CTPartners
PERFORMANCE
Q UA L I T Y
R E S U LT S
PQR PILLARS OF
SUCCESS A TALK WITH AMERICAN EAGLE OUTFITTERS’
ROBERT HANSON TECH-EMPOWERED LEADERSHIP 4 GLOBAL EXECS ON CAREER MOMENTUM EDITIONONE 2013 A CTPartners Publication
American Eagle Outfitters CEO Robert Hanson
CTPartners
PQR
EDITIONONE 2013
EDITORIAL
Publisher and Editor-in-Chief Jennifer Silver – jsilver@ctnet.com Executive Editor Kristin Terrell – kterrell@ctnet.com Managing Editor Jenni Prior – jprior@ctnet.com Editorial Services FraserWalbert Media LLC – www.fraserwalbertmedia.com DESIGN
Ken Silvia Design – kensilviadesign.com CIRCULATION
Circulation Associate Janet Senk – jsenk@ctnet.com CTPartners CTPartners is a leading performance-driven executive search firm serving clients across the globe. Committed to a philosophy of partnering with its clients, CTPartners offers a proven track record in C-Suite, top executive, and board searches, as well as expertise serving private equity and venture capital firms. With origins dating back to 1980, CTPartners serves clients with a global organization of more than 400 professionals and employees, offering expertise in board advisory services and executive recruiting services in the financial services, life sciences, industrial, professional services, retail and consumer, and technology, media and telecom industries. CTPartners’ focus is straightforward: Place the right executive in the chair. Evidence of CTPartners’ ability to get the job done is its 76% placement success rate and average days to placement of 149 days in 2012. CTPartners has a stick rate of 88% for the 18-month period ending on June 30, 2011. Methodologies used include our proprietary technology, ClientNet®, a technology tool that permits clients to access password-protected information over the Internet from any place, at any time, to check the status of their search engagements, and the 40-Day Audit ™ processes, a comprehensive assessment tool that provides formal feedback and insures search milestones are met according to plan. Headquartered in New York, CTPartners has offices in Bogotá, Boston, Caracas, Chicago, Cleveland, Columbia MD, Dubai, Frankfurt, Geneva, Hong Kong, Lima, London, Mexico City, Panama City, Paris, Santiago, São Paulo, Shanghai, Silicon Valley, Singapore, and Washington, D.C. Page 02 | CTPartners PQR
04 Cover Profile: Robert Hanson The CEO of American Eagle Outfitters outlines key strategic priorities for the company—and his core focus as a leader + Sherry Harris on talent, Joe Megibow on multichannel e-commerce
ON THE COVER (and above), Robert Hanson photographed by Peter Vidor
14 Management How companies across all industries are getting ahead in the cloud + Sound Bites: The CIO’s journey into the cloud with Western Union’s David Thompson, SAIC’s Charles Beard, Jr.
10 Momentum Politics, accounts receivable, and other sources of career momentum
20 Management Banks grapple with the expanding digital mandate + By The Numbers: Today’s digitally demanding consumer
26 Five Google’s Daniel Alegre on the five guiding principles of his career + Sound Bites: Daniel Alegre on seizing career opportunities, integrity
28 To Lead How cutting-edge technology empowers leaders and defines top-tier organizations CTPartners PQR | Page 03
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PROFILE ROBERT HANSON, SHERRY HARRIS & JOE MEGIBOW
HOW A TOP TALENT TEAM IS LEVERAGING AMERICAN EAGLE OUTFITTERS’ BRAND— AND GLOBAL POTENTIAL
THE
PILLARS
OF
SUCCESS
I
n today’s intensely competitive global retail sector, the race is on to maximize the power of the brand and the customer experience across regions and sales channels alike. PQR
spoke with American Eagle Outfitters CEO Robert Hanson and two key executives about their strategic vision, business opportunities and challenges, and key talent priorities. >>>
Robert Hanson, CEO, American Eagle Outfitters Photography: Peter Vidor
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PROFILE
PQR You joined American Eagle Outfitters just about one year ago. What attracted you to make the move? Robert Hanson What most surprised and excited me was the level of resonance that existed within the marketplace for this brand. That creates tremendous potential. When I considered that, along with the caliber of the talent here and the values of the people who work at this company, it was a powerful combination. From my perspective, there were some pretty clear, near-term opportunities to pursue by more thoroughly leveraging the brand in a variety of ways, as well as a long-term growth story that I believed I could help to create with this team. PQR You established some exciting priorities early on. Would you share those with us? Robert Hanson In terms of the shorter-term priorities, really there were five. First, we needed to maintain a competitive top line in a very volatile and demanding environment. The second priority was to ensure that we could deliver greater margin flow-through with more robust inventory management. Third, was to rebalance distribution across the brand in order to be more profitable. Accelerating the growth of our e-commerce business was the fourth priority (see sidebar, “Joe Megibow on e-Commerce”). And the fifth was to get more leverage on the corporate infrastructure. PQR That was an aggressive set of short-term goals. What progress do you see one year into this effort? Robert Hanson I’m very proud of the team in their having demonstrated their ability to deliver against all five of those priorities during 2012. It’s not that we don’t have a lot more to do—and that there aren’t plenty of opportunities ahead for us to make much more progress. There are challenges and opportunities ahead. But this team has truly done great work. American Eagle Outfitters experienced 11% revenue growth and 41% EBIT growth in 2012. Page 06 | CTPartners PQR
Even more importantly, we have effectively implemented against those five near-term priorities while at the same time developing a long-term strategic plan that has received sound endorsements from our board and investors. PQR What is that long-term plan? Robert Hanson I like to keep a strategic plan focused, which helps the management team ensure that it remains relevant as the corporation moves forward. In our case, the strategic plan has four pillars. Together, they will enable us to grow profitably and create sustainable enterprise value. The first pillar is “fortify,” by which I mean, fortify our core assets, our brand, our processes, our core capabilities. This will give us the strongest foundation to compete in North America and, increasingly, around the world. There are many important elements for us to focus on here. For example, do we have the right assortment architecture? Are we in the right locations? Have we developed and implemented the best inventory management systems? The second pillar is to grow in North America. When I got here, many investors saw North America as a mature business for American Eagle. But I don’t like the term “mature business.” I think it leads to, for lack of a better term, lazy behavior. My team and I have taken a long-term look at North America and we have concluded that we have great sources of profitable revenue growth in this region, through a combination of opening new stores, accelerating the growth of our e-commerce business in the U.S. and Canada, and moving into Mexico, where we just opened our first store. Pillar three is about transformation of this retailer to its true potential as a viable, profitable, investment-grade competitor on a global stage. Success here depends upon two areas of profitable expansion: e-commerce and non-U.S. storefronts. We currently have stores in 14 countries and e-commerce business in a good many more. Yet we’ve just begun to scratch the surface. We hope to open storefronts in eight to 10 coun-
PROFILE
tries per year during the course of the next five years. We’ll tailor that strategy to whatever is best suited for the country itself, which means that the expansion might take place through direct ownership, joint ventures, or franchise licenses. PQR And the other pillar?
