They were definitely dropping some “New Coke” references in those first few months. But Patrick Doyle and his leadership team would just smile at each other. No matter what the media pundits said, they knew they were right.
When Domino’s Pizza made the decision to scrap its old pizza recipe in 2009, Doyle’s team had amassed a year and a half’s worth of data that said customers viewed Domino’s as a convenience brand first. They ordered Domino’s for a pizza in 30 minutes, not for quality food. Customers perceived the pizza itself as a brand weakness.
It’s something the leadership at Domino’s never really took to heart. Like its customers, Domino’s leaders had always viewed their specialty as convenience. Any complaints about the food would be offset many times over by the customers who kept coming back for the efficient service. It’s a philosophy that made Domino’s the worldwide gold standard in pizza delivery, with yearly sales in the billions.
That all changed in early 2008.
“We had launched a new ad campaign called ‘You Got 30,’ which kind of took us back to our roots,” says Doyle, the president and CEO of Domino’s Pizza Inc. “While we weren’t guaranteeing anyone a 30-minute delivery, we were reminding them that most of the time, they’ll get their pizza in 30 minutes. The campaign emphasized how Domino’s saves you time and what you could do with that 30 minutes.”
The campaign fell on deaf ears. Consumers had heard it all before.
“They simply did not care,” Doyle says. “The consumers who already used us because they appreciated the convenience already knew what we were telling them. Those that didn’t, who said the convenience factor was great but we needed better food, it didn’t change their minds about anything. So it was right then, in March 2008, about two months after we launched that ad campaign, that we decided we needed to go back to the drawing board with our pizza.”
Take a bold step
To this day, it’s something of a parlor game at Domino’s Ann Arbor headquarters: Who else in the world of business has admitted an inferior flagship product, scrapped it and rebuilt it from scratch?
“We still can’t come up with one,” Doyle says. “The closest example I ever heard was an ad in the late ’60s from Volkswagen, which had a picture of one of their cars, and under the picture it said ‘lemon.’ They were dealing with some quality perceptions head-on, but it was a single print ad from 45 years ago. We have wracked our brains, and our ad agency’s brains, to come up with a comparable example where a company has come out and said, ‘Our product wasn’t good.’ We haven’t yet.”
To make the product better to the eyes and mouths of customers, Doyle and his team had to go directly to the source. The first step was to listen to the people who had an ax to grind with Domino’s. Throughout 2008 and into 2009, Doyle and the rest of the company’s leadership stayed quiet, listened and took their verbal lumps as consumers launched repeated salvos, comparing the crust to cardboard and the sauce to ketchup, among other things.
“We did every possible kind of research,” Doyle says. “We were doing qualitative research like focus groups, where you’re getting people into a room and having them help you get a sense for where the opportunities were. Those were the comments you ended up seeing in the commercials themselves. But then, we also went out and tested every possible ingredient change, every combination of new sauces, crusts and cheeses, until we thought we had it optimized. Then, we took the new pizza ideas to our most loyal customers to see if they’d appreciate the change. We took it to people who weren’t doing business with us. We went to kids, we went to every possible demographic group and kept testing it.”
The rounds of data gathering and testing put Domino’s on the path to wholesale product change. The recipes for the crust and sauce were completely remade, and new cheese would be used.
Doyle and his leadership team had their new product ready for rollout by the fall of 2009. Then came the next step: explaining themselves, first to the company’s 4,900 U.S.-based franchisees, then to public at large.
State your case
The biggest momentum boost for Doyle and his team might have come with a show of hands.
In the weeks leading up to the rollout of the new pizza, the corporate leadership at Domino’s held a series of meetings around the country, meeting with the leaders of all franchise locations.
“We had five meetings over the course of a couple of weeks,” Doyle says. “We showed them the research and talked to them about customer perceptions of the pizza. We had them sample the old product and the new product, and laid out all the implications for them.”
At one point during one of the meetings, Doyle had the franchisees sample the old and new versions, then vote for which pizza they preferred.
“At one point, we did a show of hands,” he says. “It was nearly unanimous. Out of over 1,000 franchisees in the room, there were 12 who preferred the old pizza. It was absolutely overwhelming. We made the case, we allowed them to give us input, but ultimately we had overwhelming support from our system. And that is maybe the most important constituency. Those are the people who pay us to manage the brand. They’re the ones who are relying on us to do the right thing.”
But Domino’s is an industry giant and a public company to boot, meaning the convincing didn’t stop there. When Domino’s made the announcement near the end of 2009, members of the media and pizza-consuming public were quick to whip out references to New Coke, the famous 1985 business blunder in which Coca-Cola reformulated its flagship beverage, resulting in a massive consumer backlash and, ultimately, the reintroduction of the old formula as “Coca-Cola Classic.”
However, Domino’s reasoning for changing their pizza recipe was fundamentally different from the reason Coca-Cola changed its formula a quarter-century ago.
“Interestingly, while New Coke won in blind taste tests, if you went to Coke customers, they’d tell you that the taste of Coke is why they bought the product. It’s what they were used to,” Doyle says. “When they changed the formula, they were messing with what made Coke what it is. What made Domino’s a household name was the fact that we deliver really quickly. We didn’t build our reputation around the taste of the old pizza. So it was a far different level of risk involved with changing something that consumers considered a weakness. At Coke, they were changing something that consumers considered a strength.”
By the time the New Coke questions came raining down, the new pizza recipe had already caused a spike in sales. The company’s first-quarter U.S. sales in 2010 were up 14.3 percent over 2009. Year over year, Domino’s finished 2010 with a 9.9 percent bump in sales.
“It actually made the New Coke questions kind of humorous,” Doyle says. “The fact that sales were up double digits made it very easy for us to say with confidence that we weren’t pulling a New Coke. Whenever we’d get the New Coke question, we’d just kind of smile at each other.”
But before Doyle and his team could chuckle at the New Coke references, there was still a great deal of work to be done. In December 2009, Domino’s had to retrain 4,900 franchises on how to make a pizza. Corporate leadership had to ensure that the old ingredients ran out and new ingredients were stocked as close as possible to the changeover period, which was the week between Christmas and New Year’s Day, when Domino’s rolled out their first ad campaign touting the new pizza.
It was a massive logistical balancing act, and it had to be carried out in the span of several weeks.
“We trained a hundred trainers, they each had 50 stores to cover, and there are typically two to three people in each store who are making the pizzas,” Doyle says. “We’d have the trainers organize the pizza makers into groups of 10 to 15 people per day. Over the span of a couple of weeks, each trainer probably trained about 150 people. You just get the people into a store and go to work. You show them how to do it, and you don’t let them leave until you’re confident they can do it right.”
The scope of the transition didn’t allow for a completely clean break between old and new. There was a period of about a week just before Christmas when a given store could have been selling the old pizza or the new.
Despite the months upon months of research, communication and training, Doyle still had a knot in his stomach as the initial rollout was taking place. Despite overwhelming evidence that the consumers wanted an improved pizza from Domino’s, there was no fallback plan if it failed. Doyle and his staff had to completely commit to the new product, because they were going to finish destroying the reputation of the old product by openly admitting its inadequacy. It was an all-or-nothing proposition.
“I remember one of the meetings with the franchisees,” Doyle says. “One of our greatest franchisees raised his hand and asked a great question: ‘I’m on board with the changes, but what do you do if this doesn’t work?’ All I could do was laugh and say, ‘My successor will have a really hard time dealing with that.’ There was no Plan B. There couldn’t be. On the plus side, when you’re facing something like that, it does tend to help you focus more.”
Domino’s, which generated $6.2 billion in global sales in 2010, also rolled out a similar product change in Mexico. The company’s overseas markets were not altered because they already use different ingredients from those used in North America.
Make meaningful change
Doyle admits that much of what happened is unique to Domino’s, but there are still some lessons about change that are applicable regardless of the nature of your business. Chief among them, you need to make change that has an impact. Otherwise, your customer might not even notice.
Don’t change the label and expect consumers to embrace it as a real, meaningful improvement.
“There are a lot of incremental changes made by companies and trumpeted to consumers as something completely different,” Doyle says. “But consumers tune it out. They know it’s not true. They recognize it for what it is. You have to do things that are material in order to get consumers’ attention.
“You walk up and down the aisle in the supermarket, and there are all kinds of new and improved products, with starbursts and arrows pointing to what is improved. But all they did was change the color of the cap on the jar. And then the company is surprised that consumers don’t get excited about it. You lose credibility as a brand and a company if you so clearly overstate the magnitude of the change. You have to make changes that are real and relevant to consumers, and big enough that they’re going to notice.”
How to reach: Domino’s Pizza Inc., (734) 930-3030 or www.dominos.com
The Doyle file
Name: Patrick Doyle
Title: President and CEO
Company: Domino’s Pizza Inc.
Born: Midland, Mich.
Education: B.A., University of Michigan; MBA, University of Chicago
First job: I was mowing lawns and maintaining some tennis courts when I was 12 or 13 years old. So pretty much as soon as I was tall enough to reach the lawn mower bar.
What is the best business lesson you’ve learned?
The fundamental lesson is that every business is about people, and the companies with the best people are going to win. If you’re recruiting the best and training the best, and getting the best excited about what the company is doing, you’re going to succeed.
What traits or skills are essential for a business leader?
The ability to listen well, the ability to build consensus when you need to build consensus and the strength of your convictions. Once you’ve listened, you go out and lead. That takes a bit of confidence sometimes.
What is your definition of success?
There are a lot of basic ones in terms of creating shareholder value, growing sales and earnings. But personally, what is most gratifying to me is to see the people we’ve brought into this business, whether employees or franchisees, winning and succeeding. It’s about seeing them build great careers and great businesses.
