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Why Millennials Aren’t Millennials
LinkedIn’s Success In China
Anthony J James discusses if Millennials are going through an image crisis at the moment | 17
Despite the failings of Twitter, Google and Facebook, LinkedIn is experiencing success in China | 22
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ISSUE 17
EDITOR’S LETTER Welcome to the 17th Edition of the Chief Strategy Officer Magazine
Welcome to the 17th edition of Chief Strategy Officer.
multinationals can really learn anything from startups.
In this month’s edition, we hear from a number of thought leaders in company strategy. Anthony J James provides insight on whether the Millennials are going through an image crisis at the moment, and how recent research proves that they are one of the most diverse demographics. He looks into how this affects company strategy, and what can be done to target them as effectively as possible.
Starbucks is the world’s most successful coffee chain. Did you know that you can now drive from Boston to Philadelphia and never be more than 10 miles away from one? Despite this dominance, they’ve made the bold decision to diversify into the highly challenging restaurant industry. This article examines whether Starbucks’s new strategy can bring them even more success.
We also hear from Anthony Alfidi - the founder and CEO of Alfidi Capital - who draws on his own personal experiences within company strategy, and describes how he’s seen the creative process flourish.
China proved to be a step too far for Twitter, Google and Facebook. But LinkedIn is bucking the trend, and proving that it is possible to make a success of a social network in the world’s most populous country. In this article, we analyze how they’ve done this and the strategies that have got them to where they are today.
Everyone seems to be looking to the startup model for guidance on how a company should be run. But considering that 90% of them fail, has the term ‘startup’ actually become an adjective for an office which promotes open communication? We ask if
We hope you enjoy the magazine, it has been created to help spread new ideas within strategy, so if you have any feedback please get in touch with me at sbarton@theiegroup.com. Also, if you like the magazine, please share it. Simon Barton
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In addition to this, we look at whether there’s a diversity problem within the Venture Capital industry, and if the industry has been getting away with it for too long.
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CONTENTS 6 | IS STARBUCKS LOOKING TO CHANGE ITS STRATEGIC DIRECTION?
9 | LINKING INNOVATION TO ENTERPRISE STRATEGY
Can the world’s most successful coffee chain make it in the restaurant game?
Anthony Alfidi discusses the links between innovation and strategy and how companies can implement an effective creative process
14 | SHOULD THE STARTUP MENTALITY BE USED BY EVERYONE?
Many traditional companies want to make their processes leaner, but is the startup model the answer? 17 | WHY MILLENNIALS AREN’T MILLENNIALS
Anthony J James discusses if Millennials are going through an image crisis at the moment 20 | BUSINESS TRANSPARENCY
12 | IS THERE AN EQUALITY PROBLEM IN VENTURING?
After the much discussed problems in Silicon Valley, we see if the spotlight should be turned on the venture capital industry
JP George examines the implications of increased company transparency, and whether it’s given everyone more power 22 | LINKEDIN’S SUCCESS IN CHINA
WRITE FOR US
Despite the failings of Twitter, Google and Facebook, LinkedIn is experiencing success in China. We investigate why
MANAGING EDITOR SIMON BARTON
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| ASSISTANT EDITOR JAMES OVENDEN | CREATIVE DIRECTOR CHELSEA CARPENTER
CONTRIBUTORS ANTHONY ALFIDI, SAM GEAPIN, HARRIET CONNOLLY, ANTHONY J JAMES, JP GEORGE, MAX BOWEN CHIEF STRATEGY OFFICER
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IS STARBUCKS LOOKING TO CHANGE ITS STRATEGIC DIRECTION? Simon Barton Managing Editor
You can now drive from Boston to Philadelphia safe in the knowledge that you’re never more than 10 miles away from a Starbucks. In Manhattan, the coffee brand is literally inescapable. There are now more than six branches per square mile in the Borough, which according to Quartz, equates to one store per 14,762 people.