is going to delight the customer and keep the customer coming to you. It’s what helps build your brand identity. I could go on and on. Right now, we’re in the process of rounding out the teams that will be responsible for geographic and channel management—both key elements in our strategic plan—and we’re doing this through a combination of the promotion of high-quality performers and the recruitment of external talent, as appropriate. I probably spend 25% of my time on talent management-related issues and this investment is well worth it. We’ll never succeed without the right team in place.
Robert Hanson The fourth pillar is all about making certain that we have a strong balance sheet and are demonstrating our investment grade to shareholders by providing high returns. Among other metrics, we aim to consistently deliver a 14% to 17% return on invested capital. This team is committed to investing behind our growth and returning excessive funds to shareholders through competitive dividends and, when appropriate, “In our case, the stock repurchases. PQR Robert, you’ve set the bar very high, both with your short-term priorities and American Eagle’s longer-term strategic plan. How important is procuring top talent and assembling the right team in order to succeed on these fronts?
strategic plan has four pillars. Together, they will enable us to grow profitably and create sustainable enterprise value.”
Robert Hanson Let me answer that question by stepping back a moment. From my own career, as well as my observations of business leaders and my experience of being coached and advised by people I admire, my view is that a great CEO focuses on five to six things. These usually include strategy, performance management, the brand or product and customer experience, company culture, talent, and stakeholder engagement—by which I mean the board of directors, investors, various partners, and the company’s employees. These are my major focus points. I believe that talent is the most important part of all this (see sidebar, “Sherry Harris on Talent”). Talent is the commonality that underlies all of these issues. Great talent drives great performance. Talent creates the product or service that hopefully
PQR It sounds as though it’s been quite a year. Looking back on it, how would you assess this experience of leading American Eagle through these important changes?
Robert Hanson I am excited by and appreciative of the performance of our team in 2012. They exceeded all of our near-term priorities and financial metrics. We have a plan in place that we believe positions us for a transformational period of growth and sustained top-tier shareholder return. We have a terrific brand, great customer-service experience, we are executing well, and we are hungry as a team. What can I say, except this: It’s truly a pleasure to be able to coach and mentor a great group of people like this, including our tenured talent and people who have joined us from elsewhere, bringing their skills to the table. This is a growth company from all aspects, people and business. The future will bring untold possibilities and what we’re fostering here is a values-based, high performance, collaborative teamwork culture that will drive our business success. In turn, our financial successes give us the reward opportunities to create a best-in-class place to work. >>> CTPartners PQR | Page 07
PROFILE
JOE MEGIBOW ON E-COMMERCE PQR Joe, you joined American Eagle during the past year as its Senior Vice President/General Manager of Omni-Channel eCommerce. Would you define this role for us and give us a little context within the retail sector? Joe Megibow Retail has been around a long time. Arguably, even e-commerce has a certain maturity about it, although it’s a relatively recent development when compared to retail in general. But they’ve kind of existed as separate buckets. A lot of the brick-and-mortar retailers have set up online arms, which may have become very large and reputable, “There’s a but they’ve developed largely as temptation in separate operations. You have companies to both Walmart and walmart.com. What has happened recently, chase what I call though, especially with the advent ‘shiny objects.’ of mobile devices, is that consumers are effectively walking What’s the next into stores with their computers. big new thing?” So there’s a convergence that has occurred in consumers’ minds. We’ve seen this before, in more limited ways. Consumers want to know, if I bought something online, why can’t I return it to the store? Why is there a different assortment in the store and online? At the core of the retail experience, there’s a single customer: That customer has a single view, but there’s been a lot of channel conflict. And from the retailer’s perspective, there’s been confusion. Is the sale that I make online stealing from a store’s P&L? If we’re working so hard online to drive sales, what happens when the sale gets credited to the store? The challenge, and the opportunity, for someone in my position is to figure out how we can use technology to seamlessly drive a satisfying experience for our customer. How do we remove these channel conflicts so that the real world and the digital world work together to give the customer the best experience?
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PQR What has the company done to help empower you and your team to achieve these objectives? Joe Megibow Robert Hanson is very clear about this being a core element in our strategy to transform American Eagle. That’s why my position was created and that’s why I report directly to the CEO. It is a very forward-looking approach. We don’t define this as online versus brick-and-mortar. I am focused on everything. Loyalty programs. Outreach. Customer engagement. Everything that I do is about helping our customers, making sure that they like our brand, they like our product, they can find out about the right deal for them. It’s a holistic approach. After all, there may be many channels, but at the core, we’re talking about the AEO experience for each one of our customers.