The halls and rooms that comprise Turner Enterprises Inc. are more than simply office space for the entity that runs famed businessman Ted Turner’s operations. They’re partially a tribute to Turner, chairman of the organization, featuring photos and awards depicting his success, but they’re also part museum, with memorabilia and paintings decorating conference rooms and foyers that show his passions ranging from the Civil War to sailing.
Enter Turner’s assistant’s office and you’ll see more than 100 magazine covers featuring Turner from over the years adorning the walls. And from there, enter Turner’s own office — dim, as the lights are off to conserve energy — and you can’t help but notice the wall full of honorary degrees behind his desk and further evidence of his achievements and interests.
It’s all a legacy of a life of entrepreneurship and innovation by the man who pioneered 24-hour news by founding CNN and has been involved in many different business ventures over the years, including starting the Ted’s Montana Grill restaurant chain. Beyond his business achievements, he’s won 180 sailing trophies and is one the largest individual landowners in the United States with approximately 2 million acres of personal and ranch land. He’s also passionate about furthering clean-energy initiatives, and he gave a $1 billion gift to the United Nations through the United Nations Foundation, which he created to support goals and objectives of the U.N.
Turner’s accomplishments could take up pages, but constrained by word counts, simply put: Ted Turner is a legend most business owners would do just about anything to sit down and talk to, but when it comes down to it, he can summarize his success in just a few main keys.
“One common thread is hard work, and another is careful consideration and thinking through what it was that I wanted to do and going through the mental exercises of what could go wrong and being prepared for that as much as possible,” Turner says. “You can’t predict completely what’s going to happen, but you can have a plan and think it through as carefully as you can, and then once you make the decision, after very careful thought — or this is the way I did it — when I did decide to move forward, then move forward with great speed.”
Think through an idea
When Turner first thought about the concept of 24-hour news, like most great ideas, it was because he had a problem.
“I wouldn’t have done it if I wasn’t convinced I was right, and the reason was I never got to see television news because I got home after 7 o’clock when the news went off at 7,” Turner says.
He also went to bed before 11 o’clock when the news came back on, so he had to read the newspaper to keep up with current events. Twenty-four-hour radio was already successful, so he thought if 24-hour radio news could work, why couldn’t 24-hour television news?
“People came home, and it was 8 o’clock at night, and they already missed the early news, and it was three hours away from the late news, so why wouldn’t it be something some people would want to watch?” Turner says. “Maybe a lot of people would want to watch sit-coms and the talk shows, but there probably would be some people who would like to see the news and not waste their time with entertainment.”
But, like many often do, he didn’t initially do anything about it.
“The easiest thing is to do nothing, and then you’ll never get in trouble — and you’ll never get anywhere either, but doing nothing is an option, and that’s an option that most people avail themselves of in life,” Turner says. “They do as little as they can, and they don’t realize what they could have done because they didn’t do anything. That’s most people. It’s just too hard, and it is hard. It’s extremely hard, and you’ve got to be — there’s an old expression I heard somewhere — smarter than a tree full of owls to do anything like create a Microsoft or a Google or a CNN.”
He says you have to be like Yogi Bear — smarter than your average bear — and that’s exactly how Turner was as he thought through this seemingly crazy idea of 24-hour news.
“At the beginning, when I first thought that, I never thought that it would be me that did it, because I didn’t have two nickels to rub together, and I knew it was going to cost a fortune to do,” he says. “So for the first three years, I sat there and watched and nothing happened. I figured CBS or NBC or ABC would do it, or all three of them at the same time, but they didn’t. They made the choice to fight cable rather than embrace it and try to keep things the way they were with three channels.”
Create a distinctive plan
When Turner realized he would have to be the one to start 24-hour news, he made sure to think through what it would take and the possible problems.
“Let’s face it: 90 percent of all new businesses fail, so the odds are way against you to start, but that’s how you really break through,” Turner says. “You have to come through.
To really break through, you have to come up with some kind of plan that’s a little bit distinctive and hopefully a little bit different than what your competitors are doing — if there are competitors. Usually there are.”
He’s seen both — when he started Ted’s Montana Grill, there were tens of thousands of other restaurants he would be competing against but very little barriers to entry. On the other hand, with CNN, the barriers to entry for delivering 24-hour news were huge.
“They were costly, and there were limited satellite distribution capabilities at that time, and there was not very much distribution — certainly not enough,” Turner says. “There was no way CNN could be profitable with cable penetration at 14 percent, which is approximately what it was when we started.”
Instead, he recognized that it needed to be at 50 percent.
“In order to get my television channels in to people’s homes, we had to get the rest of the people in America to subscribe to cable, and cable wasn’t even in front of over half the homes,” he says.
Recognizing what he thought was the threshold for success was an important part of creating that plan.
“You make your own metrics for what success is,” Turner says. “You set up criteria and write down what you think would make you feel successful. Each person would do it differently. What success is for one person wouldn’t be success to another. If one guy said, ‘If I made $1 million, I’d be a success,’ but to another, ‘I wouldn’t be a success unless I made $1 billion.’ They’d be off by a factor of 1,000 to one.”
Sometimes you may start in with your idea and then realize you’re not going to make it unless you reach certain thresholds.
“To grow a business successfully, you have to have a successful business or have an idea of how to make the business successful if you grow it a little bit more,” Turner says. “Some businesses are a little too small and would have to reach a certain tipping point of size to where they tip in the right direction.”
When it comes down to it, you may simply not know what it will take to be successful.
“You just have to estimate it,” he says.
Turner says that comes down to judgment and using your mind.
“It’s pretty tricky, but some people know how to do it,” he says.
Turner says it’s important to stretch your mind and its capacity as much as possible.
“It helps to be born with it, I guess, because basic intelligence is inherited,” he says. “It’s an inherited trait as much as anything else, but you can develop it. Your mind is, to a large degree, a muscle like the other muscles in your body, and the more you use it, the sharper it gets, just like your body. You can take a skinny little kid and turn him into a marathon runner if they’ll train hard enough and are motivated to train hard enough, and basically my success in business and in life, it was due, to large part, I just wanted to do it and wasn’t afraid.”
When he made the decision to go forward with 24-hour news, he didn’t lollygag.
“I moved as quickly as I could, for instance, to get CNN on the air because I wanted to pre-empt CBS, NBC and ABC because once we announced that we were going to do it, it was going to make them think about it and revisit it more, and all three of them had everything they needed to start.
“They already had bureaus. They had news organizations. They had news anchors that were underutilized — they were doing two hours of news a day, and they were spending $200 million a year to do two hours of news a day, and I was going to do 24 hours of news for about $30 million.”
He planned to get CNN on the air within 10 months because he anticipated it would actually take longer, and he wanted it on in 11. Along the planning road, most things went according to plan, but he did have his share of anxieties. While he thought through most of the worst-case scenarios, he was completely caught off guard, for instance, when their satellite disappeared and they lost their satellite signal less than four months before CNN was set to air.
“It never occurred to me because I wasn’t in the satellite business — what do you mean the satellite disappeared?” Turner says. “That was my reaction. Well, that’s what it did. They never found it. It just blew up, and it’s out there floating around in space. There was a TV series called ‘Lost in Space’ and our satellite was lost in space.”
Luckily, there was a clause in the contract that anticipated this possibility, so they were able to negotiate a deal to gain access to another satellite in time for the launch. CNN launched in 11 months — as Turner had anticipated with his one-month, built-in cushion.
While he moves full-speed ahead in business, he recognizes sometimes it doesn’t work.
“We went full blast with the AOL merger right into disaster, just like the Germans when they invaded Russia,” Turner says. “They were going fast, but they were headed straight for catastrophe — they were headed for Stalingrad. So going fast can be reckless and very foolish, but you’ve got to be sure you’re right, then go ahead. But that’s not easy to do always. It’s not always easy. Not everybody can see the future with accuracy, and there are the things that happen along the way that sometimes aren’t anticipated, no matter how good you’ve done, and then you’re in real trouble.”
He says there are all kinds of ways to get into trouble in both business and life, and sometimes you won’t know right away.
“A lot of times you have to wait and see, and only history will tell if you’re right or wrong,” he says.
While Turner may have made some mistakes along the way and had his share of challenges, he’s had more success than anything, and he says it comes back to those main keys.
He says, “Those are the main things that in starting a voyage or a venture, those three things would be very carefully think through what you’re going to do, then what could go wrong — take a look at what could go wrong and anticipate that in advance and be prepared — and the third thing is when you do decide to go forward, move rapidly.”
How to reach: Turner Enterprises Inc., www.tedturner.com
On a mission
If you look in the parking lot at Turner Enterprises Inc., you’ll see solar panels, which Ted Turner installed as an energy source.
“Anyone can do that, and the technology already exists, and it works,” Turner says. “This building is going to be powered by those solar panels.”
Turner is passionate about environmental causes and encourages other business leaders to follow suit.
“They can put solar panels on a fence post — electrify your fence and keep out people that you don’t want to come in. Keep your cattle in or your bison for that matter,” he says. “We use solar electric power fences on a ranch. If you have a house, you can have a solar hot water heater.”
If you’re not quite sure if solar power is the way to go for your business, Turner suggests at least seeking outside help to identify ways for your business to make a difference.
“Hire an environmental consultant to come up with recommendations specific to your company and business for how you can cut down your carbon footprint and use less energy,” Turner says.
Beyond the big things, he points out there’s also myriad small things you can do. For example, when you walk into Turner’s office, it’s dim. He keeps the lights off to save energy and only turns them on when he needs them. Additionally, he uses low wattage bulbs. He also suggests looking around you for the obvious.“As you walk down the street, if you see piece of trash, you can bend over, pick it up and carry it to the next closest wastebasket,” he says. “Making the world a better place is as easy as picking up a piece of paper.”
Tom Swidarski may not be a secret service agent, a bouncer at a night club or a front desk manager at a high-profile office building, but as president and CEO of Diebold Inc., his job’s focus is similar to all three — security.
