer, there were more ticket buyers from the US than any other country, and America paid more for broadcasting rights than any other nation. The US also has more registered soccer players than any other country. The scene is set. The desire and appetite for the sport is there. The MLS just needs to take advantage of this unprecedented opportunity. Fans of the Chicago Fire light ﬂares to engourage the team at an MLS game last season

Founded in 2002, Soccer United Marketing (SUM) is the preeminent commercial soccer company in the United States. SUM holds the exclusive rights to the most important soccer properties in the nation, including: all commercial rights to Major League Soccer; the United States Soccer Federation and all men’s and women’s national teams; promotional and marketing rights to Mexican National Team games on U.S. soil; and marketing, promotional and broadcast rights to the prestigious eightteam Mexican club tournament - InterLiga. In addition, SUM holds the English-language broadcast rights in the U.S. to the 2006 FIFA World Cup. SUM managed the marketing and promotion of the CONCACAF Gold Cup, the region’s premier soccer tournament for national teams, and the highly successfully Real Madrid American Tour in July, 2005.

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36 hours in... Chicago Time: +6hrs GMT | State: Illinois | Area code: 312, 277 and 872 | Population: 2,853,114 (2009)

Economy

In the know Made famous worldwide by the eponymous musical, Chicago is a city of energy and character, with a rich nightlife and a distinctive architecture. ‘The Windy City’ is the third most populous in the US and home to 11 Fortune 500 companies. However, the downturn in 2008 took its toll on this once thriving city and today Chicago is focused on re-stabilizing its economy and returning to growth. Despite economic disaster, Chicago remains one of the more popular tourist destinations. Known as something of a cultural melting pot, Chicago boasts a plethora of ﬁne restaurants, diverse neighborhoods and classic museums.

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Until the recession set in 2008, Chicago had the third largest gross metropolitan product in the US and was widely considered to be one of the most afﬂuent cities, playing host to a number of ﬁnancial centres and future exchanges. Today Chicago still stands as one of the richest cities in America, and is predicted to enjoy familiar levels of growth by the second half of this year.

Drink The Green Mill lounge offers an enchanting taste of Chicago’s timeless jazz culture. Once frequented by Al Capone, this remains one of the city’s ﬁnest jazz clubs and is an ideal spot to unwind with a classic cocktail listening to lazy sax rhythms late into the evening. Alternatively, Second City is a gem in the Chicago entertainment scene, showcasing quick, sketch-based comedy. The sharp and witty gags make up for the club’s cosy size and exhibits its best line-ups in the middle of the week.

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Sleep Trump International Hotel and Tower

Morton’s Steakhouse

Lavish and elegant, the Trump certainly satisﬁes visitors’ expectations. Unsurprisingly given its name, this hotel is centered towards its business clientele, offering excellent corporate rates and charming extras such as complimentary business card and personalized stationary upon request.

Sofitel Chicago Water Tower A popular business hotel, the Soﬁtel is a stylish and chic spot set amid a quaint neighborhood but within easy proximity to Chicago’s retail center and Rush Street’s myriad restaurants. The hotel’s own eateries offer quality French style cuisine and there is a complimentary 24-hour ﬁtness center where guests can unwind after the stresses of the day.

Eat For classic American cuisine, Morton’s Steakhouse is tucked away on Sate Street, offering high quality steaks with attentive service. The discreet location allows visitors to get a table without too much trouble, and the staff are always on hand to assist. For a cheap and cheerful option on a night off, try the charming Irazu, a tiny Costa Rican eatery that boasts some of the best value for money in Chicago. The more socially responsible diner might enjoy hit Mexican restaurant, Chilam Balam, a vibrant spot that aims to support local and sustainable farmers and ranchers. The shared platters make it ideal for group dining and the richness of the ﬂavors have established a well deserved reputation as one of Chicago’s ﬁnest new restaurants.

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Chicago-headquartered firms Boeing Exelon United Airlines Tribune Company Jone slang LaSalle

Chicago Metropolitan Area headquartered firms Fortune Brands McDonald’s Tenneco Sara Lee Corporation

Time off Chicago is home to some of America’s ﬁnest museums and galleries, providing the ideal way to while away a lazy afternoon. The Art Institute of Chicago is one of the ﬁnest art collections in the US, with over 250,000 exhibits from across the world. For a more in depth cultural experience, make a visit to the Chicago Cultural Center to enjoy one of the lunchtime concerts or arts lectures. Alternatively, Chicago is well known as one of the most sport fanatic spots in the country. The city is home to the White Sox baseball team and ice hockey season champions the Blackhawks, not to mention to infamous Chicago Bulls basketball team. Anyone who takes the time to catch a game will not be disappointed.