PQR There’s so much going on right now relating to new technologies, new media developments. How do you decide which opportunities are worth pursuing first? Joe Megibow There’s a temptation in companies to chase what I call “shiny objects.” What’s the next big new thing? What’s coming up on social media, Facebook, mobile payment possibilities? These things just keep coming along. And you can quickly end up with a disjointed strategy or a large collection of “things” without stepping back and asking, how do I build a seamless experience for the customer? Am I building that experience or just moving in a lot of fragmented directions? The real trick is simplification. From my perspective, the key question is: Are we working to do everything we can to make all the touch points for the AEO customer as good as possible? And, have we built a platform that we will be able to innovate on? It’s easy to have features. It’s hard to achieve that objective. But that’s what matters.
PROFILE
SHERRY HARRIS ON TALENT PQR Sherry, you were one of American Eagle Outfitters’ key recent hires as its Chief Talent and Culture Officer. How have evolving marketplace demands for retailers impacted talent needs? Sherry Harris Everyone is on a global stage. The retention of top talent and the acquisition of critical talent on a global basis are so closely linked to a retailer’s strategic goals and performance that these issues cannot be divorced from other aspects of organizational success. The health of your P&L depends upon the quality of your talent and how well they perform. Here at AEO, when we talk about our strategy and long-term vision, we’re always asking: Do we have the right talent in place to drive our strategy over the next few years? What does this mean in terms of skills, experiences, core competencies? And how well is our talent executing on these strategies? PQR Would you talk to us about the company’s talent plan and priorities? Sherry Harris Robert Hanson has brought tremendous clarity about the strategies surrounding the future of our brand. We all recognize that the organization is highly reliant on our ability to identify and align key talent that can understand and execute the strategy. We believe that the ability to accomplish this depends upon creating a higher level of engagement than the company might have enjoyed in the past. In order to recruit and retain great talent, it is incumbent on us to create a workplace that is worthy of it. Put another way, you can’t change the marketplace if you aren’t willing and able to change the workplace.
PQR What does that mean in terms of the corporate culture and values? Sherry Harris One important distinction—and it’s part of the reason why I joined the company—is that Robert Hanson has a winning strategy, and it’s not just about doing better. It’s about doing something that is meaningful and different. The top performers want to work for a winning team. That’s “In order to not a news flash. But recruit and retain top talent also wants to contribute to somegreat talent, it thing that is bigger is incumbent on than what they alone us to create a are responsible for. They want to be chalworkplace that is lenged by meaningful worthy of it.” work and meaningful business problems. Every organization has a culture. If you don’t consciously design it or don’t work at clearly conveying it, then you may not get what you want. Who do we want to be? What do we want to be known for? For any organization, retailer or not, it’s important to nurture connections and community, spirit and values, and all those things that sometimes feel like they’re fluffy or intangible—you’ve got to work to make them visible. I like to tell people, a company’s culture has to be designed but it cannot be manufactured. And it must be nurtured by everyone from the CEO on down. This is an important element of the transformation that’s taking place here at American Eagle Outfitters. I’m proud to be part of it. ■
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MOMENTUM C A R E E R
I N S I G H T S
F R O M
F O U R
T O P
G L O B A L
E X E C U T I V E S
Maarten van Beek, Executive Vice President for Human Resources, Mölnlycke Health Care, in Gothenburg, Sweden
“I’m working in one of the fastest growing healthcare companies. Our people and culture are the main reason behind this success. Our people develop, manufacture, and sell the leading products and services in our industry. Our whole company is focused on growth and innovation. As an executive, I understand that if we maintain our momentum, and continue to expand at this pace, our people must grow. Our organizational structures must adapt and our capabilities must grow. These priorities are lined up within my role and responsibilities, and that is very exciting. I studied psychology and human resources at two universities in the Netherlands and developed a strong theoretical background. I studied at Cornell University, where I learned how to ‘commercialize’ that theoretical knowledge into a practical perspective that could bring value to the world of business. I’ve had a fascinating career that has taken me to all the continents except, at least so far, Australia. While previously working in the consumer goods industry, I held managerial roles while I was based in Brazil and Singapore. These experiences taught me a great deal. When you work in different cultures, you learn to be humble. You can’t assume you have all the answers. You need to be open to asking questions and learning from the people you are working with. I still keep that in mind. After all, when you are in a fast-growing company and you are focusing on developing the people and the organization, you must also foster the culture that has brought the company to the place where it is today.” Page 10 | CTPartners PQR
Photography: © Mölnlycke Health Care
Javier Rodriguez, President, DaVita HealthCare Partners Inc., in Denver
“I have been with DaVita since 1998, through the company turnaround and the time since then, and I have learned many career lessons. The first is that, too often, people want to plan out their job moves and career path. Yet my career path did not follow any normal standard. Instead, when the organization had trouble, I asked, ‘Where can I add the most value?’ People said, ‘Accounts receivable is not a good career move.’ I said, ‘They need me there.’ Then I went to payor contracting, and people said the same thing. While both of these areas are critical to the overall business, they were an unexpected turn. But the senior team noticed. At the end of the day, you start to think about the enterprise more broadly, as opposed to just your career, and it ends up being good for your career. Second, don’t fear risk. I speak to many young MBAs and they often ask for career advice. I say, ‘All of you are very smart, analytical, and want upward mobility, but you don’t want the risk associated with that. You want it to be smooth and predictable. That is the surest way to make sure your career is kind of vanilla.’ You don’t have to seek risk, but to create a differentiating opportunity, it does take risk. During DaVita’s turnaround, when most companies would have focused on economics, we focused on people and capabilities, and figured the economics would follow. It worked. We invest in the individual. We want people to get that extra juice out of life. Part of that is to avoid making a big distinction about where work ends and play starts. They should become blurry lines.” >>>
Photography: Courtesy of DaVita Inc.
