Fall 2016 insights

InSights

A publication from the Albers School of Business and Economics the Center for Leadership Formation Fa ll 2016

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it being defined in terms of size: an extent, amount, or intensity that is above average. Synonyms for “great” include words such as considerable, substantial, serious. m A search for definitions of “extraordinary” suggests it goes a step further, being defined as very unusual or remarkable or unusually ly al great.

Synonyms include words such as exceptional, l Mu Alan amazing, astonishing, sensational, incredible, or phenomenal. In essence, the term extraordinary goes beyond greatness — it suggests very significant impact.

Applying this to organizations, let’s start by assuming that organizations aim to be successful. At minimum, for-profit firms require financial success. They measure this in terms of growth, profit, return on equity, for example. Nonprofit organizations seek outcomes that serve public interests with funding they receive from donations, taxpayer support, or Marilyn Gist and Alan Mulally endowment. Nonprofits typically measure service delivery What is the distinction between “great” and “extraordinary”? and/or problems solved.

And what difference does leadership make? These are So if organizations aim to be successful, those that are compelling questions because organizations have such a considered great would be those whose success is above powerful effect on society, and on the people who work for average on relevant measures. For example, in Good to Great, them. The questions are also compelling for organizational Jim Collins (2001) examined how companies beat the general leaders because leaders play a major role in determining stock market by at least 3 times over 15 years. And those that organizational outcomes. This article will address these are extraordinary would have ‘unusual greatness’ according questions, providing views from both authors. To begin with, to the definition above. This means they have phenomenal we’d like to frame our use of the terms great and extraordinary. success or very significant impact on relevant measures or in m An internet search on definitions of the word “great” shows Continued on page 4

Letter from the Dean

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in this issue Moving from Great to Extraordinary / 1 Lessons From a Legacy / 3 Extraordinary: A CEO Perspective / 6 Recapturing The American Business Leadership Mystique / 8 What Differentiates the Startups Likely to Move from Great Ideas to Extraordinary Success / 9 Social Enterprises: Business Models with Time-Tested Traits of Success / 10

TrendWatch / 12 Big Data and Data Analytics: Opening New Margins of Competition /13 Upcoming Events / 16

s you are receiving this edition of InSights, I am starting my 16th year as the dean of the Albers School. I am not very reflective and looking back is not in my DNA. I have to be forced to do that, but somehow the theme of “Great to Extraordinary” moves me to do that about our Leadership EMBA (LEMBA) program. The program is in its 11th year, and there is no program that we are more proud of! It has gone from Good to Great in a short period of time! Our LEMBA alumni go on to do great things, and it is ranked 12th in the nation among EMBA programs in the 2017 US News and World Report. The last issue of InSights focused on the impact of the program and why it deserves such recognition!

LEMBA is a great program, but like any program, it can get even better, so we want to make it extraordinary! As you will read elsewhere, that became much easier when Alan Mulally, retired President and CEO of Ford Motor Company and Boeing Commercial Airplanes, agreed to join the Center as a Senior Fellow. He is a transformational and extraordinary leader who will help take our Center for Leadership Formation and programs it runs, the Executive Leadership Program and LEMBA, to a higher level. We are excited and honored to be working with him!

I continue to be amazed by the great work our faculty and staff members do with our executive students. Students marvel at their transformation as skilled practitioners, savvy business leaders, and contributors to the Common Good.

Please enjoy reading about the theme of “Great to Extraordinary!”

Joseph M. Phillips Dean, Albers School of Business and Economics

Center for Leadership Formation Staff Dr. Marilyn E. Gist Associate Dean, Executive Programs Professor, Department of Management Executive Director, Center for Leadership Formation Ariel Rosemond Associate Director Kathleen McGill Manager, Executive Programs Outreach Lorri Sheffer Programs Manager

Center for Leadership Formation Fellows Alan Mulally Senior Fellow, Former President & CEO Ford Motor Company Phyllis Campbell Chairman, Pacific Northwest, JP Morgan Chase Jim Dwyer President & CEO, Delta Dental of Washington Allan Golston President, US Program, Bill and Melinda Gates Foundation Jim Sinegal Co-Founder & Retired CEO, Costco Wholesale Brian Webster President & CEO, Physio-Control, Inc.

Center for Leadership Formation Advisory Board Lindsay Anderson Vice President Quality, Boeing Commercial Airplanes Scott Armstrong President & CEO, Group Health Cooperative Scott Bond President & CEO, Washington State Hospital Association Sallie Bondy Director, Business Operations for Boeing Fabrication, The Boeing Company

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Lessons from a Legacy Ariel Rosemond

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n March 21st of this year, the world lost a great business pioneer and innovator. It is fitting that we pause and reflect on his legacy.

Dr. Andrew Grove fled Communist Hungary in 1956, to graduate at the top of his class at the City College of New York and earn a PhD in Chemical Engineering from the University of California, Berkeley. Intel Corporation, with Grove as its Chief Executive Officer and Chairman, would help

delivering microprocessors was a testament to the focused genius of the company’s executive leadership team. It is also only a preamble to Andy Grove’s story.

Extraordinary businesses, and the executives who lead them, relentlessly pursue the mastery of purpose. The most successful leaders display it through their operational efficiencies, industry dominance, and influence over the market. Organizational leadership must establish and maintain a culture of consistent effort towards this pursuit.

Grove famously led Intel’s dramatic transformation in response to the commoditization of its central offering, the memory chip. In successfully transitioning a dynamic framing of purpose, Intel dominated the semiconductor industry and positioned itself to benefit from the massive growth in personal computing.

Engaging his incredible ability with

book Only the Paranoid Survive, Grove brought the concepts of strategic dissonance and inflection points into the classroom and into executive leadership discussions around the world. Business leaders look for the clues that industry fundamentals are changing and must be ready to act. They achieve and retain success through proactive reinvention.

Executives who take this lesson to heart are primed to meet the needs to

“You have to understand what it is that you are better at than anybody else and mercilessly focus your efforts on it.”