On one hand, Swidarski’s job is to supply security solutions for his customers, which include financial institutions, government operations and commercial businesses across 600 worldwide locations. However, in addition to handling security for customers, Swidarski is also responsible for ensuring the security of Diebold’s 150-year-old legacy, a part of his job that presents its very own set of challenges.
When Swidarski became president of Diebold in 2005, he was tasked with the weighty challenge of eliminating $100 million of cost out of the company over three years — a program dubbed the “SmartBusiness 100.”
“We weren’t sure exactly how we were going to do that,” he says. “But we said, ‘Hey, Charles Diebold probably had ‘SmartBusiness 1.’ He got the first dollar out. It’s our job to get the $100 million.’”
Building a profitable business is a matter of controlling costs as much as it is generating revenue, and amid the global economic slump, Diebold’s SmartBusiness cost-savings initiatives have been a key part of increasing Diebold’s profitability and securing its position in the competitive global landscape.
Since 2005, Swidarski has not only led Diebold to achieve the SmartBusiness 100; but in the last year, the company has already launched SmartBusiness 300, and begun its third $100 million tranche of cost reduction. The company’s shares rose 18 percent last year, with fourth quarter revenue increasing nine percent to $791 million.
“Hopefully, the economy turns and things move in the right direction, but in all of our businesses, you can control the cost side of the equation,” Swidarski says. “You can’t control the revenue side — so it’s making sure that we have a good understanding of the cost side.”
Get the info
One way to better understand the cost of your business is to utilize your information-gathering and research tools. By having focused research to use in your company’s strategic planning, you’ll know where resources are most needed for your business to become faster, more nimble and more cost-effective, whether that’s in setting up new operations or proactively adjusting value points with spending to meet changing customer needs.
Before you decide how to allocate your company’s physical and financial resources, you have to make sure information about your customers, industry, competitors and so on, is collected and evaluated similarly throughout your organization. In Diebold’s case, Swidarski added paperwork for all of his global market managers to analyze industry activity in detail.
“What we tried to put in place was a similar process that we could use across the board in terms of the evaluation,” he says. “Then we put it incumbent upon each of the country managers to fill out the documents and forms. At first, people looked at is as, ‘I’m filling out documents and forms.’… Now they understand that to get the R&D effort that we need for a place like Thailand, we need to know the specifics and granularity of the competitive landscape there and how that differs from Brazil, because they are different competitors. To get a group of diverse people across 90 countries focused on the priorities, everybody has to understand the endpoint. So collecting that information became very important.”
Implementing new information-gathering procedures in your business is sometimes necessary to ensure you have all the knowledge needed to make financial decisions.
For example, Swidarski recognized that Diebold could better plan for global operations by moving its $70 million per year R&D — previously based in the United States — out to its top revenue-generating countries and develop micro-market plans to map out each market’s strategy.
“In those micro-market plans, we know exactly what gaps we have, what technology from a software-hardware service standpoint and what we need to do to create competitive advantage,” Swidarski says. “Those countries — they drive about 80 percent of our total revenue — so [there is] very focused effort there.”
Having focused research for specific markets also helps Diebold identify which markets need new capabilities and which could be served by the company’s existing technology.
“Other countries may fall out that are going to use the technology we develop for a China or a Brazil or a United States or a France,” Swidarski says. “So though we may not develop something specific for a smaller country in Europe, we still have the technology that we developed that may be specialized for France that we can use there. That helps us hone our resources not only on the front end but on the back end.”
Look at the big picture
Another way businesses can learn to be more cost-effective is by changing the way they analyze their operations. There are many different parties and steps involved in operational processes such as product design or engineering, so it’s difficult to gauge how cutting costs in one area might affect another. To understand where costs can be streamlined, you need to look at entire processes as whole, complete puzzles instead of as their separate pieces.
“You may make a module less expensive, but then you have to service it out in the field,” Swidarski says. “So for us, it’s looking at all aspects of it and the intelligence you want to build in the module that may give you savings on the backend. That is even more important than saving $2 on the front end if you are going to save $5 or $10 on the backend by having a sensor that helps you have reduced inventory.
“Probably some of our biggest innovations come from our treasury. Our day sales outstanding in the United States have dropped from 60 and 75 days to about 30 days because of process improvements with less people. That’s really where we get the biggest gain. How do we handle everyday processes and look at them wholistically, rather than ‘my little piece of it.’ When you look at an order-to-cash process, where are the areas of ways you call pull out of that? And through that, you get cost savings, as well. We need to do that based on the competitive environment that we are in.”
By looking at the big picture, you’ll have a better sense of how different parts of a process interact and affect one other and, therefore, recognizing how to trim, alter or consolidate costs in one or more areas without sacrificing quality in others.
“There’s more to come out from a process-improvement standpoint than there is from working with suppliers and saying, ‘I want that for 3 cents versus 4 cents,’” Swidarski says. “That gets you a little bit. But it doesn’t change the process.
“It’s not only the design aspect of what’s needed in the marketplace; it’s what are the other aspects of what that device is doing and the connective tissue of it as to what the total cost is and how we attack that wholistically. So we’ve brought our engineers from our service organizations in earlier. We brought manufacturing into design. We brought software in and where we use to test serially, we now test entire pieces wholistically. It really has made a tremendous difference.”
Recognize your value points
You can’t have a good understanding of cost if your strategic analysis doesn’t take into account how the value points that your customers are choosing constantly change. So lastly, to understand the cost side of your business, you need to follow your value points.
The real value a business brings to its customers is shaped and changed based on the competitive landscape. Swidarski sees that more and more of the value Diebold provides customers today is in the service side of its products such as ATMs; so he’s led Diebold’s transition into services-focused organization rather than a manufacturing one.
“The way I view it is: If someone defines you as a manufacturer, you may or may not be,” Swidarski says. “That may be a little part of what your value is. … In our case, if you use a simple device like an ATM, the knowledge of how that needs to be incorporated within an environment is much more important — the software associated with that, the intelligence you can put on that to make it more valuable, the ability to self-heal a remote device. So as we look at it, manufacturing may be a phase that 10 or 15 years down the road, doesn’t have to be something that we absolutely do. Now, today, we do that, but I wanted to make sure that the value points, that the bank that my customer’s choosing, I recognize what those value points are.
“There’s 80 percent that’s spent on managing an ATM that has nothing to do with how much that hardware costs. It’s that 80 percent that has the services that have the greatest value that we spend a lot of time focusing on.”
The point is, you don’t want to define your value it in a way that may not be relevant for your customers changing needs and interests.
“When I met with the first CEO from one of the biggest banks in India, he said to me, ‘You know, your ATM costs four times what it costs for me to buy a car,’ and I said, ‘Well, my ATM’s about 40 times more reliable than your car,’” Swidarski says. “The point is, as you deal with different folks from a different perspective, there are different issues that are the most important issues in their decision process. Having something over-engineered and developed from very sophisticated U.S. folks may not make it to the marketplace because the price points might be wrong.”
When you better understand the cost of doing business, you don’t just learn what strategies are needed to save money and be more efficient. You also learn you can focus your financial resources where they can have the most impact, so as your customers value points change, your business can adapt and grow to meet them.
“It’s in viewing the value chain and how you fit in,” Swidarski says. “Not limiting our thought process in that regard has allowed us to move the value points and allows us to generate over half our revenues from recurring revenue.”
“Now we are about managing high value of networks, creating and managing complex networks. That’s really what we do. It happens to be an ATM today. It happens to be security devices. But in the future it can be anything.”
How to reach: Diebold Inc., (330) 490-4000 or www.diebold.com
The Swidarski File
President and CEO
Education: Bachelor’s degree in marketing and management at the University of Dayton; master’s degree in business management from Cleveland State University
What is a typical week in the life of Tom Swidarski when you are not in the office?
Quite a bit of my time — maybe 40 or 50 percent — is spent traveling. And a lot of that is international. That’s really for me to get in front of customers as well as our associates and understand and make sure that we’re meeting customer needs and where we have holes or gaps and making sure that the information we’re getting in. It’s important for customers, especially larger customers that are maybe spending $100 million or $150 million with you, that they see the CEO and that he’s committed to it. So China is important in that regard. Brazil is important in that regard. For me, it’s also important to not only go see them but also to view our operations, to sit with our top team as well as always spend time with our folks internally.
How do you get employees to buy in to your vision?
If you can demonstrate in the deepest, darkest hours the humanity of making tough calls and doing it appropriately, that really helps people buy in to the vision of what you are trying to accomplish, regardless of how good you are at communicating. Regardless of how good your vision is and how fancy it is, it comes down to do people trust you. For me, that’s what it’s about.
Wellness is everywhere these days. It’s in the home. It’s in the workplace. And it’s a topic of national conversation. But wellness means more than just staying healthy and eating right.
“When you look at wellness, you have to examine everything — your career well-being, your financial well-being, physical well-being, social well-being, community well-being and, ultimately, your spiritual well-being,” says Dr. Deepak Chopra, wellness guru and founder of the Chopra Center for Wellbeing.
Smart Business sat down with Chopra, who works with individuals, executives and companies to foster wellness in numerous forms and discussed the impact health and well-being can have on individuals and organizations.
Dr. Chopra, how important is wellness and can you put an actual economic number on that importance?
There is a lot of good data that shows how well-being correlates with economics, and there are huge implications of how one’s well-being affects the bottom line of a company.
It is currently estimated that 15 percent of the work force in the United States is ‘actively disengaged.’ These are unhappy people who go to work each day and make it their business to make other people unhappy. The cost of actively disengaged workers in the American work force is about $350 billion a year. There are another 57 percent of people who are not actively disengaged, but they’re disengaged, which means they’re just punching the clock. That leaves only about 28 percent of workers who are actively engaged.