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MOMENTUM
Michel Levy, General Manager, Microsoft Brazil, in São Paulo
“I started my career as an entrepreneur. After graduate school at Stanford, I founded the first computer reseller store in Brazil, and I had that business for approximately 15 years. This was a great journey, and extremely challenging, because I’d had no prior experience. I learned the hard way, in the highly unfavorable economic environment of the 1980s, with high inflation. But it was an absolutely fantastic learning experience. I found mentors along the journey who had the experience to guide me. I learned many lessons about leadership. It is difficult for a small company to hire and retain people. I found that you have to make employees part of the challenge, make them part of the excitement of building something, and make them part of the rewards. In the corporate world, you have many other tools that help you to develop people. At Microsoft, the amount of tools and programs we have available for developing people is amazing. But I’ve learned that what motivates people most, especially great talents, are new challenges. Offer your employees a challenge that is a little bit of a stretch and they will want that opportunity to contribute at a higher level. During my career, I’ve also found that the ability to transform, learn, and relearn is key. And you must prepare your people for the unknown. You’ll find this in every book, but being able to lead through change and help your people to cope with change is key to success. This is especially true in our business, with rapidly changing technologies and business models. The challenges differ by the hour.”
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Photography: Antonio Carlos Carreiro
John Engler, President of the Business Roundtable, in Washington, D.C.
“Earlier in my career, I was privileged to serve as Governor of Michigan. In any career, it is important to continue to learn and prepare, not just for the role you have, but for future roles. That was true many years ago when I was a freshman in the Michigan House of Representatives, on the furthest back bench of the minority, and it was true in my third term as Governor. Every day there was something new to experience and learn. At the Business Roundtable, I work with the CEOs of the world’s top companies. These men and women are incredible leaders in their specific fields, and collectively, they care deeply about this country and want the United States to be successful. Our nation has to be focused on a growth strategy. We cannot look forward to a future where a 2% annual increase in GDP is considered the new average. That is a performance that does not bring out the best of America. In today’s complex society, political and corporate leaders need to understand that it is not important or even possible to know everything. The skill lies in building networks and developing the kind of loyalty and trust that allows you to talk to people, gain insights, and avail yourself of the knowledge and expertise that is out there, yet still function in an independent fashion to put the information together and make your own judgment. Also, I think it is important to be clear-eyed in terms of your purpose and direction. What is the focus? Where are we going? You must be able to articulate that in order to bring people onboard to make the journey together. That is the art of leadership.” ■
Photography: Courtesy of Business Roundtable
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Illustration: Š istockphoto.com/retrorocket
MANAGEMENT
AHEAD
IN THE
CLOUD
Cloud Computing Redefines Strategic Management t’s practically a cliché to talk about management or technological trends that offer the potential to transform the global marketplace, along with the way we live and work. True transformation is rare, however, with examples such as the Internet and the Industrial Revolution. More often than not, even the most exciting new developments end up prompting incremental changes, relatively small steps forward, when viewed from history’s larger perspective. Yet for organizations and management teams in industries and regions around the globe, cloud computing seems poised to be a rare exception: a pathbreaking development that holds the potential to change nearly every aspect of a company’s strategic business model, including the ways that it conceives and delivers products or services to the market, interacts with its customers, manages its operations and IT infrastructure, controls costs and achieves efficiencies, and above all, maintains its competitive edge.
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MANAGEMENT
During this era of rapid-fire change, an organization’s ability to fully realize cloud computing’s transformative potential will depend upon successfully accessing a rare breed of executive. A company’s target profile will include relevant and proven expertise, what might best be described as “innovation DNA,” and exceptional skills in communicating and strategic partnering across a variety of functional organizations and business units within an enterprise company. We are still at the early stages of this brave new world, but cutting-edge corporations are already making bold moves into the cloud, whether as users, providers, or some combination of both. They are developing sophisticated talent-management strategies to fully support these endeavors, but much is still evolving. In order to assess the management opportunities as well as the challenges presented by cloud computing, PQR reached out to a number of leading global executives and business experts. Their insights were revealing. Moving into the Cloud To understand the current state of the cloud computing market—as well as organizations’ readiness to embrace this new IT consumption model—PQR spoke with Saar Gillai, Senior Vice President and General Manager, Converged Cloud, at Hewlett-Packard Company. In this role, he and his team interact continuously with CIOs from a broad range of industries and regions across the globe. “I’m meeting with major CIOs perhaps every day, talking to them about their strategic objectives, what is working better or less well for them right now, and trying to help them understand what cloud computing now makes possible,” he explains. “One of my objectives is to help change mindsets, because cloud computing really does offer a different lens with which to view Page 16 | CTPartners PQR
and understand what is possible.” The potential impact upon the broad spectrum of management strategies may be profound. After all, as Mr. Gillai notes, “Things that previously were the most important in terms of technology and its potential now may be much less important. But people can only appreciate that if they learn how to think differently about technology—and it’s one of our goals here at HP to enable this process.” One subtle but significant insight that Mr. Gillai offers is that large organizations “conceptually get it” when it comes to recognizing that cloud computing offers the promise of speed, agility, cost savings, and other efficiencies. “But in terms of concrete details, understanding the way that this concept translates into a range of possible cloud computing solutions, which can be fine-tuned to fit each large organization and its own particular needs and vision, in terms of all this, corporate leaders are still gaining insights.” In today’s environment, CEOs and boards of directors frequently encourage CIOs to make moves into the cloud. But as with any rapidly developing, disruptive technology, it’s hard to figure out exactly how best to start. This can lead to confusion, false starts, and plenty of missed opportunities. “When we think about cloud computing, the image we like to use is of a journey. Everyone will move to the cloud, over time,” Mr. Gillai emphasizes. “Some changes will happen soon, others will develop more gradually.” Concerns about security, existing technology investments, and other matters will be addressed throughout the journey. One of the ways that HP is trying to support the process is by offering different types of training and certifications through the HP ExpertOne program for customers, including courses to help IT employees, as well as executives, develop a cloud-savvy mindset. There are a number of different models