– Andrew s. Grove, Time magazine

create and subsequently dominate the Dynamic Random-Access Memory (DRAM) industry. Intel’s headquarters, would become part of the “Silicon Valley”— the global hub for technology and innovation for most of the last half-century. The success of Intel in

marketing and management, Grove made the “Intel Inside” brand the standard in PC hardware, while also contributing business management knowledge with his insightful books.

In writing for Stanford University Graduate School of Business and in his

adapt and overcome. The competence to welcome and influence change is a hallmark of extraordinary business leadership.

Since his passing, much has been written about Andy and his legacy.

This funny, direct, argumentative, highly Continued on page 7

Mike Butler President of Operations & Services Providence Health & Services Dan Dixon Senior Executive & Vice President of Public Affairs, Providence Health & Services Mike Ehl Director of Aviation Operations Port of Seattle Brad Harlow CEO & President, PhysioSonics Aaron Howes Vice President, Risk Management & Insurance Expeditors International

David Jackson Founder & Chief Strategist Jaxx Strategic Partners Harvey Kanter Chairman of the Board, Chief Executive Officer and President, Blue Nile Jim Klauer Senior Vice President, Non-Foods Merchandising Costco Wholesale Paul Lambert Founder, Forum Solutions, LLC John Milne Founder & CEO, Avnew Health

Doug Moore President, McKinstry Sarah Patterson Executive Vice President & Chief Operating Officer, Virginia Mason Medical Center Chris Rivera President & CEO Nativis, Inc. Dan Wall President, Global Products Expeditors International of Washington

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Moving from Great to Extraordinary: Why Leadership Matters Continued from page 1

other ways.

Many factors contribute to an organization’s outcomes, but leadership is critically important. It is leaders who prepare organizations for change and help people through that change (Kotter, 2001). They set direction, align, and motivate people. Without strong leadership, organizations tend to stagnate or run aground. Yet for all the discussion on leadership, many people are unclear how to put these ideas into practice to achieve organizational greatness, let alone extraordinary impact.

This article is the first in a series that explores “how to” in conjunction with Alan Mulally, the Center for Leadership Formation’s Senior Fellow.

Mulally has been recognized as #3 among the world’s 50 greatest leaders (e.g., Fortune, 2014), and one who delivered extraordinary organizational results (cf., Hoffman, 2012). In a quote from Fortune, Mulally was described as “Ford’s miracle worker [who] saved the company without resorting to bankruptcy or bailouts by doing what previous leaders had tried and failed to do: change Ford’s risk-averse, reality-denying, CYA-based culture.

After earning $7.2 billion of profit last year — far more than General Motors or Chrysler — the company paid its 47,000 UAW workers a record $8,800 each in profit sharing.” (Fortune, 2014).

Of note, Mulally’s work is considered extraordinary because he not only achieved great financial results (and during the Great Recession when US auto manufacturers were at risk of failing), but he positively impacted the organizational culture and the value chain.

In this article, we preview the key principles in Mulally’s leadership approach. Subsequent issues of InSights will treat each of these principles in depth. We close by suggesting additional criteria that lead to extraordinary outcomes.

Mulally’s approach begins with the formation of a compelling vision and a

The contributions of leaders are essential to organizational Excellence.

comprehensive strategy for achieving it. He looks for one that fits the competitive and economic context (e.g., business need) but also is clear enough to rally everyone behind it.

At Ford Motor Company, after extensive research leading to a strong understanding of the market and the company’s situation, he formulated the vision and strategy of “One Ford” — implying that everyone and all of the company’s efforts needed to unify around this vision. In turn, the vision became the focus for decisions on which businesses to keep and spin off, how to align the company’s management and unions, and how to gain the support of suppliers and dealers.

Once the vision is introduced, Mulally follows through with “relentless implementation.” Import-antly, he believes in the plan and persists in aligning and motivating everyone’s efforts toward the unifying vision.

There are three elements to his approach to implementation, and they are embodied in the “Business Plan Review” process he developed.

1. The development and use of metrics: Knowing the organization’s vision, each leader is tasked with identifying a strategy, plan, and metrics for his or her part of the organization that affect progress toward the overall compelling vision and strategy for the company. These metrics must be able to be tracked and reported.

2. Transparency: All leaders must share with others how their part of the

organization is performing each week. Through this transparency, everyone knows how the organization as a whole is doing.

3. Collaboration: Mulally’s “Working Together” principles and practices invoke a culture that respects the dignity of all employees, avoids fear and intimidation, and substitutes a norm of supporting each other.

As problems surface in the weekly Business Plan Review, separate meetings are held with a team of people who can support progress in those areas. These collaborative efforts continue until the problems are resolved.

In sum, the extraordinary results Mulally achieved came from a specific leadership approach and management system. It can be applied to other organizations, but must be used as a whole. For example, vision does not work without implementation. And the use of metrics in a climate of fear will reduce transparency. Mulally notes that leaders are then left trying to “manage a secret.” So it is critical to embrace the entire approach, something that is challenging for many leaders.

We close with considering criteria beyond financial outcomes that comprise extraordinary results. In a time when the world’s needs are great, organizations have three compelling opportunities to have significant and positive impact on society beyond financial gain and employment opportunities. One involves innova-

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Continued on page 5

tion. The extraordinary impact of companies like Apple and Microsoft came from introducing significant innovation into the market. Both Steve Jobs and Bill Gates are credited with compelling visions that were extraordinarily innovative at the time.

The impact has significantly benefitted people’s lives worldwide.

Another path to extraordinariness is improving the quality and dignity of work life. Both Fortune and Seattle Business Magazine, for example, publish annual lists of the best companies to work for. Nationally, Google/Alphabet has ranked #1 for seven times in ten years in Fortune’s list. Both sources use employee surveys to decide on rankings.

Fortune indicates that “two-thirds of a company’s survey score is based on the results of the Trust Index Employee Survey, which is sent to a random sample of employees from each

company. This survey asks questions related to employees’ attitudes about management’s credibility, overall job satisfaction, and camaraderie. The other third is based on responses to the Culture Audit, which includes detailed questions about pay and benefit programs and a series of open-ended questions about hiring practices, methods of internal communication, training, recognition programs, and diversity efforts.” These issues clearly relate to the quality and dignity of employees’ work life.