I’m on the advisory board of the Gallup Organization, and we’ve studied this issue. What we’ve begun to find is that the economic implications of this are not only in the billions but probably in the trillions. What’s more, we don’t understand the relationship between physical and mental well-being and economics very well because medicine has not focused on this. But the fact is that new information shows that your physical well-being is linked to all these other things and there’s an enormous economic impact tied to wellness.
Can you give me an example of how this works?
If you are having an unhappy time at work, for example, such as if you’re not only disengaged but your supervisor ignores you, your likelihood of getting disengaged and ultimately becoming sick goes up by 44 percent. If, on the other hand, your supervisor doesn’t ignore you but criticizes you, your disengagement falls to 20 percent because you’d rather be criticized than ignored. That is because, when you’re ignored, you don’t exist. Finally, if your strengths are noticed by your supervisor or by your colleagues, your disengagement falls to less than 1 percent. That has huge economic implications, not just for a person’s well-being but also for their family.
Likewise, there is data on social well-being, community well-being and financial well-being. If you work for a firm that makes sure there is some safeguard for you not to get into debt, if you have a certain amount of savings taken care of through automated plans and if you can afford to pay your taxes comfortably, those have direct implications on your health and, therefore, on your productivity.
When you actually sit down and analyze it, you can come to the conclusion that, for companies, wellness and well-being may just be your biggest investment because it has huge returns for you economically. Think about it from this perspective: If you have happy employees and you’re happy yourself, you’re going to have happy customers. And if you have happy customers, you’re going to have a healthy company and happy investors.
So you’re saying that there’s a correlation between happiness, health and wellness, and prosperity?
Absolutely. We now know so much about happiness and workplace happiness and how that has direct effects on your neurophysiology, on your biology, on things like immunomodulators (the things that modulate the activity of your immune system), so no longer is the connection between emotions and wellness and well-being disputed.
If you’re a business leader, you need to consider whether you engage emotionally with your employees and even your customers, in order to improve and increase your business. This emotional engagement requires immense amounts of knowledge about what makes people emotionally intelligent.
For 40 years, we focused, as a medical profession, on the deleterious effects of stress. We now know that with people who are stressed, there is a direct correlation with addictive behavior, cardiovascular disease, infections and some types of cancer. But we hadn’t looked at the opposite: If stress could make you sick, could happiness make you better? And the evidence shows it can.
What can someone do to spark that happiness and, in turn, become healthier?
There is a lot of good data on happiness. Happy people see opportunities where others see problems. Happy people have ways of getting over the limiting beliefs that hold them back. Happy people have meaning and purpose in what they do. Happy people make other people happy. And they know the fastest way to be happy is to make someone else happy.
Here’s something worth thinking about: If you have a happy friend, your happiness level goes up 15 times. If your happy friend has a happy friend, it goes up another 10 percent. And if your happy friend has a happy friend who has a happy friend that you don’t even know, it goes up another 10 percent. Here’s why: Because when two people meet, it’s not just those two people meeting, it’s all the relationships and factors in that person’s life that influences their behavior.
These days, we are doing a lot of research on social networks and how they not only improve the quality of life but also the quality of well-being, economics, productivity in the workplace, engagement and even biochemical responses, such as your blood pressure level. It is all tied to wellness and well-being.
Wellness seems to be something everybody should be interested in pursuing, but it goes well beyond just eating healthy, exercising and trying to be happy. You’re talking about a complete behavioral change, correct?
That’s true. I work directly with companies and executives to provide training on leadership skills in this area. True leadership requires several strategies. It requires the ability to listen, but the ability to listen not only as a good observer but as an analytical listener, emotional listener and spiritual listener. Leadership also requires the ability to create a vision, the ability to engage emotionally with people and the ability to enhance your awareness to understand what people need — whether it is your customers, employees or investors.
Finally, leadership requires the ability to strategize and take action.
There is a whole section I call responsibility. When you talk about corporate or leadership responsibility, you talk about initiative, investing the right resources, risk management, values and establishing corporate missions. But what is missing for corporate leaders and leadership training is that as leaders we need to be healthy ourselves, physically and emotionally, and we need to make sure the people we work with we have at least some tools to ensure their health, wellness and happiness. That does require a different way of thinking, and yes, it is a behavioral change.
How do you get to that point? It’s a lot harder than simply waking up a little earlier and working out before going to work or eating that salad for lunch instead of a double cheeseburger.
If you motivate people through fear it usually doesn’t work. There’s a high dropoff rate, and furthermore, fear has its own consequences, such as stress. So many times, when people are motivated by fear, they end up worse than they were before. Instead, people have to be inspired and feel some type of joy in this transformative process. They also have to understand that if they take on this transformative process and take responsibility for their well-being, they’ll be much more productive. They’ll be able to accomplish more by doing less.
Take stress for example. When people are stressed out, they do things they shouldn’t, like drink to excess. If somebody has a hangover because they were stressed out and sought refuge by drinking too much, half the day is wasted just recovering from the hangover. And by the time you’ve recovered, then you’re ready to create another hangover.
So it’s very important for people to recognize that their energy level, their creativity, their ability to motivate others and their ability to produce more is directly related to how they’re feeling inside and their health.
What are some ways people can take to increase their wellness?
There are a few simple things that will help create well-being.
Get good sleep. The importance of sleep has been underestimated. There is an overwhelming percentage of the population of the United States that take sleeping pills to sleep. That doesn’t produce normal, rejuvenative sleep, which is necessary.
Engage in a minimum amount of exercise each day.
Be a little careful about your diet. Don’t be compulsive, but try not to eat anything that comes in a can or has a label.
Have healthy relationships.
Use some technique for stress management, even if it is 10 minutes for meditation, reflection or thinking about how you want your day to go, sitting quietly or strategizing around your priorities.
Build up on your relationships — both at home and in business.
You mentioned relationships. What’s the importance of personal relationships in wellness and well-being, and how can those directly impact one’s mood?
Emotions are contagious. If you’re feeling stressed, even if you don’t say or do anything that’s inappropriate, there’s a phenomenon called limbic resonance. People around you will start to feel stress, their blood pressure will go up and their heart rate will speed up even though they are not aware of it. All of this means that, as a social species, we are constantly monitoring, regulating and being regulated by the emotional state of others around us.
This emotional state not only affects our emotions but our physical state — blood pressure, heart rate, adrenaline levels. If you are emotionally fulfilled, happy, you affect other people not only by what you say or do but by your very presence.
And the opposite is true. If you’re stressed out, you affect people in a negative way, not only emotionally but physically, just by your presence.
So what can you do to keep this from negatively impacting your wellness along with the well-being of others?
There are techniques to change this. You can acknowledge other people’s strengths, help build teams and foster teamwork, and actually make sure that people work only in those areas where they can utilize their strengths.
We have identified 35 strengths where people fall into and found that even if people are really good and productive, if you put them in the wrong seat on the bus with regard to their strengths, they’re not going to be happy, and that’s going to affect their productivity. Therefore, team-building and putting together the right set of talents based on people’s strengths is imperative in the workplace. And, you must acknowledge people’s strengths. We don’t always do this.
We asked people in over 150 countries the same question: Do you like what you do every day?
Only 20 percent of people said yes. We also found out that more people die in the United States on Monday morning at 9 a.m. of a heart attack than any other time because they hate their jobs. These are facts that are immediate and alterable, and they all correspond to wellness.
How important is getting the right amount of sleep each night?
Sleep is very important. Restful sleep is the time when your body rejuvenates. There is a period during sleep, dream sleep, which is when you have some sort of detox activity, where the stress is removed. For many people, between six and eight hours of sleep makes sense.
So what should be the first thing people do to take responsibility in their own wellness and well-being?
Sit for five minutes with your eyes closed. Put your attention in your heart every morning and ask yourself, ‘Who am I? What do I want? And how do I want my day to go?’ If you start living that question, you will spontaneously know what your priorities are. And that will ultimately lead to a healthier, more productive and happier life.
How to reach: Chopra Center for Wellbeing, www.chopra.com
Every day, it seems the social media world is growing, making the physical world around us appear that much smaller. With those changes, the line that previously separated our personal and professional lives has blurred as websites and applications like Facebook, LinkedIn, Flickr and YouTube provide the ability to connect with family, friends and business colleagues and to share information, news, videos and photos.
So what exactly defines social media, and where is this new frontier headed? More important, how can we best take advantage of what’s out there?
Who better to answer those questions than Jeff Weiner, CEO of LinkedIn, the Web’s largest and most powerful network of professionals.
Q. Social media means different things to different people as well as companies. What would be a good definition of social media?
Broadly defined, it is the creation of content, information and knowledge, distribution of it, consumption of it, and leveraging social interactions. Whether that’s a status update, sharing an image, a video or a blog post, even retweeting a headline or sharing a headline — those are all examples of social media.
I think the social interaction component, the virality, really takes what historically has been behavior we all have done offline, and when you bring it online and digitize it, it starts to scale and moves at a speed with which we haven’t seen previously. It really has the opportunity to change everything it touches.
Q. So what do you see as the true cultural sea change that is being caused by social media?
This goes way beyond brand building and customer outreach, which is how many organizations are using social media. ... Leveraging social platforms is going to fundamentally change the way we work and how business gets done. It’s going to really revolutionize and disrupt all of it. So whether it’s the way you hire people, find your dream job, transition from cold calling to warm prospecting by leveraging the power of first-, second- and third-degree relationships or whether it’s exchanging and sharing information, knowledge, insight and data that you need to derive insights to make better and more informed decisions, I don’t think people can really afford not to participate within these platforms.
Q. Since it’s going to be everywhere, where would you start?
It starts with recognition. There are three behavioral changes we focus on the most at LinkedIn. First is the way in which we represent our professional identity. Think about that for a moment. The way in which individuals now build their professional brand starts with their profiles. And those profiles, when they’re kept fresh and relevant, are search engine optimized so that when people search for your name or the names of people like you with your experience, your skills, your aspirations, you’re the first thing they see when they do that search on Google.