Image Copyright: Jianying Yin
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The pricing strategy seems to be to keep things cheap, something which the coffeehouse is not famous for
Despite this dominance, Starbucks is expanding its menu in a strategic change which could see it become more of a restaurant chain. They’re looking to target a fairly specific demographic too; people who like going out for a drink, but don’t like everything that comes with it. Noise, crowds and watered down beer. Charles Passy, a reporter for Marketwatch and a self proclaimed ‘coffee snob’ who finds Starbucks’s coffee ‘unpalatable’, was seemingly won over by the ‘Starbucks Evenings’ concept when he visited one of the few stores which already has an evening menu. Whether the program - which is expected to reach 12,000 US stores in the next five years - represents an attempt at a rebrand, however, remains to be seen. For a company so synonymous with a particular product to branch out is always a risk. But let’s be clear, it’s not as if Starbucks is going into the furniture industry, it’s going to start selling hot food and alcohol. The main problem this will likely throw up will be the need for Starbucks to change people’s perceptions of what it actually does. Asking someone whether they’d like to go for a beer or a glass of wine at Starbucks seems odd, but that’s because it’s seen as a coffeeshop at the moment, not a restaurant, and certainly not a bar.
students by offering cheap beer and live football. Instead, a combination of fine wines and craft beers are on the menu, combined with cheese boards and an assortment of tapas. As mentioned before, this clearly indicates that Starbucks is looking to attract those who want to avoid crowded, raucous bars and instead prefer a more laid back environment in which to drink. While cheap beers are off the menu, the pricing strategy is to keep things reasonable. This will require some serious marketing because most will assume that an evening at Starbucks will come at a high cost. Again, this will be a stern test for Starbucks to overcome, and will probably require the company to test the concept out in detail in the US before it makes its way over to Europe. Diversification should be encouraged, especially if there’s a clear link between the new idea and the company’s core processes. ‘Starbucks Evenings’ fits in with that and therefore has a reasonable chance of being successful. As mentioned before, much of it will be to do with changing the perception of Starbucks as just a coffeehouse. Setting a target of implementing the evening menu into 12,000 new stores is optimistic, but if the company’s recent success is anything to go by, there’s a good chance they’ll be successful.
In Seattle - the city where Starbucks first made its name - ‘Starbucks Evenings’ have actually been on trial since 2010. If their current menu is anything to go by, they certainly don’t want to attract
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linking innovation to enterprise strategy i’ve heard a few things over the years about innovation.
Anthony Alfidi CEO & Founder, Alfidi Capital
Large enterprises that have their own internal innovation efforts don’t like discussing the secret sauce behind their creative process. I suspect a common approach has something to do with mixing specialists and generalists on cross-functional teams. Maybe they pick people who are naturally creative and driven, or who are misfits and need an unstructured outlet for their frustrated ambitions. I’m less interested in the interpersonal dynamics of enterprise innovation and more interested in the institutional processes that link innovation to strategy. Prevailing wisdom holds that there are three critical paths to innovation. The first path is topdown, driven by product managers. The second path is from a distinct internal lab, like the classic case studies of Bell Labs or Skunk Works. The final path is from bottom-up intrapreneurship. I think these paths all have peculiarities that demand some kind of governance to ensure they stay on track and accomplish bottomline results. The top-down path can be subject to internal political fights for resources and may ignore innovation that can move business units into more desirable quadrants on the BCG growth-share matrix. The internal lab can waste resources on ineffectual projects,
like government scientists in the Federal Lab Consortium who are rumoured to sometimes churn out busy work to justify budgets. The bottom-up path intrigues me most because it can be an outlet for the pent-up creativity of unheralded performers, but it can go nowhere without incentives. I think gamification can incentivize plenty of little ideas that can later be subject to Technology Readiness Level (TRL) scrutiny. I like arguing from first principles because it provides an epistemological foundation for whatever comes next. It’s also a great way for me to show off my stellar intellect.