Finally, extraordinariness can be achieved through the impact an organization has on the larger societal good. One example is Starbucks, which has been recognized for its global development work with coffee growers as well as direct-service work to improve disadvantaged domestic communities. However, the company is also known for progressive

With compelling vision, comprehensive strategy, and relentless implementation, leaders can move their organizations from great to extraordinary.

Alan Mulally served as president and chief executive officer of The Ford Motor Company and as a member of Ford’s board of directors from September 2006 – June 2014. Mulally was named #3 on Fortune’s “World’s Greatest Leaders” in 2014, joined Google’s board of directors in July 2014, and the board of directors of Carbon 3D in May 2015.

Mulally led Ford’s transformation into one of the world’s leading automobile companies and the #1 automobile brand in the United States. Prior to joining Ford, Mulally served as executive vice president of The Boeing Company, president and CEO of Boeing Commercial Airplanes, and president of Boeing Information, Space and Defense Systems.

He has been named one of the 30 “World’s Best CEOs” by Barron‘s magazine, one of “The World’s Most Influential People” by Time Magazine, and “Chief Executive of the Year” by Chief Executive magazine. He also was honored with the American Society for Quality‘s medal for excellence in executive leadership, the Automotive Executive of the Year, and the Thomas Edison Achievement Award.

Mulally serves on President Obama‘s United States Export Council. He served as co-chairman

of the Washington Competitiveness Council, and has served on the advisory boards of the National Aeronautics and Space Administration, the University of Washington, the University of Kansas, the Massachusetts Institute of Technology, and the United States Air Force Scientific Advisory Board. He is a member of the United States National Academy of Engineering and a fellow of England’s Royal Academy of Engineering. Mulally has also served as President of the American Institute of Aeronautics and Astronautics and as Chairman of the Board of Governors of the Aerospace Industries Association.

Mulally holds Bachelor and Master of Science degrees in aeronautical and astronautical engineering from the University of Kansas, and a Masters in Management from the Massachusetts Institute of Technology as an Alfred P. Sloan Fellow.

Dr. Marilyn E. Gist is Associate Dean for Executive Programs and Professor of Management, Albers School of Business and Economics, Seattle University. In addition, she serves as Executive Director of the Center for Leadership Formation providing academic direction for the executive degree and certificate

employment practices that support health benefits and educational pursuits for part-time, retail workers — a practice that Howard Schultz introduced to an industry known for low wages and high turnover.

In sum, the contributions of leaders are essential to organizational greatness. This article is the first in our series on the leader’s unique role and contribution in an organization.

Subsequent issues will address how the leader can hold him- or herself and the team accountable for results that affect all stakeholders and society as a whole. With compelling vision, comprehensive strategy, and relentless implementation, leaders can move their organizations from great to extraordinary.

References Collins, J.C. (2001). Good to Great. New York: Harper Collins.

Fortune Magazine (March 20, 2014). “The World’s 50 Greatest Leaders.”

Hoffman, B.G. (2012). American Icon: Alan Mulally and the Fight to Save Ford Motor Company.

New York: Crown Publishing Group, a division of Random House, Inc. Kotter, J. P. (2001). What Leaders Really Do. Harvard Business Review.

programs. Prior to this, Marilyn held the Boeing Endowed Professorship of Business Management at the University of Washington, where she was also the Faculty Director for Executive MBA programs. In addition to her academic roles, she has served in management positions in the public and private sectors, and has extensive consulting experience.

Marilyn is an internationally recognized scholar.

She has over 25 publications in leading scholarly outlets. Google Scholar, which monitors how often a publication has been cited by other scholars, provides one measure of the quality or importance of a person’s work. Marilyn’s work has been cited roughly three thousand times in articles and books that were published subsequently by other people. Her current publications include “Developing Dual-Agenda Leaders” (co-authored with Professor Sharon Lobel) in the 2012 Journal of Corporate Citizenship, and ”Self-Efficacy” (coauthored with Angela Gist) in the 2013 Oxford Bibliographies in Management.

Marilyn earned her BA from Howard University and her MBA and PhD from the Smith School of Business at the University of Maryland, College Park.

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EXTRAORDINARY: A CEO Perspective

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HARVEY KANTER

oving from great to extraordinary is much easier to say than do. After all, “extraordinary” is something unusual or remarkable, and when you think about it, it’s pretty rare. Being extraordinary requires a committed mindset, a relentless drive, a strong team, and the ability to power through setbacks.

In 2012, I was recruited by Blue Nile, a leading retailer of diamonds and fine jewelry, to lead its evolution as a retailer poised to meet the demands of the next generation of consumers.

Though I had a lot of retail experience already, including at Carter Hawley Hale’s Broadway Department Store (now part of Macy’s), Sears, Eddie Bauer, Aaron Brothers, Michaels, and Moosejaw Mountaineering, this was a new challenge. To accomplish the vision set forth for Blue Nile, “great” wouldn’t be good enough. I needed to lead the team to be extraordinary.

As it relates to business, a clear focus on the challenge is important.

I’ve faced significant challenges before.

For example, I joined Moosejaw in January 2009, and the company, like many retailers at the time, was hammered hard by the recession and challenged in sales and profitability.

However, a strong business plan and laser-focus on the customer led to a turnaround. Blue Nile, on the other hand, already had an enviable business model and a reputation for being

obsessively customer-focused. To evolve the company, we would have to become extraordinary. That meant literally redefining retail.

Today’s consumer, including the coveted millennial, doesn’t care if a retailer is online or not. They demand a great experience anytime and every time, whether they’re on a phone, a tablet, a PC, or in a store. To leverage this environment, the team at Blue Nile reimagined retail and put the company squarely on the cutting edge in a few ways.

industry. Finally and most recently, the “Webroom” concept we launched in June of 2015 is fundamentally changing how our customers shop for jewelry.