This ability to carve out a piece of digital real estate that you, yourself, can control to put your best foot forward is an incredibly powerful and valuable dynamic. It’s not just the individual; it’s also your company. There are over a million active company profiles on LinkedIn. And these company profiles not only represent who you are and your company’s identity, but they enable you to build your talent brands, establish the way in which you’re going to recruit and how you recruit, and build word-of-mouth around your products and services. So identity is an absolute cornerstone.
The second is building your network. I think historically, when people hear the expression ‘professional networking,’ they think of the guy at the conference who is handing out as many business cards to people as possible, just building the Rolodex. That’s not what we mean anymore. We mean the way business gets done.
If we believe the world is getting flatter, more global, more digital, more networked, this is the way business gets done — it’s the way people are tapping knowledge, exchanging information — and if you’re not taking advantage of that and building out your network, your competition is.
And then lastly is the whole notion of sharing information and knowledge — collaborating, sharing business intelligence and competitive intelligence. To be able to really derive this kind of insight from whatever networks or social environments you’re operating in becomes an enormous advantage versus those folks who aren’t able to do the same.
Q. You mentioned identity. How accurate do you think people or company’s identities are on the Internet? Who and what should we trust?
When you’re talking about a professional context, I think things change versus a social context. One of the first things people do when they meet in a professional setting is exchange business cards. The more your professional identity is out there, the more opportunities potentially accrue to you. It’s kind of a tried-and-true practice. So when you’re putting your profile out there for everyone to see publicly and transparently, the people who work with you and know exactly what you did, well, they’re going to call you out if you’re not telling the truth.
It’s very much self-policing in a professional context. The comments you see and the quality of interaction from people’s professional identities are very different than what’s shared outside of the professional context. It’s that important. If you’re sharing what you’ve done in a professional context or what your company is about, it’s perfectly transparent.
Q. And if you look at work/flex integration, where do those boundaries start and stop?
For a platform like LinkedIn, one of the reasons that we create the value that we do is that no matter where in the world we go, what cities we go to and the members we meet up with, we hear that people want to keep their personal lives and professional lives separate.
That context matters to people, for very obvious reasons. We all went to school, and we all had fun at school. And when I was back at school, not everyone was carrying a camera around in their pockets via a phone and uploading essentially everything that everyone did every minute of the day, having those images tagged and then having those images viewed by everyone they met.
I think people appreciate keeping their personal lives and professional lives separate, if that’s what they want. But there are also environments where those are unified.
Q. Should you have different conduct online than you do offline?
Generally speaking, for the most part, you need to conduct yourself online the same way you conduct yourself offline. This whole notion of creating a separate social media policy, save for regulatory environments where you have compliance issues, and there are very hard and fast rules, you really want to conduct yourself the same way. You want to be true to yourself. You want to be true to the values of the company you operate for. I think the sensitivity comes from the dynamic described earlier — when it goes online, it moves at the speed at light. So you’re talking about a far different scale at a far different speed with greater sensitivity.
Q. Are there some good ways to create a company’s social media strategy, and how do you measure a return on investment from that strategy?
Pursuing a social media strategy for the sake of having a social media strategy is not the right thing to do. It will end up being a big waste of time. And it wouldn’t surprise me if a lot of folks are doing it because they’re told this is something you have to be doing right now. But try to figure out how you take your organization’s top priorities and leverage social connectivity to create greater value. That, I think, is a very, very smart thing to do. So trying to align your priorities and objectives makes a lot of sense.
If you’re trying to go out and do recruiting using social tools, how is that going to benefit your organization? Explicitly, there are ways of measuring that.
Historically, people are filtering through hundreds or thousands of active candidate resumes. Now technologies exist that you can find the perfect person, which creates huge efficiencies for your recruiters. They can target the ideal candidate instead of constantly spending 90-plus percent of their time saying no.
For your salespeople, how are they tapping first-, second- and third-degree relationships to eliminate cold calls? Think about the effectiveness of tapping warm prospects and how much more business you’re going to be able to do as an organization. That kind of stuff can be measured.
And then there’s the implicit stuff, such as how your company, in and of itself, can leverage social connectivity ... or the ability for your organization to share news or insights that one person in the company has identified as being valuable to everyone else in your organization is going to be a little more challenging to measure the explicit ROI of that. But implicitly, as people start to share that kind of information, best practices and knowledge, your organization is going to work more productively.
And so it comes back to what are your objectives and how are you going to leverage these technologies to achieve greater productivity.
Q. What’s the most fundamental change coming up?
It’s going to be transparency. These technologies are going to eliminate, if not dramatically reduce, the ability for organizations to conceal the things they don’t want people to know about — both internally and externally.
And the best part of this transparency is the efficiencies it creates in the marketplace. For example, when you take the friction out of the ability for people to move from one company to another, guess where they’re going to end up? They’re going to end up at those companies that are the best places to work because they know those opportunities because recruiters from those companies are able to identify them in ways that were impossible before because they can align their skills, objectives and their aspirations with those companies.
There are myriad examples of companies that are going through situations where they’ve introduced a bad product or service and are getting customer complaints over here. Historically, they’ve tried to hide that. That’s no longer possible because everyone’s an influencer. So if you’re not constantly having dialogue with your customers via some of these tools, you’re going to be punished for it.
Steve Jobs said an amazing thing at a conference I attended when asked whether he liked doing business in an enterprise setting or with consumers. He said he loves doing business with consumers because, at the end of the day, they vote with a thumbs up or a thumbs down. They’re either buying your products or they’re not. That’s the kind of efficiency that’s created when you have this kind of transparency. •
HOW TO REACH: LinkedIn, www.linkedin.com
Bill Ford Jr. never thought he’d see the day when Chrysler and General Motors would be forced into bankruptcy proceedings, when American automakers were in such peril that they had to look to the government for a bailout or when the entire auto industry was teetering on the brink of disaster.
Yet that’s exactly the depths to which the automotive industry sank over the past two years. As the worldwide economy slumped into a massive recession, the auto industry took one of the worst beatings of any area on the business landscape. Car sales slumped, auto component suppliers went bankrupt, Chrysler partnered with Fiat, and GM underwent a restructuring and downsizing that included the elimination of the Pontiac, Saturn and Hummer brands from its lineup.
As the executive chairman of Ford Motor Co., Ford — the great-grandson of company founder and American business icon Henry Ford — helps lead the one U.S. automaker that didn’t face bankruptcy proceedings or the humiliation of limping to Capitol Hill with its hands out. But that doesn’t mean Ford Motor Co. has emerged in 2011 unchanged or unchallenged by the events of the past two years.
In November, Ford gave a presentation at the Ernst & Young Strategic Growth Forum in Palm Desert, Calif., moderated by veteran journalist Charlie Rose. During the presentation, Ford talked about the recent past of the auto industry, where the industry is headed and what business leaders in other industries can learn from the lessons taught to automotive executives in the past couple of years.
“Every industry says they’re in a time of great change,” Ford says. “I suppose when you’re in it, you really feel like you are. But if you just look back a few years and look forward a few years, you’d be hard-pressed to find any era in any industry that will comprise more change.”
Do the right thing
When the other American automakers went to Washington seeking a federally funded lifeline, Ford figured his company would be at a disadvantage on the consumer sales front.
“We didn’t really know what a bankruptcy meant for us,” he says. “Would a customer buy a car or truck from a bankrupt company? What we didn’t realize at Ford was that it would resonate with the average person on the street that we didn’t take a bailout. We thought the average person would take the opposite stance, as in, ‘I have so much money wrapped up in this company, I’m going to buy their car or truck.’ We were worried that no one would buy from us, because they were now shareholders of sorts in GM and Chrysler.”
Instead, Ford received — and still receives — letters of support from small business owners and operators who admire Ford’s ability to get his company through the recession without the need for taxpayer dollars.
“The letters I got, and continue to get, are incredible,” Ford says. “Things like, ‘I’m a small business owner in Des Moines and no one would ever bail me out, and we’re really glad that you guys did it the right way.’ It really was heartwarming to see the response we got.”
But there was a cost for staying financially self-sufficient. Ford Motor Co. had to borrow against many of its assets to finance the research and development projects that allowed it to stay away from the jaws of bankruptcy and bailouts. The company amassed a large amount of debt, compared with GM and Chrysler, who emerged with clean balance sheets thanks to their sources of external funding.
But Ford believes a commitment to developing your business internally is one of the most reliable methods by which you can weather an economic storm. If you’re developing new products and services and finding other ways to enhance your business from within, you’ll become much more strategically diverse and self-sufficient as a company.
Ford’s emphasis on internal development is reflected in one of the first conversations he had with Alan Mulally, who succeeded Ford as the company’s president and CEO in 2006.
“One of the things I told Alan in our first meeting was, ‘There is no point in going through all of the pain we’re going to have to go through if we don’t keep investing in research and development and product development,’” Ford says. “He agreed completely. Now that we’re through and out the other side, most of our competitors, both domestic and foreign, slashed their spending during that period. Not only didn’t we do that, we actually accelerated some key areas. So when the clouds started to lift, we had the products, technology and features that made our vehicles very desirable.”
Ford and his leadership team set those wheels in motion even before Mulally came on board, working with bankers to get capital to pump back into the company’s development areas. From Mulally’s first day on the job, he began making the rounds to banks, trying to secure the loans necessary to make it all happen.
“It was a pretty dicey period,” Ford says. “You can imagine it was a pretty interesting conversation I had with the extended Ford family.”
To build the case to the other stakeholding members of his family, Ford needed to go back to the basics of good business communication from the executive level: Lay out your plan, be as forthcoming with information as possible, answer questions and seek feedback.