Art Institute of Chicago, Chicago, Illinois, USA

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Technology for today’s executive Apple iPad

Sony Ericsson Xperia X10

After months of waiting, Apple has ﬁnally unveiled its latest piece of shiny new tech outside of the US – the unimaginatively named iPad. Apple believes its new tablet-style device will occupy a gap in the market between an iPhone and a MacBook. For the critics (of which there are many), therein lies the problem; it’s too big to ﬁt in your pocket and too impractical to replace a laptop. There’s no denying the iPad’s seductive curves and glorious 9.7-inch screen will have Apple fans’ palms perspiring, but its ability to garner mass-market appeal looks unlikely. For starters, it cannot run Flash and it won’t even allow you to multi-task. It also has no USB port, no SD slot, no camera and no GPS. In essence its an iPhone on steroids.

The past year or so, Sony Ericsson has found itself losing ground to its rivals, particularly in the smartphone market. To redress the balance, the Japanese-Swedish manufacturer has released the all singing all dancing Xperia X10 running on Android. The unavoidable selling point is the massive VGA high-resolution screen – it dominates the front of the device. The generous four-inch screen size means the X10 is slightly on the porky side at 13mm thick and 135g in weight but this phone is packing a lot of kit, including an 8.1 MP camera, GPS, 348MB of RAM and 1GB of on board storage. It also has a 3.5mm headphone jack. Can the X1 dislodge Apple’s crown? It’s unlikely but Sony-Ericsson have made a ﬁne stab with this handset.

Flip Mino HD 8GB It’s amazing to think how much camcorders have shrunk in size from the days when you needed to put on a back brace before hauling a breeze block-like piece of kit up on your shoulder. The pocket size Flip Mino is about the same size as a chunky mobile phone and records in HD, capable of capturing 120 minutes on 8GB of built-in memory. A convenient USB arm ﬂips out from the side of the unit for transferring video to a PC or Mac, doing away with the need to scrabble around for a USB cable. The easy-to-use FlipShare software allows you to edit, email or upload video to YouTube or MySpace. This is a point and shoot camcorder that even the biggest of technophobes would not have any trouble getting to grips with.

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Nokia Netbook 3G With a new netbook seemingly rolling out onto our selves every month, you could be excused for not paying attention to Nokia’s latest addition. However, if you’re in the market for a new netbook then sit up and listen to this. Having taken the netbook concept one step further, Nokia has added memory card and SIM card slots, alongside a 10.1-inch glass-fronted screen – that is fully capable of leashing out HD ﬁlms – and an in-built webcam and microphone. While you’re unlikely to be playing the latest PC games on its Windows 7 operating system, you can be assured that the $750 you’ll spend will be worth every cent.

09/07/2010 14:46

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140 P.S. BOOK REVIEWS

Buying Professional Services: How to get value for money from consultants and other professional services providers By Fiona Czerniawska and Peter Smith

2 Change: Bring it on! By Keely Nugent Change is a tricky concept in business. It is inevitable yet, we are often reluctant to get on board. Nugent has recognized the same resistance to change in international racing horses; in her book she applies the tried and test techniques of the equestrian world to business. Change: Bring it on! clearly and concisely explains how to establish a winning team by managing change and the challenges it brings.

It times of economic uncertainty, when markets are competitive and money is tight, value for money and return on investment are primary concerns for businesses. This book looks at the amount of money organizations across both private and public sectors are spending on professional services, and how those services are actually beneﬁting businesses today. Buying Professional Services takes real life examples from the public and private sector as well as professional services themselves to explain how business can effectively utilize this market. BMUS SAYS: Thorough and detailed yet remains accessible and useful. This book provides some excellent insight into a subject has been largely unexamined.

Seven Keys to Imagination: Creating the future by imagining the unthinkable and delivering it

BM SAYS: Simplicity is key with this book. With brief sections making it manageable even for the busiest among us. A light and refreshing read while still insightful.

The Reluctant Networker By Neil Munz-Jones No matter how much we don’t want to admit it, networking is the way to get ahead in business, whatever industry 3 you’re in. According to the author, around 75 percent of executives got their jobs through networking, a statistic that is hard ignore, in today’s competitive climate. The Reluctant Networker not only highlights the potential beneﬁts of networking, but explains how to make the daunting task of building a network of contacts more manageable to those who ﬁnd it unnatural. BMUS SAYS: Munz Jones is a reluctant networker himself, which makes his book both constructive and refreshingly not patronizing. Thoroughly recom-

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By Piero Morosini Cave

Morosini’s book examines the power of the imagination as taught throughout history, and how that can be applied to generate a successful future. An intelligent and complex book, Seven Keys to Imagination unravels the various elements of an innovative and creative mind, and applies them to real world, industry-leading examples. This book offers an alternative way of thinking about how to develop your own future, however the parallels that Morosini draws between magic and business become somewhat gratuitous and irksome.