The Webroom is a hybrid online/ offline shopping experience in one low-overhead installation. Unlike traditional jewelry stores, customers can walk into a Webroom and independently try on an assortment of engagement rings, view jewelry from every angle in dazzling display cases, and get pressure-free advice from

“To evolve the company, we would have to become extraordinary. That meant literally redefining retail.”

First, Blue Nile went all in and created a responsive design website in 2013, which renders elegantly on a PC, tablet, or phone. The company was among the first retailers—and certainly the first jeweler—to do so. Next, clearly understanding the importance of social media for consumers, we made it a priority to supplement Blue Nile’s already stellar reputation. Far more than a “check the box” novelty, the company sees social media as a critical tool for building awareness and loyalty, and believes it is instrumental in consumer consideration. We’re clearly doing something right; Blue Nile was just recognized by Internet Retailer as America’s 10th best social media marketer, surpassing many larger brands in and out of our

non-commissioned consultants. All transactions continue to happen online via in-store tablets or the customer can choose to order at a later time on their own smartphone, PC, or tablet, through the Blue Nile website.

This vision, which puts Blue Nile in a leadership position, is part of the emerging trend of “omnichannel” marketing. There has been a lot of buzz about this re-imagined retail experience. When reporters write about the omnichannel trend, Blue Nile is almost always mentioned as a pioneer. Taken together, these efforts are dramatically shaping and reshaping retail. With a clear focus on the challenges we face and a relentless drive to meet them, we’re moving from great to extraordinary.

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Lessons from a Legacy

Moving from great to extraordinary is achievable with clear goals and hard work.

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But extraordinary efforts are not necessarily all about business.

There are other critically important elements as well.

Back in 2014, I toured Fred Hutchinson Cancer Research Center, one of the leading U.S. research institutes, with three Nobel Laureates and world-class researchers in immunotherapy. As a cancer survivor, I was impressed by the work being accomplished there, and I committed Blue Nile to the “Obliteride,” an annual bike ride that raises money for the organization. After only two years of participation, I’m pleased to say that Blue Nile has become a significant contributor to the fundraising total and even hosts a rest stop along the way. What we have accomplished working together with the Hutch is extraordinary in my view.

Simply put, moving from great to extraordinary is achievable with clear goals and hard work. As we have at Blue Nile, leaders must be sure to have forward thought, push boundaries, and give your consumers or audience what they want, even if they don’t yet know that they want it.

Harvey Kanter is Chief Executive Officer, President and Chairman of Blue Nile, Inc. He has an MBA from Babson College and a BS from Arizona State University. Kanter is a graduate of Seattle University’s Executive Leadership Program and a member of the Center for Leadership Formation’s Business Leadership Advisory Board. Harvey also serves on the advisory boards of the UW Bothell School of Business and on the Jewelers for Children Special Programs Committee.

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intelligent and irreverent business pioneer was an exemplary business leader and educator. He was a close friend and guiding figure to the charismatic pioneer of personal computing, Steve Jobs, and a mentor to scores of others. Intel employees still remark on the positive impact of his “One-on-One” leadership development techniques on their careers. It is here that we find yet another interesting lesson in the study of executive leadership.

Much of Andy Grove’s remarkable legacy is centered on his extraordinary levels of influence, on the personal computer industry and management practice. He succeeded in mastering his purpose and in leading Intel to do the same.

When the conditions demanded, Intel reacted to the market, with incredible results. Finally, his great influence over technological innovation and business management is well recognized and respected. The most influential business leaders must be oriented to creating value for the customer, investor, supplier, employee and mentee. Andy Grove left a legacy of great value.

“There is at least one point in the history of any company when you have to change dramatically to rise to the next level of performance.

Miss that moment — and you start to decline.”

– Andrew S. Grove, fortune magazine

Executives striving towards extraordinary performance will extract lessons from Andy Grove’s legacy. To wield any significant influence over the long run, the competencies to develop are the discipline to lead, the mindset to recognize and respond to challenge, and the orientation to satisfy the changing needs of the stakeholder.

Ariel Rosemond is Associate Director of the Center for Leadership Formation at the Albers School of Business and Economics, Seattle University. Ariel is also a graduate of Seattle University’s Executive Leadership Program and Executive MBA.

“Businesses fail either because they leave their customers or because their customers leave them!”

– Andrew S. Grove, Only the paranoid survive

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Recapturing The American Business Leadership Mystique Rubiná mahsud

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ince childhood, I have always thought of extraordinary leaders as those who think of others before themselves.

During a crisis or in the wake of a disaster, leaders are just like ship captains and plane pilots who are expected to evacuate others to safety first. From this perspective, let’s take a look at the actions of business leaders in America today, focusing on CEOs. Historically, American businesses have been known and admired globally for their leaders’ relentless innovation, imagination, and job creation. Because of these qualities, American companies created demand that never existed before and catalyzed new industries and markets around the world.

American businesses and their leaders inspired the world with their ability to mobilize human energy and achieve solid consistent growth and profitability for their companies and the economy.

Personally, the mystique of American business and its management led me to embark upon my Ph.D. in business management in the U.S.

Leadership Cries for Repair Sadly, a new corrupting phenomenon is destroying that mystique I found so alluring: the enormous and widening income gap between American CEOs and their employees.

Partly as a result of this, America’s reputation for management greatness is shrinking and may evaporate altogether. The Huffington Post reported that CEOs of the fifty U.S. firms that slashed the most jobs from 2008 to 2010 pocketed 42 percent more compensation during that period than the average CEO of an S&P 500 firm.

The study further suggested that the majority of these CEOs announced

Mauborgne (2014) in Blue Ocean Leadership suggested that leadership can be thought of as a service that those associated with organizations can decide to “buy” or “not buy.” Every leader has customers, among them the directors and shareholders to whom the leader must deliver performance.

At least as important to leaders are the employees who “buy” leadership for guidance, support, and inspiration.

Unfortunately, considerable evidence suggests that employees are not “buying” their executives’ leadership.