MANAGEMENT
for cloud computing: private clouds managed by corporations themselves, or public clouds, managed by a service provider for a number of clients, or some combination of both models. HP’s Converged Cloud combines the cloud models to deliver hybrid clouds, which help enterprises leverage both private and public clouds to their advantage. While some startup companies operate entirely in the cloud from their earliest days and may leverage one cloud model, larger organizations often will have thousands of applications and perhaps millions of dollars invested in their technology infrastructure and need flexible hybrid models. HP Converged Cloud extends to both small and large enterprises. “So it’s only realistic,” Mr. Gillai concludes, “to assume that these organizations will combine some traditional operations using technology they already have in place with sourcing from a public cloud and some internally managed operations in a private cloud. The challenge is to make sure that there’s a commonality throughout the organization’s cloud computing strategies, so that you don’t end up with a siloed approach to the cloud which will create new inefficiencies.” Pursuing the Possibilities Given the pace and magnitude of cloud-driven change, it can be difficult to assess where cloud computing is heading, both for service providers and the exponentially increasing number of organizations they serve across the globe. PQR turned to Kerry Bailey, Senior Vice President of Corporate Development for Verizon. He previously served as President and CEO of Terremark, Verizon’s cloud services business and a recognized leader in the infrastructure-as-a-service space. It’s Mr. Bailey’s belief that, ultimately, the cloud computing market will be dominated
by a handful of global platform providers. “When the IT market finally shakes out to a platform-based delivery model, there may be only six or seven providers able to operate at a level of scale and efficiency, and with enough comprehensive services to be able to migrate large applications from the Fortune
“When we think about cloud computing, the image we like to use is of a journey. Everyone will move to the cloud, over time.” —Saar Gillai
500 and other major organizations to the cloud. After all, the cloud itself is truly all about economics and that requires scale and efficiencies.” Verizon’s own experience offers an illuminating case study, since the company is very large and has utilized its own cloud to run many of its applications. “That brings scale,” Mr. Bailey comments, adding, “as we bring more internal workloads and external customers over to our cloud, we can keep scaling these systems and increasing the economics. Just think about the scale and economics that we can offer customers by running a company the size of Verizon on our cloud computing platform.” Part of what can make cloud computing so confusing right now is that, as Mr. Bailey notes, “it’s a new world in the IT industry, everything is moving very fast, and it can seem as though ‘everybody’ is trying to be a cloud service provider these days. There’s a herd of companies from the traditional IT world rushing to become cloud providers. That doesn’t mean they are all created equal,” he emphasizes, “but they are all trying to do it as this is the new buying CTPartners PQR | Page 17
MANAGEMENT pattern of the enterprise.” Meanwhile, he adds, “we have what I would describe as the original disruptive cloud computing companies, such as Amazon, Google, and I’d even say Facebook, providing plenty of motivation, because they’ve created large platforms and demon-
“We expect that by 2020, as much as 60% of this total market, or even more, will be cloud. That will be a huge change.” —Kerry Bailey strated that the cloud can work and drive great economics. We’ve seen this new consumption model turn everything on its head, with cloud companies beginning to take on new ownership of the IT customer as this will increasingly become the way that IT is procured.” Right now, Mr. Bailey notes, total cloud spending is still at an extremely early stage, representing only a tiny fraction of the information technology and communications market. “But we’ve made it through the ‘hype’ stage, when traditional legacy players were stamping the word ‘cloud’ on everything, to now seeing major enterprises moving large amounts of workload to the cloud and benefiting from the speed, agility, and new business models that can be created. Acceleration is pretty strong, which only makes sense because cloud computing makes it easier to consume IT. We expect that by 2020, as much as 60% of this total market, or even more, will be cloud. That will be a huge change.” For Mr. Bailey, as a leading cloud services executive, these are exciting times. “It’s amazing and rewarding for me to watch all these different trends coming together. UltiPage 18 | CTPartners PQR
mately, the legacy IT players—hardware companies, software companies, system integrators, and telecom providers—will need to shift to this new delivery model, but only the most innovative will survive and thrive.” Which brings the conversation back to Verizon, where senior leadership is committed to capitalizing upon the opportunities offered by cloud computing. “We have a saying here at Verizon: Change energizes us. We’re driven by the idea that what made Verizon successful yesterday will not make us succeed in the future. We first started talking about possibilities connected with cloud computing in 2009,” Mr. Bailey recalls, “and our CEO and board have encouraged us to not only understand these big changes, but also to get ahead of them.” But challenges remain. “The biggest challenge for us right now is talent, finding people from the engineering and software level all the way through to senior executives who really understand the cloud and its potential, and who can be part of the process of making this happen.” Meeting the Talent Challenge While cloud computing concepts have been around for some time, and prior delivery models met some of the criteria now used to define “cloud,” the infrastructure, software, and platform-as-a-service marketplaces are still in the early stages of their evolution. As a consequence, only a small number of companies are accepted as true cloud leaders, with successful business models and revenue growth, along with the history of truly delivering ‘cloud services.’ Therein lies the challenge. “From a skills and expertise perspective, larger enterprise technology and services companies will need to find individuals who understand how to navigate large, matrix-based, and complex organizations, while also possessing the entrepreneurial enthusiasm to drive what amounts to a startup business within many