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10 link innovation to strategy The top leaders of a small startup or large enterprise determine overall strategy. I mentioned the growth-share matrix above because it used to be a popular tool but its critics prefer to include more measures of profitability. That’s why nature and Providence gave us key performance indicators (KPIs) and SWOT analysis. The strategy derived from these concepts should drive innovation goals that bolster strengths and mitigate weaknesses. This philosophy can prevent innovation from falling into a ‘paralysis of analysis’ that destroys focus.
measure innovation the way vcs measure startups Success metrics for enterprise innovation have readily available comparables from the way VCs evaluate, fund, and manage their startup portfolios. One truism is that a stereotypical VC will look at 1000 business plans, listen to 100 live pitches, fund ten startups, and harvest one success. Let’s copy that funnel and graft it onto enterprise innovation. Start with random generation of 1000 off-thewall ideas, write the best 100 into basic proposals that are testable against the firm’s KPIs, launch the best ten as live projects after assessing their net present value (NPV), and harvest one big success.
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use multiple testing methods, rapidly and repeatedly
design a km process to document innovation
This VC-style 1000:1 funnel helps innovators ‘fail quickly’ by rapidly testing ideas and dropping the ones that are unlikely to succeed. Enterprises with a separate internal lab may have an advantage in testing if they can run projects that ‘decouple from a brand’ in Lean Startup terms. Crowdsourcing and Twitter A/B testing are methods to covertly launch trial products to see if they gain CustDev traction.
The knowledge management role is to archive the 1000:1 process, locate the most successful iterative path from idea generation to ultimate success, and replicate that path in future iterations. KM should also track active projects the way VCs track their funded startups. The final documentation of an innovation series won’t bear much resemblance to a typical BPM improvement effort. It will look more like case management with an artisan approach to photographing prototypes and archiving program code.
define success as meeting specific kpis A startup’s KPIs are more growthoriented and time-constrained than those of a large enterprise. Their definitions are different. The ‘success’ of an externally oriented project is defined by its ROI compared to the capex spent on generating the 1000 ideas that led to its creation. The ‘success’ of an internally oriented project can be defined as improvements in quality control or business processes that reduce cost or avoid liability.
Senior management’s ultimate role is to link the innovation strategy that strengthens the enterprise’s SWOT position with whichever of the three innovation paths resides within the firm’s structure. The cultural incentives will be different for each path and the KM case documentation will be different for each result. That’s the cool thing about innovation. It’s always about something different. Vive la difference.
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Is There an Equality Problem in Venturing? Much has been made of Silicon Valley’s diversity problem. While the issue has always been a concern, it’s been brought into sharper focus more recently as some of the tech-hub’s most influential players release their hiring updates. Sam Geapin Director, Global Marketing
Facebook - according to the Washington Post - has just 81 African Americans in its 5,500 strong workforce, while Hispanics make up just 4% of Yahoo’s staff. Clearly a contentious issue across the entire tech-industry, it’s now the turn of the Venture Capital market to be brought under the microscope. Experienced venture capitalist, Kerri Golden, understands the industry’s pitfalls more than most. Every time she’s at a conference she jokes that there’s never a line at the women’s bathroom, and that all the deals are happening in the men’s room. There’s been a dearth of women in a number of industries recently, but the venture capital CHIEF STRATEGY OFFICER
industry, for whatever reason, has managed to dodge much of the criticism which has been targeted at those in the finance industy and in Silicon Valley. That changed, however, in 2012 when Ellen Pao - now most famous for being controversially ousted as Reddit’s interim CEO this year - filed a lawsuit against Kleiner Perkins Caufield & Byers, claiming that they had unfairly refused her the advancements and compensation she was due. After the case went against her, she was fired, and when she took her former employer’s to court for unfair dismissal, she lost again.