“Historically, American businesses have been known and admired globally for their leader’s relentless innovation, imagination, and job creation.” massive layoffs even though their firms were profitable. Among those leading the layoffs were the Hewlett Packard CEO (earning $24.2 million in 2009 while laying off 6,400 workers), the Walmart CEO (earning $19.2 million while laying off 13,350 workers), and commercial and investment bankers who paid their CEOs approximately $20 billion in 2008 while their industry collapsed around them, requiring government bailouts as it shed tens of thousands of jobs. The retailer Target recently announced a $5 billion loss in Canada, terminating 17,000 employees, but the former CEO walked away with $61 million. The current CEO’s compensation was $28.2 million in 2014 alone.

What’s the impact of this on US employees? Should we care? Kim and

The Price of Non-Repair A major reason for not “buying” the leadership arises from the accelerated pay inequity in the face of massive layoffs. Almost all of the accumulated data suggests that this compensation inequity leads to high levels of resentment, mistrust, and disrespect for executives. Gallup’s 2013 survey on the State of the American Workplace suggested that only 30 percent of corporate employees are actively committed to doing a good job; 50 percent merely put their time in, while the remaining 20 percent act out their discontent in counterproductive ways, costing the U.S. economy around $500 billion each year. The study concluded that the key reason for widespread employee disengagement was poor leadership. As the Huffington Post suggests, employees quit their leaders, not their companies.

The idea that a single person in the company can be worth 531 times the average worker’s salary is demoralizing to the average employee. In essence, a grocery worker with a salary of $18,000 per year would need to work about 900 years to reach the average CEO’s pay (Whelton, 2006).

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What Differentiates the Startups Likely to Move from Great Ideas to Extraordinary Success Lisa Zhao

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uccessful startups are founded on great ideas.

However, ideas are often abundant and not unique.

What differentiates startups likely to move from great ideas to extraordinary success are not the ideas but the entrepreneurs’ drive and ability to execute the ideas and turn them into realities. The entrepreneurs who achieve such success have key qualities in common. In many cases, they also benefit from strong support networks.

Successful entrepreneurs are laserfocused on their missions, and they

nor the first to enter the digital music industry—he succeeded by doing a better job at both.

Successful entrepreneurs are not afraid of failures. They are willing to take risks but do so in a disciplined way. They make small bets and test their business models in the marketplace as inexpensively and quickly as possible. This approach enables them to quickly learn, pivot, and iterate in search of a sustainable and scalable business model.

Jeff Bezos built a culture of quick learning at Amazon by encouraging experimentation and insisting on a

local communities. Bill Gates led Microsoft to extraordinary success by strategically partnering first with IBM and later with other PC makers and software developers. For many years, Microsoft helped these partners attract new businesses and customers, which in turn increased demand for Microsoft’s products.

Critical as the above qualities are for entrepreneurs to succeed, they

“Successful entrepreneurs are not afraid of failures. They are willing to take risk but do so in a disciplined way.” understand that they can realize their missions only by solving customers’ problems, addressing their needs, and fulfilling their desires. Mark Zuckerberg works toward his dream of an open and connected world by helping Facebook’s customers achieve their desire of being socially connected.

Elon Musk of Tesla Motors realized his vision for a cleaner, more humane world by offering innovative products to provide people with a luxury vehicle while addressing their concerns about environmental degradation.

These entrepreneurs learned from others who have experienced successes and failures doing similar things. Iconic entrepreneur Steve Jobs led Apple to innovate by building on other people’s discoveries and experiences, not only in the technology industry but also in other industries such as consumer goods and fashion design. He was neither the first to build a personal computer

culture of measuring results. Many of Amazon’s experiments failed, but most were small endeavors. Bezos once said, “If you double the number of experiments you do per year, you are going to double your inventiveness.”

PayPal pioneers Max Levchin and Peter Thiel initially planned to offer security software for handheld devices. But when their offerings failed to gain traction, they pivoted to a webbased system for securely transferring cash from one user to another and PayPal took off.

Finally, successful entrepreneurs are team players. Attaining big, multifaceted goals requires wide networks of diverse talent and minds that can be tapped into for inspiration, knowledge, technology, and resources.

Successful entrepreneurs build these networks by sharing their success with their stakeholders, which include their customers as well as their employees, partners, investors, and

also need support from others. Some of that support comes from family and friends who are called upon to share in an entrepreneur’s sacrifices.

But entrepreneurs also need a strong support system of mentors from industry and academia, and a network of established businesses with which they can partner. Local entrepreneurial leaders can be important players in such a support system.

A good example of a startup that benefited from such a support system is Vera Whole Health, which was founded in 2008 by a Seattle University MBA student, Ryan Schmid.

After facing and overcoming serious challenges during the financial crisis and recession, Ryan built an innovative and successful business. That success was owed in large part to the qualities of a successful entrepreneur discussed earlier, such as Ryan’s ability to learn from failure and pivot from a fitness

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Social Enterprises: Business Models with Time-Tested Traits of Success atul tandon

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any Seattle University students and alumni are probably familiar with renowned management guru Peter Drucker who once said, “The purpose of an organization is to enable ordinary human beings to do extraordinary things.”

Professor Drucker passed away 11 years ago after a six-decade consulting career. Fortunately, I had opportunity to meet him several times; for over 30 years, his business wisdom and insights helped shape my career in the financial services industry, the non-profit sector, and now as a social entrepreneur.

So how does an organization educate, inspire, and bring together ordinary human beings to accomplish extraordinary things?

Some people may try to answer that question by studying today’s corporate giants, such as Facebook, Amazon, or Google. All three are

Critical lessons can be learned from socially-conscious organizations that have demonstrated staying power.

The honest answer? Well, time will tell!

Time is the great leveler of strength, performance, and impact. It has thrown many a great enterprise into the dustbins of history. Standard Oil once controlled nearly 90 percent of the petroleum-related products

Five of those traits, in my experience and observation, are: m A long-standing, clear, and easily understandable mission m Consistent focus on people— both internally, towards staff, and externally towards customers m An uncompromising commitment to deliver value to their customers and stakeholders m A repeatable, scalable, and continuously improving operational model m An enduring commitment to social good, in addition to generating investable surpluses Three social enterprises I’ve studied exemplify these traits and merit elaboration. Like other successful ventures, they focus on creating common good for all stakeholders— clients, employees, investors, vendors,

“the purpose of an organization is to enable ordinary human beings to do extraordinary things.”