“I was very proud of the fact that, over the course of that discussion and over the next couple of years, when every day they’d pick up a paper that says, ‘Ford, GM and Chrysler aren’t going to make it,’ they all hung in there,” Ford says. “I had to continually sit down with them and say, ‘We do have a plan, you’re not seeing it yet, but it’s going to work.’ To their great credit, they all hung in there. And that really allowed the rest of the management team to not have to worry about the shareholders. They could focus on fixing the problem.”
The patience of the Ford family is being rewarded. Not only did the company emerge from the financial crisis without the need for federal money, but Ford says the company’s debt is being paid off much faster than either the company’s leaders or industry analysts anticipated.
“There was a disadvantage to doing it the way we did. But that disadvantage [of debt] is shrinking almost on a daily basis,” Ford says. “I wouldn’t trade places with anybody. I love where we are. I love our product, our direction and our freedom to operate without interference.”
Face the future
Before you can build something, Ford says you have to value it. You have to value the end product as a company and as a marketplace. The failure to adequately value the domestic manufacturing sector is something Ford believes the American business community will continue to face.
To increase the value of manufacturing businesses, Ford says it will take a combination of new, innovative ideas, intellectual partnerships, capital investment and an appreciation for how other countries handle their manufacturing bases.
“Manufacturing was kind of seen as yesterday’s news, brownfields, and we’re going to become a high-tech and service economy,” Ford says. “The problem is, the multiplier effects of those jobs versus manufacturing jobs is minuscule. To put it another way, every country that Ford does business in around the world will really do everything they can to help their manufacturing base. In our country, it was the opposite. The feeling in Washington, and even on Wall Street, was ‘Who cares? Shut your plants here, because we’re going to be a different kind of economy.’”
It’s taken the economic downfall of the past several years to increase awareness about the importance of maintaining a manufacturing base.
“Manufacturing has to change, and it is changing,” Ford says. “We’re making new things, high-tech things. The auto industry is one of the biggest users of high tech. We should now be building those high-tech components and clean energy components here in America. If anything good has come out of the last three years, it has been a recognition in Washington, and I think on Main Street, that manufacturing matters a lot, and we ought to have a strong manufacturing base. That recognition in and of itself is a great start.”
New avenues to maintaining the manufacturing base won’t be discovered without new ideas. And to that end, Ford sees a great deal of fertile soil in the nation’s universities. Whenever possible, the business sector needs to partner with and leverage the research capabilities of educational institutions.
“In terms of where we go forward, one of the great advantages we have in this country are our universities,” Ford says. “And we have great venture capital activity. We really need to take advantage of those great resources, both the venture capital mentality and the help that the universities can provide to all businesses in terms of R&D, partnering and I’m happy to say those are all vibrant pathways.”
But even with the external financial and intellectual avenues available to businesses, growth still boils down to what is going on under your own roof. You need to have the manpower and the brainpower to take advantage of the opportunities presented to you, which is why Ford promotes an innovative and entrepreneurial spirit among his employees.
“It’s something we struggle with every day,” Ford says. “I believe that now, we have the equation right at Ford. A few years ago, we didn’t. Part of it is you have to look at what the inhibitors are, because people really do want to be innovative. Most people want to try new things. But in our case, one of the things I did was do a deep dive into our product development system. We had a terrific R&D function, built with a couple of Nobel laureates. But somehow these great innovations weren’t making it into our vehicles.”
It demonstrated to Ford how a company’s leaders need to remove internal barriers to innovation — barriers that might exist within your company’s structure that you might not even realize.
“In our case, it was our finance system that created the barrier,” he says. “Whichever program it was — let’s say it was the new Explorer — wanted to adopt the new rear seat belt we just introduced. That program would have to take the cost of that entire innovation. So you wanted to be the second program to take the innovation, not the first.
“That is just one example of how you need to look at what the structural barriers to innovation are. People often blame the culture. People often say, ‘It’s a big company; nobody wants to take a risk.’ That can all be true, but there can also be structural inhibitors like the one that I just mentioned. You have to get those out of the way.”
The other critical component in building your business for the future is a motivated work force. You motivate employees by giving them avenues to pursue their ideas and removing roadblocks. But you also need to encourage the behaviors you want to see.
Ultimately, your internal culture needs to work in tandem with your outside resources. When a motivated work force can draw upon extensive financial and intellectual support, your company can have the tools to weather just about any circumstance that comes your way. There will still be adversity, but you’ll be prepared for it.
“You have to celebrate success,” Ford says. “That is a cultural thing. We do a lot of that, we have awards within the company for innovation. It’s great when you recognize externally. For instance, we’ve been the keynote at the consumer electronics show for the last three years. They never had an auto show up, much less give a keynote. We won the award last year for best in show. That is very reinforcing for our employees, when they’re recognized not just from an auto trade standpoint but something completely different that is seen as really cutting edge. That emboldens people to continually go further.”
How to reach: Ford Motor Co., (800) 392-3673 or www.ford.com
Ford Motor Co. Executive Chairman Bill Ford Jr. touched on a number of topics during his November presentation at the Ernst & Young Strategic Growth Forum. Here are some additional nuggets of information from one of the world’s leading automotive executives:
Ford on where the auto industry is headed: When you think about this industry, for 100 years, we had a changeable line. The Model T had an internal combustion engine and was sold through dealerships. But now we sit on the threshold of some very interesting technology coming into vehicles on the safety side, on the data management side, in terms of real-time road information, where traffic is, where the parking spaces are, all of that will be available very fast.
Ford on the future of electric cars: If you think of electric as we know it today, there are three types. There is the hybrid, there is the plug-in hybrid, and there is the pure electric. To me, the pure electric is great because it is totally clean depending on how the power is derived, which is a whole separate discussion.
If you live in San Francisco and just need to drive around town, that’s OK. But if you all of a sudden want to drive down to Los Angeles, that’s an issue. Plug-in really alleviates that. With the plug-in hybrid, you can drive on the electric motor for the first number of miles, but once the electric runs out, it will then run as a conventional engine. So that gives you a lot more versatility.
Then the current hybrids, which don’t require anything to be plugged in, we keep refining those so the batteries become more fuel-efficient. So really, it will be a three-pronged approach in terms of electric. You’ll have all three of those in the mix.
Ford on international growth: By the year 2020, there are going to be 9 billion people in this world. If you look 10 years beyond that, there are going to be 30 cities of 10 million or more. Most of those will not be in the U.S. or Western Europe, and they don’t have the infrastructure to start shoving cars into those cities. So mobility starts to become a big issue. How are people going to move in big urban areas? The answer is not going to be to put two cars in every garage. So how do we help countries and municipalities solve the urban mobility issue. That will require us to define ourselves not as a car and truck company but as a mobility company.
Growing up in Pittsburgh, Mark Cuban’s parents wanted him to learn a trade so he’d have something to fall back on. So the guy — who is now worth $2.5 billion — got a job working for a carpenter laying carpet and quickly learned he was absolutely horrible at it.
He was so terrible at his next endeavor as a short-order cook that he couldn’t tell if the food was done right unless he tried it, so he always cut off tiny pieces to sample.
And then there was the time that he was a waiter in a nice restaurant and could never open the wine bottles without getting cork in the wine.
“It was just horrible,” he says. “I was like, ‘Why aren’t you scheduling me more hours?’ [They said], ‘You can’t do this worth a damn, Mark.’”
But through all of these early experiences, he learned that it’s OK to not be good at everything.
“I’ve learned that it doesn’t matter how many times you failed,” Cuban says. “You only have to be right once. I tried to sell powdered milk. I was an idiot lots of times, and I learned from them all.”
He applied lessons learned in his failures as he started Broadcast.com, an audio and video portal, which he later sold to Yahoo for $5.7 billion in stock. His failures also helped him succeed when he bought and turned around the Dallas Mavericks NBA franchise and co-founded HDNet, an all high-definition television network. And these are just a few of his successful ventures that have landed him at No. 144 on the Forbes 400 Richest Americans and No. 400 on the World Billionaires lists as well as a guest venture capitalist “shark” on ABC’s “Shark Tank” reality TV show.
“I don’t care if you’re working a counter at McDonald’s or as a bartender like I did or as a doorman like I did, when it fails, whatever it may be, you’re going to learn,” he says. “You’ve got to take that positive orientation to it and develop your skills.”
Cuban has refined many skills over the years as he’s built his businesses, and he’s learned a lot. But in particular, he’s learned how to look at opportunities, how to know himself and how to be ruthlessly focused.
Look at opportunities
If someone wants to pitch Cuban an idea, he’s open to it, but he’s not going to take a meeting for it. Instead, he wants to keep the details short, sweet and to the point.
“What I tell people is, ‘Anything you’re going to tell me in a meeting or a sales pitch, put it in an e-mail, and I’ll read it, and you know, give me as much technical information or business details as you can,’ because that takes all the personality out of it,” he says. “It lets me deal with just the facts or the details, and once I have a feel for the details, then we can deal with the personalities and the people involved.”
Cuban can quickly — often within seconds — recognize if a pitch is something he’s interested in or not. He starts with whether it’s an industry he wants to be in. He knows he wants to steer clear of websites driven by advertising, he’s not interested in being part of the next cool fashion trend, and it’s safe to say that his early experiences in the restaurant industry are just one reason he doesn’t want to open a restaurant of his own. Instead, he tends to stick to technology and play to his own strengths.
He says that just looking at the industry is about 90 percent of it. Beyond that, he looks for any red flags.
“The more people try to sell you on the size of a market, that’s usually a first red flag,” Cuban says. “If someone says, ‘This is a billion-dollar market, and all we’ve got to do is get one-half of 1 percent, and we’ll be making X, Y, Z,’ that’s someone usually selling themselves.”
Another red flag is if someone also says that the company is going to be better than an established player — like someone saying the company is going to be a better Facebook than Facebook. Also, he looks at how people react when he brings up competitors. If they start saying what those folks can’t do instead of talking about what gives this opportunity a unique competitive advantage, that’s a good indicator to him, as well.