MANAGEMENT of these Tier 1 organizations. That’s a very difficult combination to find under any circumstances, but most especially within an environment like this one,” notes Michael DeSimone, a CTPartners Managing Partner who has led executive searches in the cloud services space for both large Fortune 500 and private equity/venture-backed firms. CTPartners Managing Partner Debra Germaine agrees. From her own experience leading executive searches in the cloud services space, she notes, “The biggest obstacle we face in our quest for talent is the small number of companies that have actually figured this out and monetized cloud computing at a level that captures the attention of large organizations. There is a large and growing demand for skilled executives with proven records in this space, however, we need to cast a wide net and be quite creative in identifying promising candidates.” Ms. Germaine pauses, and then adds, “This is not a market in which we can define specific competencies and backgrounds and then go out and recruit people with the ‘right’ current accomplishments. Very few of them exist and the competition is fierce. We find ourselves needing to explain to clients that everything about the cloud, even the ways that they evaluate and interview candidates, will be different from what they have experienced in the past.” Functionally, Mr. DeSimone says, “cloud demand is highest for product/solutions, technology, and strategy executives who can help shape these businesses.” But since attracting top functional leaders from the few proven, large-scale cloud players can be difficult, “companies may need to consider those who have helped build cloud businesses that never really took off or are still in relatively early stages. Until there is a greater supply of people with successful track records in the space, top leaderships may need to forego this in favor of finding
individuals who have at least created a cloud operation of some sort and who show promise of producing better results next time around.” This same dynamic is playing itself out in business centers around the globe, with expansion into the cloud a high priority for more and more management teams. “When we speak about cloud computing, I like to say that we have moved from a very trendy topic to a very real trend with strong momentum,” notes Lilian Poilpot, a Partner in CTPartners’ London office. Mr. Poilpot concludes, “Globally, the hunt is on for people who not only understand the basic parameters of the transformation that is taking place—they know how to think about the cloud in tactical as well as technological terms. Desirable candidates,” he concludes, “will possess the right DNA to be an agent of change.” Making the move into the cloud won’t be simple. But for organizations with the right cloud team in place to help navigate the journey, the rewards will be well worth the effort. ■ Sound Bites:
The CIO’s Journey Into the Clouds PQR asked two prominent CIOs for a first-hand account of what it has been like to migrate a major organization to cloud computing. Listen to interviews with: Charles Beard, Jr., Senior Vice President, Chief Information Officer and General Manager Cybersecurity, Science Applications International Corporation (SAIC) David Thompson, Executive Vice President, Global Operations and Technology, Chief Information Officer, Western Union
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MANAGEMENT
THE
DIGITAL BANKING MANDATE As Customers Clamor for Digital Options, Banks Fight to Gain Momentum and Relevance
A
s the digital revolution continues to disrupt and remake a broad swath of industries around the globe, banking is now center stage in what may prove to be a long fight for digital
relevance. With consumers no longer content using mobile technologies merely to check account balances, demand for holistic mobile services from their financial services providers is skyrocketing, so much so that the once distant risk of non-financial services companies encroaching on market share is now an active threat. Customers wish to pay for a cup of coffee at a Seattle café with their phone, transfer funds by laptop in London, then pay bills in selected currencies via a tablet in Hong Kong, all from the same account. This is only the beginning. As the marketplace bursts with new mobile and digital options from both new and established players, banks urgently need to keep pace with customers’ evolving preferences and digital demands. >>> Photography left (top): © istockphoto.com/deenphoto; (bottom): © istockphoto.com/kizilkayaphotos
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MANAGEMENT The management challenge is significant. As Sam Plowman, Executive General Manager of Direct Banking for National Australia Bank in Melbourne, succinctly puts it, “Traditionalists are embracing the digital future, but are not sure how to lead it.” The marketplace is aggressively defining new challenges and opportunities for financial services companies and their management teams. To maintain their competitive position and relevance with current and future customers, banks must develop a clear digital strategy that takes Pay for coffee with a smartphone swipe into account their digital offerings as well as third-party products and and at quite the same pace. Digital banking is expected to overtake joint ventures. Most critically, banks need leadership tal- branch utilization by 2015, according to a ent with the strategic vision and political PwC (PricewaterhouseCoopers) survey of fortitude to ensure they not only meet but 3,000 banking customers across nine develanticipate—through innovative products oped and emerging markets. What’s more, and services—the consumer demand for a the majority of the respondents said they would be willing to pay an additional fee for digital economy. the convenience of digital banking services. Branch banking surely will not die, but its Rapid Growth Mobile payments are projected to reach $90 reign as the foundation of banking sales and billion in the U.S. by 2017, according to For- service now is coming to a swift end. rester Research, Inc., the Cambridge, Massachusetts-based technology and business research firm. And Hampshire, U.K.-based Juniper Research Ltd. sees worldwide mobile payments leaping to an eye-popping $1.3 trillion by 2017. More important, digital advancements will drive efficiency and begin to isolate lesser channels to the backwaters, very similar to what the digital camera did to film, Page 22 | CTPartners PQR
The Opportunities At a time when banks globally are battling thinning margins and aggressive regulations, one of their saviors is, surprisingly enough, their own consumer base. As customers become more comfortable with digital solutions, financial service companies can take advantage of the efficiencies offered by digital Photography: © istockphoto.com/RyanJLane
MANAGEMENT
New ways to bank and pay bills
services as well as the multitude of cross-selling initiatives driven by the rapid advancements of big data. In established markets, digital technologies will allow banks to design a future branch strategy, one that allows for aggressive cost savings and increased services if executed correctly. Equally important, banks can begin to plan acquisition strategies, for both customer and competitor, with spirited discussions around significant cost savings in branch infrastructure. As banks pursue growth, digital access is an especially valuable tool for reaching those who reside in remote areas outside of urban centers and may not currently have access to traditional branch banking. “Think of the scale of countries like China, India, and Australia. Customer acquisition is no longer dependent on having a countrywide network. Banks instead can build technology platforms Photography (left): © istockphoto.com/Mario13; (right): © istockphoto.com/pressureUA
to address a greater percentage of banking needs to complement a more efficient branch network,” says Nicholas Evans, a Singapore-based Partner with the CTPartners Financial Services Practice. Mobile phones are the interaction vehicles of choice in some parts of emerging Asia and are especially present throughout southern China, India, and Africa. As Matthew Dooley, Managing Director of the Hong Kong-based consultancy Connected Thinking and former Head of Digital Experience for HSBC, puts it “Banks now can address a whole new population that was not reachable through traditional banking models—‘the unbanked.’ They don’t need to own the infrastructure anymore; they just have to provide valuable services.” And digital banking offers much more than a way for banks to reduce costs or ease market entry. Social media and interactive communication tools offer a ready capability for banks to keep in close contact with customers to build loyalty, personalize services, and cross-sell bank products. Younger consumers, in particular, are expected to reward those banks that provide the most innovative and customer-friendly digital offerings. >>> CTPartners PQR | Page 23