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Experienced venture capitalist, Kerri Golden, understands the industry’s pitfalls more than most. Every time she’s at a conference she jokes that there’s never a line at the women’s bathroom, but that all the deals are happening in the men’s room
Whilst she was ultimately unsuccessful, the case brought the lack of diversity in the sector out of the shadows. Three years down the line, there’s been little progress. Today, the number of women partners in venture capital stands at just 6% - and it was 10% last year. The issue has real ramifications for the entire tech-industry. Venture Capital remains the driving force behind technological development, and there’s evidence to suggest that men tend to favor male-led projects. This makes it tough for women to get their ideas heard, and if a worthy female-led start-up doesn’t make the cut, it removes what could have been an important source of employment and innovation. It might, however, be unfair to brand the industry as inherently sexist. The talent pool is small, with comparably small numbers of women taking subjects which tend to lead to a career in venture capitalism. With men dominating the industry, there are also a lack of role-models for women to look up to, meaning that many don’t even see venture capitalism as a viable career option. As with most things of this nature, education plays an important role. But a shift in expectations is also required, and that will surely happen as Silicon Valley starts diversifying its workforce. If something isn’t done, we could stand to lose some highly profitable organizations, and that can’t be good for the economy.
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Should the Startup Mentality be Used by Everyone? Before we address the finer points of this topic, the answer to the question posed by this article is a resounding ‘no’. Harriet Connolly Director, Global Operations
Why would successful, yet traditional companies want to think like a startup anyway? Only 10% of them make it any real capacity, and decidedly fewer - .00006% - make it to Unicorn status. The term ‘startup,’ however, is now used to describe a young company which profits from a flat organizational structure, extensive team working and an open-stance to new technology. As a term, it’s used in an idealized sense, often to go against the picture painted of more established companies, working in more traditional industries. These companies - often bureaucratic by nature and entrenched with vested interests which make their structure’s fundamentally flawed - are the
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250 pound heavyweight boxers, sluggishly throwing punches without aim, while startups like Floyd Mayweather - run round the ring, quickly and efficiently beating their opponents one punch at a time. This is a good way of looking at it, because like those two boxing styles, traditional and startup companies can learn from one another. Most companies that turnover billions of dollars won’t have been at the startup phase for decades, and therefore will never have experienced the impact that technology now has on that
15 stage of the lifecycle. Some multinationals - like Google through their ‘Labs’ have created pockets within their organization which act as startups within their main structure. Often referred to as a ‘playground’ for Google’s adventurous employees, they concentrate on working on their more extreme projects, and promote experimentation. They sit outside the company’s main structure and often focus on projects which have a high chance of failure. Mastercard, the company which pioneered contactless payment, also has a Lab in place.
As a term, it’s used in an idealised sense, often to go against the picture painted of more established companies, working in more traditional industries
Relative to the companies that they are associated with, these labs operate with a small amount of people, and in that sense, replicate the actions of a startup. Most companies, however, don’t have either the resources, or the need, to start up a labs system. They can, however, adopt a leaner approach to team working, where problems are faced with more freedom and autonomy. There’s also plenty startups can learn from traditional companies. Like the methods they use to establish a functioning businessmodel, or even how they’ve gone about implementing better HR practices. Yet a company with thousands of staff members can’t have the exact mentality of a startup with a team of five, it’s impossible. Large companies - and not just through the installation of fancy offices - can learn from startups, especially when it comes to team working. But the startup mentality, in its entirety, cannot be used by everyone.
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why millennials aren’t millennials
Last week the US-based Pew Research Centre published some research noting that the majority of Millennials - people aged between 18-34 years don’t associate themselves with the generational label ‘Millennial’ at all. Anthony J James Chief Innovation & Growth Officer, DDB Group Asia Pacific
Further, they considered themselves as more self-absorbed than any other living generation, and nearly half considered themselves wasteful and greedy. Clearly, and by their own estimation, Millennials have a bit of an image problem.
why as marketers we need to be sensitive to their labelling resistance.