“What people fail to grasp is once you introduce something, whoever the competitors are, they’re going to introduce the exact same thing,” he says. “It’s pretty much impossible to protect ideas like that when you’re already in an industry, so just trying to be faster, better, cheaper, just one-upping somebody, that’s also a red flag. When I see someone trying to be a one-upper, I’m usually turning away.”
The last element he looks at is whether there is a product or a feature.
“You look at things like location-based services — Gowalla, Foursquare and the like — and then you look at Facebook adding places or Google adding places, and you have to ask yourself, ‘Even though Foursquare and Gowalla pretty much wrote that business, are they features of somebody else’s products like a Facebook, or can they operate as a stand-alone business?’” he says. “That’s also a decision point you have to make.”
Cuban says you have to be patient and recognize that timing is part of an opportunity, as well. That’s what he’s done with the model he has now — releasing movies simultaneously for home viewing and in theaters and sometimes even prior to theatrical release — with Landmark Theatres, HDNet and Magnolia Pictures. He had to own all of those different elements, and people had to be open to it if he was to succeed, and it’s catching on now that the market is ripe for it.
“You can’t just automatically walk in and start a business every year or always have the right idea at the right time,” he says. “But you have to recognize when you have a unique opportunity and be able to pounce on it. There’s not always going to be an idea. There’s not always something. You just have to be willing to say, ‘OK, this is the lull period, but I keep on working, and I keep on learning, and if things change, there will be a unique opportunity, and when it comes, I’ll pounce on it.’”
Before Cuban ever made any money, he says he had so much “piss and vinegar” in him that he’d do anything necessary to win, but as his businesses have changed over the years, he realizes that this once-prevalent personality trait isn’t one of his strong suits anymore.
“It used to be picking up the check and closing the deal was the ultimate, and now one, ‘I love you, Daddy; can we go get some ice cream?’ conquers all,” he says.
And it’s not necessarily a bad thing, but it would be if he didn’t recognize it.
“I always thought, ‘I’ll just dive in,’” he says. “It’s like working out. There’s multiple kinds of workouts. Sometimes you tell yourself you’re going to go to the gym and get a great workout, and then you realize that you remember why you need a trainer — you need someone to push you. When you have the piss and vinegar, you don’t need anyone to push you. You just dive in, and you get the best possible business workout.”
He now looks for people with that piss and vinegar in them or in their company so he can complement them. Additionally, Cuban has always been a “big-picture geek” that understood sales, marketing and technology, but when it comes to the administrative side of making all the little things work, that’s where he’s had to find people to help him. He says it’s critical to make sure you’re grounded in reality about your abilities.
“You have to be brutally honest with yourself,” he says. “You (can’t) lie to yourself. You have to know what you’re good at and what you’re bad at. You can’t all of a sudden be a home-run hitter. You can’t be a dunker if you can’t dunk, right? It’s that simple. …You better figure out what you’re good at and be great at it.”
One easy way to tell if you’re being honest with yourself is your success record.
“[It’s] just wanting to win,” he says. “It’s not an ego thing. It’s very binary. Is there money in the bank or not? Are you successful or are you not? It’s very simple. The people who lie to themselves typically end up with more problems.”
If you can recognize your strongest skills and those of the people around you, then you can win in business.
“It’s about winning,” Cuban says. “Your ego gets rewarded a whole lot more by winning in terms of your business success and the success of your company than you do by winning an argument or a battle or just trying to prove to people that you’re good at everything. When someone tries to tell me they’re good at everything, I know they’re lying.”
Have a ruthless focus
When Cuban became the Dallas Mavericks’ owner, he walked into a losing franchise that struggled to fill seats, and he didn’t say, “I’m the new owner; do what I say.” Instead, he put his desk in the middle of the sales bullpen, put a copy of the phone book and old sales leads on his desk, and he started calling people along with everyone else.
“I said, ‘Look, we’re speeding up, and either you’re on the train or off the train,’” he says. “‘If you keep up, you stay on. If you don’t, we’ll still be friends, but you know, you’re going to fall off the train, and we’re going to figure out how to move forward without you.’”
To succeed, you have to be completely focused on what it is you want to do.
“You have to go in and be very specific about what your goals are, what you’re willing to accept and what you won’t accept,” he says.
The first thing he clarified to his employees was that they were not in the basketball business — they were in the entertainment business.
“We were going to be more like a great wedding than a good high school basketball game,” Cuban says. “A great wedding, you remember Aunt Susie getting drunk and dancing with Cousin Billy, who you hated, but it was fun to watch. What makes a good wedding fun is everyone getting together and yelling and screaming and having fun.
“When you remember the first sporting event you went to, you don’t remember the score or the date. You remember who you were with and what you did with that person.”
He then had to be clear regarding what they needed to achieve. The old arena had 17,700 seats, and there were 41 home games plus playoffs, so he put up signs saying “17,700 times 41 — that’s our goal. That’s how many we have to sell.” He asked them how they were going to get there and said nothing else mattered. He promised the team and coaches that he’d do everything in his power to give them the resources they needed to get the losing franchise winning.
As a result, games became electric with entertainment, which brought people in, and he hired new coaches to help the team win.
“I made it quite clear what we were trying to accomplish,” he says. “There was no ambiguity at all.”
In these situations, he says it’s important for you as the leader to set those goals and not rely on a group of people to do that.
“You have to know exactly what your goal is, and you have to know how you’re going to get there,” he says. “Where companies fail miserably is they try to create goals by committee. You can’t have committee leadership. If you don’t know, you’re preparing yourself to fail.”
Communication also plays a key role in setting goals and staying focused on them.
“Good leadership is being able to explain how you’re going to kick your competition’s ass and being able to explain to everybody how they’re going to participate in doing that,” he says. “Otherwise, what are you doing there?”
He says you also have to adjust your communication depending on the type of people you have in your organization.
“Are you dealing with 18-year-olds, 25-year-olds, 40-year-olds?” he asks. “Are you in a very competitive business that moves quickly? You have to match the circumstances and the context and adjust accordingly. If my business is where I trust people and things are going well, then all I need is a weekly report via e-mail. That’s it. Just tell me what’s going on — bad news first — and then we’ll deal with it. If I’m in a situation where things aren’t going well, then I’m going to be up your ass. It just depends. It’s when you try to do it the same way every time, that’s when you run into problems.”
His intense focus paid off — the Mavericks have become a winning franchise and reached the playoffs now in each of the full seasons since he bought them, and fans are packing the arena to wildly cheer alongside the animated Cuban.
“Ideas are the easy part,” he says. “It’s the execution of the idea that becomes the difficult part.”
How to reach: Dallas Mavericks, (214) 747-6287 or
www.mavs.com; HDNet, (214) 672-1740 or www.hd.net
Cuban on titles:
It’s OK to allow people to raise their voice to you. I want people with strong opinions that they get passionate about. I don’t care if someone is yelling and raising their voice in my direction. It’s not a sign of disrespect. Hell, it’s a sign of passion. … If someone is passionate about something, share the passion. And if I don’t agree with you, I’ll tell you, but at least I’m going to appreciate the passion. That means you care.
A lot of CEOs say, ‘Don’t disrespect me,’ or, ‘I’m the CEO.’ I just hate that, when people hide behind a title. I’ve never been CEO of one of my companies until this year when I had to do it, and the reason I wasn’t was because, A, I didn’t care about titles and, B, I was superstitious — I’d been the president of every company that had been successful. To me, titles never matter. I try to keep all our organizations very flat. I never wanted managers reporting to managers. There was everybody, there was the level of management, and there was me. If I had to have somebody in between me and the managers, I minimized it as much as possible.
It’s not as much setting the ego aside; it’s setting formality aside. It’s ego, but if you’re a good CEO and you’re in a successful environment, there’s 1,001 ways to get ego gratification, and it should be in winning as opposed to driven by title. If anybody ever makes you feel like you’re a lowly anything, the problem is not yours, it’s theirs.
Cuban on control:
It’s not that the glass is half full or the glass is half empty, it’s who’s pouring the water that matters. And that’s the way it should be. Everyone’s, ‘Oh, you have to look at it positively.’ You have to take control of the situation.
Sometimes you can’t — then you have to figure out who’s in control. When you think about it, if someone says, ‘Is the glass half empty or is the glass half full?’ that already means you’re at a disadvantage, because you’re stuck. You’re making an adjustment about what’s already done as opposed to figuring out if I want to pull to the top, pull halfway or pull down. It’s not about taking a positive or negative attitude. It’s about taking control.
That’s part of the job. If you’re trying to kick everybody’s ass and you realize you’re getting your ass kicked, you better re-evaluate. It happens. You get your ass kicked from time to time. If you’re playing the game, you’re going to lose some games, and you have to go and figure out who’s beating you and why.
Sometimes you can’t. MySpace isn’t going to know why Facebook beat them, but they did. Yahoo doesn’t have an immediate response or an immediate solution [to Google]. If they said, ‘Mark, you go run Yahoo,’ I wouldn’t have an immediate solution for how to beat Google. Sometimes you do, and sometimes you don’t.”
Cuban on the role of the CEO:
The show ‘Undercover Boss’ is a good learning model. You’ve got to get out there and watch. You’ve got to get out there and experience. And you’ve got to be out there. I’ve always had the attitude that there’s no job in my company that I shouldn’t be willing to do. I can’t ask someone to do a job I’m not willing to do myself. If I see paper in the parking lot, I’ll stop and I’ll pick it up. I won’t call someone to do it.