MANAGEMENT The Challenges The new digital business environment presents inherent leadership challenges. One of the greatest hurdles banks face as they address their digital transformation is the speed of change around them. Many of the new products and services arriving in the marketplace come care of innovative companies outside of traditional banking, some of which lie outside of the domain of banking regulators. Inevitably, some of these new services will have the potential to leave traditional banks behind. “Simple day-to-day digital payment relationships can quite easily live outside of the traditional banking stream,” says Robert Voth, a Cleveland-based Managing Partner with financial services and digital expertise at CTPartners. “Once consumers become fluent in digital payments without a bank at the foundation, it opens up everything to question. Checking, savings, car loans, and mortgages—all of these products can be researched, sourced, and potentially serviced by non-banks.” Challenges are plenty, including protecting client privacy while ensuring security in digital services, building an integrated and consistent experience across channels, and devising new products and services that work fluently across the digital channels. The shift toward digital banking also gives consumers greater freedom to choose among banking options. No longer are people effectively tied to the brick-and-mortar building on the corner. “Banks have been very arrogant in the past with the sense that they could control the customer. No one controls the customer anymore,” says Mr. Dooley. What will be the combined effect of these Page 24 | CTPartners PQR
forces of change? Mr. Evans says, “The way that people interact with banks will be tremendously different in five years, and the speed of this transformation will be incredibly quick. What banks need most are people who understand the opportunities of the technology.” The Leadership Perspective Identifying and recruiting exceptional executive talent to lead digital initiatives is paramount for all companies, especially those with deep-seated business-to-consumer relationships. Highlighting the need for management teams to adopt a customer-centric viewpoint when designing digital interfaces, Mr. Dooley relayed his own experience leading the launch of HSBC’s Internet banking platform in Asia in 2000. He described, “The first solution that we used for Internet banking simply mirrored the terminology, look, and feel of the systems we used at the branches.” But customers using digital banking interfaces usually don’t have bank staff at hand to assist with difficult terminology and processes. Customers found the interface confusing. Mr. Dooley said, “We learned then that we need to put the technology into the hands of the consumer and watch how people use it. That changes everything. Banks have been very slow to simplify their processes and terminology, and actually get things in front of customers in a way that they could use simply.” Devising digital services with intuitive simplicity for consumers—on par with that found in other popular digital products—is a clear mandate for bank leadership today. Singapore-based OCBC Bank utilizes a
MANAGEMENT noteworthy process, according to Mr. Dooley. OCBC has a customer experience team, which reports directly to the CEO. The team creates prototypes of new products and services, and then observes customers who have been invited to test the services. “That team physically resides on the same floor as the compliance people,” he says. “Banking is all about risk management, so innovation is often seen as raising red flags. Compliance people are brought in to say ‘No’ and business people are brought in to say ‘Yes.’ Bringing them together and letting them convince one another how to respond to customer needs is an interesting management strategy.” “Banks need a top-down approach to digital transformation,” says Marc Gasperino, Managing Partner and Global Head of the Digital Practice at CTPartners in New York. “The initiative must be championed by the CEO, and the commitment to change the organizational structure and cultural tone of the company must bleed through the organization.” Responses to digital transformation will require leadership with strategic expertise, product development talent, marketing savvy, and user experience insight, all with the political savvy to push through a business environment that may be loath to change. Strong demand for such digital leadership at global banks is ratcheting up compensation packages for the best of these leaders. Some banks are pursuing the needed digital knowhow and creativity by engaging in partnerships and joint ventures, or by retaining consultants. Others are looking outside of the traditional banking industry, as some of the most forward-looking digital talent resides in
retail, travel, and other industries. “In order to hire the most talented digital leadership from outside markets, banks need to be prepared to align digital operations, technology, marketing, customer engagement, and services currently residing in other business units with the digital strategy that these leaders need to employ in order to achieve success,” says Mr. Gasperino. The management hurdles are significant. Yet there is no doubt that banks enjoy a tremendous opportunity to leverage their extensive customer bases and product offerings in new and as yet unimagined ways. “Consumer behavior is evolving at a rapid pace, perhaps more rapidly than some banks acknowledge. The challenge is, how quickly can financial institutions institute viable digital platforms?” asks Mr. Voth. “By viable I mean economically viable, internally viable with the bank’s IT systems, integrated within their existing channels, and workable as a product from a technology and visual side for consumers. How quickly can banks evolve to that? For the financial institutions that get there quickly, the competitive advantage will be huge. And the key to unlocking this opportunity is strong, experienced leadership.” ■
By The Numbers: A Statistical Look at Today’s Mobile and Digitally Demanding Consumer
click to view CTPartners PQR | Page 25
FIVE
GUIDING PRINCIPLES OF MY CAREER
Daniel Alegre President, Google Global Partner Business Solutions; Former President, Google Asia Pacific
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NO REGRETS “If you pigeonhole yourself in one specific view of what you want to do, then you limit yourself in terms of opportunity. I am never disappointed with the direction of my career, because I actually don’t give much thought to it. At every juncture, there is a difficult decision that one needs to make. Once you make that decision, you just go for it. You are happy with it, and you never look back.” Hear more from Daniel Alegre on seizing career opportunities
w
ALL BUSINESS IS GLOBAL “There is no such thing as a local job. Every single thing that every industry does is impacted by the global nature of the world’s economy, and I have realized the importance of keeping that global mindset. There are industries that you would think are hyperlocal. For instance, you go to the doctor, get an X-ray, and a technician at the hospital looks at your X-ray. But with technology and communication today, your X-ray might be reviewed by a radiologist in Asia who sends the feedback to your doctor in real time. If one does not comprehend that everything you do is now tied to the global economy, you are going to be left behind.”