At the risk of incurring the wrath of those who abhor commentary about Milliennials from people who aren’t of the generation, I’m going to explore why the label ‘Millennials’ probably no longer matters, and
Firstly, let’s think about the term ‘Millennials’. In justice, it ought to refer to people born on or around the turn of the century, but in fact it applies to people born from 1981. Some became adults before the CHIEF STRATEGY OFFICER
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They inherited none of the aspirations held about the millennium by previous generations, shaped and reinforced as they were, by decades of science fiction
turn of the century, and even the youngest probably remember the celebrations. The millennium came after them, and was not a marker of a change in their prospects. If anything, the rise of the consumer internet, from six years before the millennium, was a much more significant marker in their personal journeys. And the millennium itself was for most of this generation, largely insignificant. They inherited none of the aspirations held about the millennium by previous generations, shaped and reinforced as they were, by decades of science fiction. Instead, this generation beheld the new century with a strong sense of its limitations and flaws. From climate change to terrorism, economic instability and allegations of government spying on personal communications, this generation were not exposed to the spacerace fuelled hope of the Boomer generation, nor even the Wall Street opportunities and excesses of Generation X. Is it any wonder that they regard the millennium as essentially broken? Then there’s the marketing practice which has dogged Millennials since they were early consumers. Marketers always pandered to this generation, and while actively critiquing their culture of selfabsorption, they also sought to exploit it, launching campaigns that allowed Millennials to share more and more about their tastes and personal lives. They were acutely aware of the control that Millennials had over brand experience, so by enabling the sharing of personal stories, marketers were able to maintain some control over brand messaging. And this cult of the personal culminated in the (in) famous Time Magazine Person of the Year cover of 2006: You. So to a very strong extent, marketers have been responsible for the current perception held by
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Millennials about themselves. But the accuracy of this perception is inconsistent with actual behaviours of Millennials. According to research conducted by Goldman Sachs and Deloitte, Millennials are actually much less acquisitive, much less interested in flamboyant exhibition of their personal success and wealth, and they are much more likely to be diligent workers in their careers. While they do move from job to job more frequently than previous generations, they tend to have a more sophisticated awareness of the value of their contribution to a career, and they will exit a role when that contribution begins to decline. Millennials are cost-sensitive, health-aware, and they prefer the recommendations of friends and family in purchase selections. They aspire to leadership, but they are concerned about the disconnect between company agendas in large corporations, and the need to improve society. In other words, Millennials are actually less self-absorbed and more realistic than previous generations. And as they rise to executive positions within the workforce, this divergence between perceived selfishness and actual behaviours is widening. As marketers we should be acknowledging that our old perception of Millennials is widely off the mark. And we should be aware that labelling of any kind is probably unhelpful when trying to sell to this age group. As this group ages, and their priorities consolidate, it is important to acknowledge that their resistance to labelling is, at least in part, because their practice doesn’t match their profile. It might be easy to call them ‘Millennials’. But we should be calling them ‘today’s new leaders’.
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Business transparency JP George Innovation Writer
In the technological day and age that we live in, it is nearly impossible for a business to avoid being transparent, and the reality is that transparency favors employees over business owners. If you are just stepping into a new career and are looking for potential employers to work for, it is important to seek out information regarding the various companies you are interested in to gauge an idea of how they operate.
It really used to come down to: if no one can see what is going on behind closed doors, then it doesn’t matter
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increase of employee engagement
gain employee’s trust
business transparency as a necessity
As employees, we are lucky enough to have detailed information in the form of reviews from current and former employees of various businesses. There are plenty of sites online where people come together and share their experiences with employers. This is perhaps one of the biggest innovations in the area, as you can avoid pitfalls that may befall you by working for an employer that doesn’t treat their employees correctly. Additionally, you may find ecstatic reviews about a certain company and will therefore be confident in your decision to actively pursue them for employment. It has really led to companies being more accountable for the way they conduct business and the way they treat their employees, because everyone now knows that the information will be presented for the world to see. There is no doubt that as a result, business transparency has taken employee engagement to a new level, as the two parties are now on an even platform and the employees cannot be taken advantage of like they were in the past.
Transparency has restored good business practices, decreased the likelihood of employees being taken advantage of by employers, and has created a much more positive and professional working environment. The ironic thing is that business transparency, by forcing employers to conduct business in an ethical manner, has actually created much stronger bonds and trust between business owners and their customers, and it has increased business efficiency as a result. The reality is that it keeps shady business practices at bay and is a win-win for everyone involved. There are undoubtedly tons of business owners out there who absolutely hate the idea of business transparency, but they will simply have to deal with the fact that transparency in business is not going anywhere due to the advancements in technology we now live with. They now simply have to conduct their companies with a higher code of ethics than they may have done in the past.