Why Women Don’t Ask The High Cost of Avoiding Negotiation – and Positive Strategies for Change, by Linda Babcock and Sara Laschever. According to this new book, by neglecting to negotiate the starting salary of her ﬁrst job, a woman may sacriﬁce over US$400,000 in earnings by the end of her career. From career promotions to help with child care, studies show that time and time again women don’t ask. Babcock and Laschever draw on research in psychology, sociology, economics and organisational behaviour to explore why women seldom ask for what they need, want and deserve at work and at home. BMUS SAYS: This book will strike a chord with modern women and will encourage them to pluck up the courage to ask for more.

BMUS SAYS: Lengthy and dense and most likely futile to anyone who currently holds a creative position. However those who do not consider themselves natural innovators would beneﬁt from this book’s insight.

mended for anybody looking to take that next step up the career ladder.

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What’s On... Q3 2010 From surf to serves, pitches to putts, your guide to the big events of the coming quarter. 07.24-5 Waikiki Offshore Series, Hawaii There are sailing regattas all over the country this quarter, so boat lovers need not be concerned if they can’t make this one. But the Waikiki Offshore Series at Honolulu provides the perfect excuse for a weekend break, to escape the heat of the summer in the city and relax.

09.09-16 New York Fashion Week, NY The world’s most glamorous business minds meet to see the latest innovation in fashion design. This season the event moves to the Damrosch Park at the Lincoln Center complex, allowing designers more space to showcase their collections. Last year the event welcomed 232,000 people and generated $466 million in visitor spending.

08.30-09.12 US Open, NY The toughest competition in the world of tennis, the US Open grand slam brings the ﬁnest players from across the globe to our shores. Champion for ﬁve years running, Roger Federer lost out last year to Juan Martin del Potro. Can he return to form for this year’s competition after early exits from grand slams in France and Britain?

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09.12 Opening NFL Game at New Meadowlands Stadium At $1.7 billion dollars, the New York Giants/Jets’ new stadium is the most expensive in history. This month sees the opening game of the season in their lavish new home. Corporate guests can enjoy the premium lounge suites, featuring a post-game interview room, a martini lounge and celebrity chef cooking areas.

09.11-12 Harvest Wine Festival at the Plains, Virginia Bringing together the ﬁnest wines in the south east and international polo, this festival is the idea’ way to round off your summer. A weekend ticket will get you unlimited tastings of the 275 artisan wines and there are various culinary seminars available, as well as world class polo matches.

09.24 Release of Wall Street: Money Never Sleeps With Wall Street still very much under the watchful gaze of the public since the economic crisis, September sees the release of the sequel to the 1987 Oscar winner starring Michael Douglas as ruthless villain Gordan Gecko.

09.28 Important Jewels auction, Sotheby’s, NY A regular feature on the Sotheby’s calendar, the Important Jewels Auction showcases some of the ﬁnest precious stones money can buy.

10.01-03 The Ryder Cup, Wales, UK This year the competition takes place at the Celtic Manor Resort, in the heart of the Welsh rolling countryside. Corey Pavin and his team look to once again conquer Europe and retain their crown as champions of this prestigious event.

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P.S. FINAL WORD

Five-minute interview Jeremy Roffe Vidal, Group Human Resources Director for Capgemini, reveals the secret to managing a global workforce: technology.

I’m a big fan of e-learning. It has allowed us to increase training participation by 160 percent in 2009 – the equivalent of 2.9 million hours of training across the world. While most companies have reduced their training budgets, we were able to actually increase it in 2009, mainly by using e-learning. Wherever the employee is in the world they can access content through the internet, and that type of training will enhance performance within the organization. It has to be accessible to everybody across the company. This is essential when you are a global firm, because our clients appreciate having knowledgeable people on the other side of the line. We have to ensure we constantly train people. This is especially important in a fast-moving technology environment; we have to keep up with that. E-learning puts the employee at the center of the training. We are also testing a social networking platform. We have more than 3000 consultants around the world and getting knowledge, feedback and client input is key to us being able to offer the right advice. The idea is to see if such a platform can bring people closer to one another, and so we are testing that in order to measure the potential benefits. Local offices need to understand local markets. It’s absolutely fundamental. That means we have nationals running the offices in various countries. They have to understand the local economic and commercial dynamics, as well as how to manage people culturally. Dialog is absolutely fundamental. We have put more focus on using technology like conference calls or videoconferences and this has brought people closer to one another. I also think that interactions have become faster, simply because you don’t have to wait for somebody to travel somewhere, you just pick up the phone. However, technology must never replace the dialog between manager and employee.

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We’ve shown resilience through the recession. Of course, we were impacted by the crisis, but probably not as much as other types of industries. As an industry that is founded on having knowledgeable employees, there were still job openings. And we’ve built a more loyal workforce as we have continued to invest in our people. People come into our company because they want to develop a career. Our workforce understands the new technology environment. The economic crisis has changed the game for everyone, and we need to train our people in order to help them through this evolution.

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