e
CULTURE IS LOCAL “After opening your mind to the global economy, flip that on its head, and recognize the importance of understanding local nuances and local cultures when doing business. By understanding—before you go into a meeting—what you can expect from the other side, it changes the dynamic of the conversation, and most importantly, the relationship that one builds with those individuals.”
r
INTEGRITY CANNOT BE COMPROMISED “There is one thing that you own and control in your life, which is your integrity. In the past, if you burned too many bridges in your country, you could move to another country and no one would know you. You could escape your past. With today’s global information flow, if you compromise your integrity and try to escape it anywhere, it is likely to come back and haunt you. Integrity is critical to interpersonal relationships across cultures. If you have integrity and the other side recognizes that, it is the basis for long-term and solid bonds.” Hear more from Daniel Alegre on building trust
t
INSIST ON PASSION “I need to be passionate about what I am doing. The second I do something that doesn’t have the component of enriching my life and enjoyment, that is the second I have taken a wrong turn. Across my career, whenever I thought I might be stagnating, I was immediately open to a new adventure, a new opportunity that would expand my horizons and really get me motivated. I am not the individual who can wake up in the morning dreading going to work. When I am not passionate, it is time for me to make a change.”
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Photography (right): Cindy Charles
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TO LEAD BRIAN M. SULLIVAN
A Commitment to Technology
“From its inception, CTPartners has been committed to being the most technologically advanced firm in the executive search industry.” —Brian M. Sullivan, Chief Executive Officer, CTPartners
Whether we’re talking about cloud computing, social media, digital banking or any number of other recent developments, the transformative power of new and evolving technologies has never been more apparent. We live and work in an era in which technology is literally redefining everything from the way that organizations manage their businesses to the fundamental nature of their customer relationships. New horizons are opening up for companies and consumers alike. And the pace of transformation keeps accelerating. As these changes unfold globally, this is an especially exciting time for me, as well as for my colleagues at CTPartners. From its inception, CTPartners has been committed to being the most technologically advanced firm in the executive search industry. That’s not surprising, since our institutional roots are in a recruitment firm that specialized in serving the technology and VC sectors. My colleagues and I recognize and value the potential of cutting-edge technologies to drive innovative thinking, exceptional customer service, and outsized results. We understand that strategies that are “good enough” today won’t satisfy tomorrow’s needs—especially within a global business arena in which top-quality talent provides that ultimate competitive edge. As CTPartners rapidly has evolved from its early roots into a firm with expertise across business sectors and around the globe, we have embraced technology as a key differentiator. In a profession that has scarcely been noteworthy for its adoption of bold, new technologies, our firm has aimed to transform the search process and client experience with innovative, proprietary tools such as ClientNet®, Candidate
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Central®, and the 40-Day Audit™. CTPartners’ decision last year to relaunch PQR, our highly regarded magazine for global executives, as a multifaceted, multimedia publication, was yet another step in this process. PQR aims to highlight state-ofthe-art strategies and insights from leading executives, corporations, and business experts with a potent new-media mixture of articles, audio interviews, and other interactive elements. Stay tuned for much more. What else is happening on the technology front? Well, as someone who has spent my entire career in the executive search industry, it’s interesting to see the contribution that social media tools can make within certain recruitment situations. When a job search can draw upon a candidate pool of a broad, more general nature, it makes sense for companies to “do-it-themselves” by drawing on social media sites to cast a wide net. At CTPartners, we applaud this trend, which is reminiscent of the way that the Internet has replaced the yellow pages for many users. It’s a great cost saver for companies when it comes to what might be described as “commoditized” HR transactions. We’ve never been interested in the race to the bottom. A development like this one allows our firm to collaborate with corporate clients across the globe in the ways that we do best: by partnering with them to identify, recruit, and retain the expert, high-end talent necessary to open profitable new markets, develop and implement strategies, create and maintain enterprise value, and continuously outperform the competition. Global transformational executives will always require sophisticated recruitment and assessment. At CTPartners, we will be there to deliver, utilizing pathbreaking technologies in our commitment to truly exceptional customer service. ■
Photography: Richard Howard; Illustration: © istockphoto.com/Photocanal25
What’s on CTNet.com For an ongoing information exchange and coverage of current topics, including strategic talent management trends, emerging market developments, new C-Suite priorities, and much more, please join us at www.ctnet.com.
Hear Brian Sullivan’s comments on “CTPartners & LinkedIn”
Also read “HR takes its (rightful) seat on the board” Stay abreast of other timely topics with our Ahead of the Curve series
And to continue the conversation with top global leaders, stay tuned for the next edition of
PQR, arriving June 2013. FOLLOW US ON:
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Stay tuned...
The next edition of
PQR
arrives June 2013.