– Peter Drucker

extraordinarily successful. Stockholders, Wall Street brokers, and business reporters eagerly await their quarterly earnings reports. Each is an instantly recognizable brand, helps drive our global economy, and is led by an innovative entrepreneur. I applaud the visionary business savvy of their leaders Mark Zuckerberg, Jeff Bezos, and my fellow Indian entrepreneur Sundar Pichai.

But interestingly, Amazon, the oldest of the three, was founded in 1994 and likely is younger than most MBA students at the Albers School of Business and Economics. Over its short life, Amazon has grown rapidly from good to great. But is it extraordinary?

flowing into the United States. But today, more than 100 years after its demise, it is referred to in classroom lectures as a corporate monopoly and victim of antitrust laws.

In my opinion, to qualify as extraordinary, an organization must have delivered great results and demonstrated sustained impact over a long period of time.

So where do we find such firms today? What makes them different?

When I counsel my clients and students to examine the time-tested traits of firms that have remained vital— and relevant—for decades, I encourage them not to limit their attention to traditional for-profit corporations.

and others. The IRS tax status of a for-profit corporation, an LLC, a nonprofit, or a member-owned cooperative does not define such entities. Instead, organizations working for social good can be any of these, including commercial enterprises that run surpluses and generate funding to not only sustain, but also to scale their operations.

Amul, located cross the world in Gujarat, India, is the largest dairy cooperative in the world as well as an excellent example of an exceptional social enterprise. The 70-year-old organization is owned by more than 3.6 million farmers and engages

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“In my opinion, to qualify as extraordinary an organization should have delivered great results and demonstrated sustained impact over a long period of time.” supporters and volunteers by operating under a three-tiered system that includes village and districtlevel milk unions, and state-level milk federations. Milk is collected at the village level and processed at a districtlevel facility, and then the milk and milk-related products are marketed through a state-level federation. This structure is replicated throughout the country.

Rather than being operated by a state or national government agency, or a publicly traded corporation, Amul is run on a business model that epitomizes socially-minded success focused on stakeholder satisfaction.

According to its website, the organization witnessed nearly 200 percent cumulative growth over the last six years and is growing its milk processing capacity by more than seven million gallons—every day.

More importantly, Amul has done more than any other corporate entity to help address poverty in India, and it is investing in the next generation with its “Made in Rural India” campaign, promoting dairy entrepreneurship as “an attractive livelihood” among rural youth.

Closer to home here in Seattle, most people are familiar with REI, the retail-based consumer cooperative founded in 1938 that models peoplefocused policies both internally and externally. For example, I know of no other firm with more than 140 stores in 36 states and nearly $2.4 billion in revenue that intentionally closes its doors, shuts down its website, and essentially, ceases all operations on the biggest shopping day of the year —Black Friday.

“We define success a little differently,” said REI President and CEO Jerry Stritzke in 2015. “It’s

much broader than just money. How effectively do we get people outside?”

Its stores offer free clinics on outdoor adventures and organize hikes and cycling trips; REI also offers meeting space free of charge to non-profit organizations, supports conservation efforts, and organizes yearly outdoor service projects. The organization has armies of volunteers who help clean up the environment, build trails, and teach children about preserving the environment.

In 1935, three years before REI was established, 18 Boeing employees banded together to create another Puget Sound-based social enterprise, the Boeing Employees’ Credit Union (BECU). In contrast to a traditional bank, the leaders of BECU and other non-profit credit unions report to member-owners instead of shareholders.

And from my observations, its leaders remain deeply committed to their customer base. While it is not the largest locally owned financial service provider in Washington state (that distinction goes to Washington Federal Bank), BECU excels at community outreach, including member- and employee-inspired giving and financial empowerment.

For example, members can participate in free, self-paced online courses on topics ranging from budgeting to first-time home buying.

BECU’s stakeholder focus results in best-of-class services while building loyalty by giving members a percent back of their account balances.

All three—Amul, REI, and BECU—have vastly different missions, stakeholders, and business models.

But all three, decades after their founding, continue to deliver superior performance, impact, and social good.

They have mastered the cocktail of extraordinary success: a clear mission, a focus on people, a commitment to deliver superior and differentiated value to their customers, and an adaptable and continuously improving business model. They educate young couples about home mortgage rates, instruct teenagers on rebuilding hiking trails after a flood, and provide life-enriching products to billions of people.

These social enterprises have provided guidance, wisdom, and insight to those of us who study successful business models, whether from the inside of a classroom or a board room. And together, they represent more than two centuries of enabling “ordinary human beings to do extra-ordinary things.”

Atul Tandon is founder and CEO of the Tandon Institute, which equips social sector organizations with strategies, solutions and staffing to grow their impact, revenues, public awareness, and leadership effectiveness rapidly.

“They have mastered the cocktail of extraordinary success: a clear mission, a focus on people, a commitment to deliver superior and differentiated value to their customers, and an adaptable and continuously improving business model.”

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TRENDwatch EXECUTIVE LEADERS’ PERSPECTIVES ON EXTRAORDINARY LEADERSHIP

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he person who stands out as an exceptional business leader is Lisa Brummel, Microsoft’s former Chief People Officer. She held this role for approximately 10 years and during that time, the employee count swelled to nearly 130,000. During her tenure were numerous annual review models, an HR transformation, sizable acquisitions, enhancements to the world-class benefits program, and one CEO change. She was strategic, inclusive, authentic, diverse, direct, compassionate, and approachable. Ms. Brummel reported to the CEO so HR had a seat at the table with the highest level executives in the company. She led HR All-Hands meetings which gave the organization insight into the latest events at Microsoft. She thanked individuals, teams and the organization for our work.