Every corporate company in the world works from the top down perspective, where the top dogs in the business set the structure, rules and the tone of the business. What it has led to is the ability to control nearly every aspect of the lives of their employees, often times going far over what is fair or right. The reality is that in order to stay employed, generate regular income through their employment and obtain a higher standard of life, these employees would often have to deal with business practices that were flat out unfair. The real beneficiaries of business transparency in today’s day and age are these employees that have had to suffer through unfair work practices to maintain their standard of life. If something occurs in the workplace that shouldn’t be happening, now these employees have a voice to speak from and they will undoubtedly be heard from by thousands of others online if they choose to do so. Although some people believe that technology is going too far and that this outlet of information may be detrimental to business owners, there is no doubt that as a whole it is making the lives of the bulk of people across the country better.
There used to be a number of problems when it came to business ethics and the code of conduct that business owners run their companies with. It really used to come down to: if no one can see what is going on behind closed doors, then it doesn’t matter. However, business owners understand that they have no walls to hide behind, and are now being forced to conduct their businesses with higher ethics. This is not only great for the employees of the companies, but the customers that end up doing business with them.
Often, business owners feel that employees should be left in the dark, regarding all sorts of business procedures and things relating to the overall function of the company. The reality is, if these employers are trying to keep their employees in the dark, they are most likely doing something that is unfavorable and that should flat out not be accepted. There are limitless amounts of things that employers can be engaged in, with the intention of benefitting the top individuals in a company at the expense of their workers and this is why they should never be held in the dark.
All and all, business transparency is one of the best things to come out of the advancements of technology that surround us today.
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LinkedIn’s Success In China American internet companies have found success hard to come by in China.
Max Bowen International Events Director
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Facebook was blocked from China in 2009 amid claims that it was used by Xinjiang independence activists as their main communications network. Twitter tried to make it and failed a year later, and Google’s exit in 2010 came after a bitter row with the Chinese government over censorship.
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LinkedIn found success where so many of its peers failed because it treated its China branch as a separate entity
Success in China comes at a cost. The internet companies which have experienced prosperity there have paid the price in data and control. The Chinese government demands free rein to censor what it wants, and companies must be prepared to hand over any data it requests. Then, and only then, are they free to operate in the country’s ever developing market. The sacrifices needed to thrive in China were too much for Facebook, Twitter and Google, but it seems that LinkedIn has found the right formula. They recently topped 10 million users in China, with their Asia Pacific division growing by 64% last quarter. As reported by Bloomberg, the region is now LinkedIn’s fastest growing sector, and is having a significant impact on bottom-line company profits. LinkedIn found success where so many of its peers failed because it treated its China branch as a separate entity. Had they treated it like a satellite office - one which was completely submissive to the company’s head office - there would not have been the scope to tailor the LinkedIn product to the Chinese audience. LinkedIn China - or Lingying in Mandarin - was founded as a joint venture with Dragon Networking. According to Li Hui, this gave the company the opportunity to be ‘more entrepreneurial’ and ‘innovate locally’.
have spoken directly to the Chinese public, and allowed them to attract people who are drawn to a variety of different career options. An App’s on the way too - it’s at the beta-testing stage currently - and is called ‘Chi Tu’, which directly translates to ‘red rabbit’ in English, but is more commonly used to refer to ‘talent’. It’s hoped that this will give LinkedIn the platform to target China’s youth. But this alone isn’t enough to make it in the world’s most populous country. LinkedIn have openly stated that they filter content on the site, which makes China an anomaly for them. You cant blame them for making an exception - China has an internet user base of 645 million, more than twice as many as the United States. They best toe the line, though, or all that progress could be quashed as quickly as it started.
Advertising has played an important part too, with many subways in Beijing carrying celebrity endorsements. On LinkedIn China’s homepage you’re greeted by well known angel investor - Xu Xiaoping - and pop star, Haiquan. These
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