We were also encouraged to do more and continually improve. Ms. Brummel mastered the art of connecting with large and small audiences; she was also very good one-on-one. Microsoft was fortunate to have such a solid leader for just under a decade. Ms. Brummel left a legacy as well as tough shoes to fill.

Tameiko Davis HR Leader – Google

B

ill Ayer, retired Chairman and CEO of Alaska Airlines, is an extraordinary leader. Bill demonstrated the depth of his extraordinary leadership to me on a trip I took to Washington, DC a few years ago. I settled into my first-class seat early while the rest of the passengers loaded. I was pleasantly surprised when my friend Bill came aboard, and I fully expected him to sit in the only remaining empty first-class seat right next to mine. I was astonished when he said “good morning” and walked by to take his seat back in coach.

I asked the flight attendant about it and she told me that he always rides in coach so that one more good Alaska customer can get an upgrade. It took me a few minutes to understand that Bill’s real message was to all of the Alaska employees: the customer is the most important person on the airplane and every employee needs to make the customer feel that way.

L

eadership is a transformative process.

As you develop your team(s), as you develop relationships and partnership, and as you develop your leadership, you’re in a constant state of transformation. The pivotal factor in moving from great to extraordinary is building powerful team dynamics.

The development of your team requires identifying individuals who will complement each other’s strengths and counter each other’s weaknesses.

Your team members are looking for a leader who demonstrates a genuine and indubitable character.

As a leader, you must be transparent with your team and share information, strategy, successes, and failures. You must provide an environment and nurture a culture of trust and openness. Allowing the team to form an organic structure versus installing a hierarchical structure promotes social interaction between the team members and the leader, and places the team members in a stakeholder position versus a subordinate position. This ensures the team will be invested in the success of the team and by that success, lend success to the organization as they strive to fulfill the shared vision and goals.

The development of “leader partnerships” offers a similar balance as noted above. You, as a leader, should seek a leader partner who can augment your strengths and counter your weaknesses. The development of this type of partnership should be done with intent. Having a partner to develop visions and implement strategies, and to be responsive to an ever-changing business environment is critical for you as a leader and ultimately, critical for the organization’s success.

Volumes can and have been written about the transformation from great to extraordinary; here, I have provided a couple of seeds that you can germinate and nurture as you continue on your transformative journey from great to extraordinary.

Don Lonam Vice President – Process Improvement Valley Medical Center

Capt. Stephen R. Taylor Chief Pilot – Boeing Flight Services

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Big Data and Data Analytics: Opening New Margins of Competition Gareth Green

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s data and computing power continue to grow— increasing in volume, velocity and variety—there is more information available to support effective business decisions than ever before. But there is more to the emerging data technologies than being big and fast; data analytics techniques are now more approachable. The term “big data” has become a catch-all phrase used to describe the rise of all data technologies, and it is not entirely accurate. “Big data” simply refers to data sets that are so large that traditional data processing applications are inadequate. Though most data analytics techniques have been available for decades, businesses have lacked the data, computing power and software to effectively apply them.

The current rise of data technologies is enabling businesses to examine new margins of performance, fostering the move from great to extraordinary.

understand the mood and direction of public corporations; human resources departments can use prediction tools to investigate productivity and staffing trends; engineers can gather performance data and use it to customize equipment maintenance plans; insurance firms can monitor the driving styles of their customers and offer them rates based on their competence rather than simply their age and gender; and health service providers can mine clinical data to gauge the cost-effectiveness of medications for specific clients. Data technologies are opening new margins to measure business effectiveness, creating better products and services.

Data provides transparency— whether big or small, simple or

now more accessible, thanks to software development. Unlocking the transparency that data can provide is the key to benefiting from data technologies— enabling the move to extraordinary.

A recent set of studies have identified three key factors in companies that have benefited from the growth in data technologies: size, awareness, and the complementarity of technology and an educated work force. Larger businesses are able to gain from economies of scale to bring down costs of data technology per unit of production. Awareness relates to managers and firms being able to learn about new practices from multiple sources, and be flexible and willing to investigate them. And complementarity

The current rise of data technologies is enabling businesses to move from great to extraordinary.

The combination of big data, data analytics and computing power is changing what constitutes data.

Historically, data was limited to numerical information because that was all that could be processed. For example, marketers can gather a huge variety of data—numbers, text, images, audio, video, location, time frame—and analyze it simultaneously in real-time to create personalized offerings to individual consumers.

Or investment brokers can use text analysis of financial reports to better

complex, survey or sensor, structured or unstructured. The key is to correctly match the data and analysis techniques to the questions at hand to make effective business decisions. It is quite common to sample from big data and analyze the “small data” to understand business settings. Much insight can be gained from querying, comparing descriptive statistics, and examining correlations, regardless of the size of your data. Or you can dive deeper using data mining, machine learning, and statistical techniques that are

indicates that you need both data technology and an educated workforce, not just one or the other.

Firms with at least two of these attributes have been more successful at leveraging data technologies and advancing in their industries.

Data technologies are not perfect, nor can they capture many elements of qualitative reasoning. While some data enthusiasts have suggested that it is better to rely on mountains of data rather than rely on business domain expertise, I contend it is critical Continued on page 15

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Recapturing The American Business Leadership Mystique Continued from page 8

In discussing this glaring disparity, well-respected management and strategy scholar, Henry Mintzberg said, “Although executives like to think of themselves as leaders, when it comes to their pay practices, many of them have not demonstrated leadership at all.”

“Sub-ordinary” or Extraordinary – A Choice The CEO sets the direction and vision of a corporation, and the skills and responsibilities required to run a company are admittedly rare. However, the current trend in excessive compensation is out of proportion to the CEO’s value added to the enterprise, and that is distressing to employees. Peter Drucker advised business leaders to think of their enterprises as social systems rather than mechanical systems. Mintzberg suggests that a robust enterprise is not a “collection of human resources” but rather, a community of human beings responsible for its performance. CEOs who accept compensation packages that single them out from everyone else are not genuine leaders. Excessive compensation effectively isolates them from that community. This

sharply contrasts with a critical role of leadership: creating and engaging passionate value-creating communities while devoting energies to employee care and concerns.

adding value to the entire enterprise.

Leaders can either become overpaid statistics with many dollar signs associated with their names, or they can become social architects who

…a critical role of leadership: creating and engaging passionate value-creating communities while devoting energies to employee care and concerns.

Jim Collins, talking on “The 10 Greatest CEOs of All Time,” stated that the overriding commonality among the ten greatest CEOs was their deep sense of connectedness to the organizations they ran, not how much they were paid. Secondly, these CEOs were unlike other CEOs, who often saw themselves as members of an “executive elite club” that measured their pay/privileges against other CEOs. Instead, the great CEOs’ ethos was a true corporate ethos, in the original, non-business sense of the word, “corporate” meaning “united or combined into one.” These CEOs understood the central paradox of exceptional corporate leadership. On one hand, a company depends more on the CEO than on any other individual for making complex and difficult decisions. On the other, a company equally depends on the CEO’s aware-ness that he or she is just another one of many resources

construct workplaces with meaning and purpose. In a new leadership model, CEOs would set the tones and create environments where every employee has the chance to collaborate, innovate, and excel; environments in which employees perceive they are fairly treated and compensated for the value they create.

Today’s CEOs need to rise to the levels of extraordinary leadership I envisioned and admired as a child, where those in power served others first. Their efforts to ensure the well-being of employees before they turn to their own will revive the mystique of American businesses while creating vibrant communities where employees gladly contribute their gifts of initiative, imagination, and passion.

DR. Rubiná Mahsud is an Associate Professor in the Albers School of Business and Economics, teaching executives at the Center for Leadership Formation, Seattle University. She teaches in the areas of competitive and collaborative strategy, blue ocean strategy, global business strategy, and international management. Her previous experience includes working as a medical doctor, medical director, consultancies with UN and other private organizations. Her work is published in the Journal of Managerial Psychology, Journal of Leadership and Organizational Studies, Consulting Psychology Journal, Business & Society Review, and The Independent Review.

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What Differentiates the Startups Likely to Move from Great Ideas to Extraordinary Success Continued from page 9

studio for women to onsite primary care clinics and health coaching for employers.

But Ryan also owes some of his success to the willingness of local businesses and health care providers to partner with him, and the sound training, mentoring, and support he received at the outset from Seattle University.

Ryan obtained seed money for Vera by winning first place in the Seattle University’s Harriet Stephenson Business Plan Competition. Kent Johnson, an SU adjunctprofessor and successful entrepreneur himself, mentored Ryan in the competition and thereafter, just as he has done for many other young entrepreneurs in the Seattle area. As Ryan explains, “Countless people offered their help to refine the business plan which ultimately made our business stronger and was instrumental in raising our seed capital. Kent’s support of the company as our lead investor and board observer (he’s currently our board chair), was the final major push that got us rolling downhill. Without Kent’s mentorship and support, we may never have raised the capital to launch in the first place.”

In short, entrepreneurs who move startups from a great idea to extraordinary success share important qualities that differentiate them from their peers. But universities and local business communities can nurture those qualities and provide the business skills and support systems that even the most highly talented entrepreneurs need to succeed.

Dr. Lisa Zhao is professor and Lawrence K. Johnson Endowed Chair of Entrepreneurship at the Albers School of Business and Economics. Prior to joining Albers, she was on the faculty of the Bloch School of Management at University of Missouri-Kansas City, where she taught courses for undergraduate, MBA, Ph.D., and executive programs. Dr. Zhao holds a Ph.D. from Cornell University. During her career, she also conducted research at Cornell University and Michigan State University and consulted with startups and Fortune 500 companies. Dr. Zhao’s research focuses on market-entry decisions, new business model development, new venture funding and exit strategies, and big data analysis and statistical modeling. She has published articles in top academic journals.

Big Data and Data Analytics: Opening New Margins of Competition Continued from page 13

to use both. Data and algorithms are not unbiased. Relying on pure correlation without understanding is likely to result in poor decisions, not to mention the danger of overlooking ethical considerations.

A balance of quantitative and qualitative analysis resulting in data-informed decisions—rather than data-driven decisions—will bring the best results. Of course, the caveat to balancing quantitative and qualitative reasoning is knowing when to use each, and that comes from learning and experience. Data technologies must be integrated with domain expertise and the human dimensions of decisionmaking.

The use of big data and data analytics are here to stay; companies will find it difficult to compete if they leave the new set of decision-making margins untapped. Firms are aware of this and are racing to find employees with the skill set to help them take advantage of the data technologies that are being developed. We are launching the Masters of Science in Business Analytics at the Albers School of Business and Economics to teach a balanced set of quantitative and qualitative skills. The MSBA program will equip graduates with a broad toolset to be data technology savvy, to solve problems with the support of data, and make decisions to benefit businesses and their customers. While the traditional margins of decision making will remain important, big data and data analytics are critical components to opening new margins and moving from great to extraordinary.

Reports available online Big Data Evolution: Forging new corporate capabilities for the long term, The Economist, 2015 The rise of the marketer: Driving engagement, experience and revenue, The Economist, 2015 Big data: Changing the way businesses compete and operate, Ernst & Young, 2014 Big data: The next frontier for innovation, competition, and productivity, McKinsey Global Institute, May 2011 Dr. Gareth Green received his Ph.D. in Agricultural and Resource Economics in 1995 from the University of California at Berkeley and his B.A. in Economics at the University of Washington. He is Chair of Economics and Finance Departments in the Albers School of Business and Economics. Green teaches microeconomics, statistics, environmental and natural resource economics, and managerial economics.

Green’s research interests include natural resource and environmental economics, behavioral economics, and statistical modeling. Specific examples of his research include the economics of fair trade coffee markets, designing water purchase programs for the Bureau of Reclamation for salmon habitat restoration in Idaho and Washington, developing and instituting water pricing policies in California irrigation districts, estimating the technology-adoption response to water pricing regulations, examining the potential for environmental water marketing and leasing in Washington state, and behavioral economics related to environmental investment decisions over time.

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