I don’t have a PR agent. I’m probably the easiest CEO in America to find and e-mail and to get ahold of. It’s more efficient and takes less time to deal with things directly via e-mail than it does for someone to go through your e-mails and go through this and not know what you’re missing and then have to have them communicate to you and you communicate back to them. The time it takes for you to answer an e-mail or hit the delete key, if it’s not worth responding to, is probably about 20 percent of the time it takes to go through one, two, three assistants. I go into Hollywood and I see four assistants sitting outside somebody’s door, and I’m like are you [expletive] kidding me? It takes more time to deal with them than it does to do it yourself. Sometimes CEOs get caught up with what they think CEOs are supposed to do. Rather than working in a way that you think CEOs are supposed to work, just do what you know is the right thing to do. Do the most expedient thing; do the most efficient thing. That sets a better precedent and a better example than doing things the way you think a CEO should do them.
Whatever you think is the standup of your culture, you have to do it yourself. If it’s selling, you have to be a salesperson. If it’s programming, you have to understand programming and engineering. If it’s design, you have to understand design. If people don’t think you know your business, how are they going to respect you and follow you?
Cuban on learning:
When I get into a business, I try to know it better than anybody else. It doesn’t matter how much I have to read or how many people I have to visit or what I have to do — I’m going to do it. There’s always someone out there trying to kick your ass. If you’re not out working, they are going to kick your ass. Regardless of what it is, I want to know more than anybody about what we’re doing. …
It’s an ongoing, nonstop process. That’s my job. My job is not to shake hands and glad hand and say, ‘Hey, how are you?’ My job is to get into a business and learn it better than anybody else and try to come up with angles and ideas that they haven’t.
You’ve got to love learning. The hardest thing, particularly once you’ve reached a level of success, is people have an inclination — myself included, and I’ve kind of learned the hard way — to say, ‘OK, I’m smart. I know this stuff.’ You’ve got to always say, ‘There probably is somebody out-working me; there’s some 18-year-old kid, somewhere, who’s trying to know this stuff better than I do.’ … Either the kid wins or you’re going to put in the same amount of work and have the same understanding or better of that 18-year-old or whoever it is. I don’t think most leaders are willing to do that. I think most leaders say, ‘I’ll just go out and hire the right people, I’ll package the right people, I’ll take some basic understanding,’ and that’s how they get outdated very quickly. The world changes very quickly. You have got to love to learn because the world always changes.
Herb Kohler believes in doing things big. And as chairman and chief executive of The Kohler Co., the Wisconsin-based plumbing fixture giant founded by his grandfather in 1873, he is in the perfect position to do so.
Kohler sets the vision for the family-owned business and its four divisions, 50 brands, 50 manufacturing locations and more than 30,000 associates scattered across six continents. He’s also a Forbes billionaire who has a passion for golf. Kohler’s Hospitality and Realty Group owns two world-class golf courses — Whistling Straits, site of the 2010 PGA Championship, the 2015 PGA and 2020 Ryder Cup, and Blackwolf Run, site of the 2012 U.S. Women's Open. It also owns the five-star American Club hotel and the Old Course Hotel in St. Andrews, Scotland, the latter of which sits on the fairway of the most famous hole in golf, the Road Hole.
“It’s just a fledging little business,” Kohler says. “It’s sort of wonderful.”
Smart Business sat down with Kohler to talk about myriad issues, including why it’s important to encourage risk-taking and how social media is changing the way business is done.
Mr. Kohler, you’ve forged partnerships with several major golf organizations in a relatively short period of time and expanded Kohler’s brand. How important is that ability to build and foster different kinds of relationships in order to diversify a business?
We’re fortunate to have a growing, multidimensional company that today goes well beyond just our core products. We historically put on large exhibitions in furniture, kitchen and bath products, so we have a talent in dealing with large crowds and large events. When an organization like the Royal and Ancient, United States Golf Association or the PGA America picks partners, they select the course first but then put all the infrastructure in support behind it.
Having our expertise is a major factor in their selection and final resolution. But it is relationships that make this possible; it’s what gets them to look at you in the first place. They are equally important, but relationships can’t carry a day. It’s the quality of the facilities and the quality of the support organization, the people and whether or not they have the capability on a continuing basis to support these larger things. These Majors provide a sizeable amount of the annual income of these organizations, so you have to be able to execute without fail. They really rely on you.
You’ve built a reputation as a leader who embraces risk. How critical is it in a culture of innovation to have risk-takers on your team?
It’s not easy in a large organization to foster any degree of risk-taking, but we ask all of our businesses, regardless of what they make or what they serve, to live on a leading edge.
They have to understand where that edge is — what’s at the forefront of their particular business field — and then, they have to have the imagination and the technology, combined, to be able to leapfrog that edge — get out there in front and stay out there in front.
We’re asking for an entrepreneurial spirit, and we do that with every business in our portfolio. Some do it better than others. Our senior executives in China are doing wonderfully well as an example.
Is that where you see the next big market for growth?
Yes. We have 10 plants there — eight for kitchen and bath, one for engines and one for power systems. Eighty percent of the product that’s manufactured in those plants stays in China. We are building a brand as fast as we can build it because within a relatively short period of time — 10 years — (China) will be the largest plumbing market in the world and the largest satellite power market in the world. It behooves us and everyone else to take a hard look at China.
What other international markets are on your radar?
India. India is perhaps 10 to 15 years behind China in its escalation, but it’s extremely important.
When you’re playing in a global market how do you protect your brand while you’re focused on growing it?
I make sure we live up to our guiding principles. The first is to live on the leading edge in design and technology, in product and process. The second is to maintain a single level of quality across all these product categories and across all the price points (that) are within a product category. We market from the low end to the midmarket to the high end and to the mass market. That’s a broad range of price points. Our prices vary because of materials, function and because of the level of detail but never in quality. That level of quality must be consistent. And, when you combine that level of quality with leading-edge products and services, that establishes our reputation. So that’s where I put my time and energy, making sure we live up to our brand.
You have embraced technology as part of your innovation. Where has it played a larger role?
There are many aspects of technology — the technology that we use to communicate, the technology we use to run our machines. We’re obviously seeing this explosion of technology in all aspects of our lives. When I built the first golf course, which opened in 1988, I was compelled to do it because of a stack of suggestions slips — physical suggestions slips. One hundred of these little slips of paper. It’s almost unimaginable today, but that was the mid-’80s. How recent! The world has totally changed. You would never find a piece of paper like a suggestion slip around today. No, you find your BlackBerry and send a message.
What about social media? What is Kohler doing in that area to connect with customers?
That also is a constant evolution. It’s remarkable. We’re just undergone a major renewal (at Kohler). We created a website for over 100 different organizations within Kohler. It was so broad. And then we created sites within those sites — and each of those works for the business and does what that business wants. But the engine underneath had a lot of standardization. It was a big task to standardize the approach within product fields, but on the other hand, it had to have a very local feel for people in places like China, Thailand and Vietnam. You can’t do business globally if you try to make all of your customers worldwide interact with you as if they were Americans.
How to reach: Kohler Co., www.kohler.com
Les Wexner felt very insecure about the opening of his first store. It was 1963 and the youngster, a son of Russian immigrants, had watched and learned from his parents’ tireless work ethic. He had worked in their small store named Leslie’s in downtown Columbus and gained the belief that anything in life is possible, if you are willing to work hard for it. And he was ready to launch a business of his own, but he wasn’t sure it was going to work.
He had no idea at the time that this single store would be the first piece of a business that would one day register more than $8 billion in annual sales and employ more than 92,000 people.
“I wasn’t sure it had any commercial value,” says Wexner, founder, chairman and CEO of Limited Brands Inc. “Then people started coming in and buying and I thought, ‘Gee, it was a pretty good idea.’ So I was curious to play with the idea. Some of it was right. Some of it was wrong. It became more proven from a customer point of view. I could make money and earn a living, and I was very happy, because I wasn’t going to be poor.”
Indeed, not. Limited operates more than 2,600 specialty stores across the United States and its brands are sold in more than 700 company-owned and franchised locations around the world.
“You have to be curious,” Wexner says. “People who are really curious have an enormous advantage. They’ve had it in the past. Curiosity and the ability to see things will be, as I look into the future, a higher and higher priority.”
Curiosity helped Wexner build a business that today comprises some of the most recognizable brands in the world. Bath & Body Works, White Barn Candle Co., La Senza, Henri Bendel and, of course, Victoria’s Secret are present in nearly every mall and shopping center one can think of.
“I had this idea about creating a lingerie business,” Wexner says. “People said, ‘You’re entitled to make a mistake, but it’s not a business. You can’t make money selling lingerie.’”
Victoria’s Secret generated $5.3 billion in 2009 sales, part of the company’s overall tally of $8.6 billion in sales companywide.
Wexner believes such success can be achieved when you realize that in addition to being a great leader, you need to be a great teacher.
Paint a clear picture
You could have the greatest idea in the world. But if you can’t share it with others, it will never amount to anything.
“Words matter,” Wexner says. “What’s clear in my mind’s eye in terms of imagining something, if I’m not real clear about my communication, you won’t understand what I’m really thinking in the fullest sense.”
Wexner has always had a sense of curiosity about what isn’t being done and what markets aren’t being tapped. But if he hadn’t been able to share those thoughts with others, he couldn’t have built his business by himself.
“I’m always fluent when I talk to myself,” Wexner says. “If you’ve got friends or a spouse or other people, there is the opportunity for confusion. An organization is just a large group. That gets to the subject of leadership. First, you have an idea. As the organization gets larger, you tend to discover what you know and don’t know about leadership.”
It’s your job to take those creative thoughts and curious personal discoveries and capture the most important aspect of it. At Limited Brands, it’s known as the main thing.
It reads: The main thing is the main thing is the main thing.
“It’s easy in an organization, just as in a family or a community, for someone to drift off what the main things are.”
You need to paint a clear picture of your idea so that your people can see it, think about it and ask questions about it. The tricky part is, sometimes, you and your people think you’re talking about the same thing, but you’re really not.
“I really like chocolate,” Wexner says. “I’m imagining milk chocolate, and you like chocolate but you like dark chocolate. When I say I like chocolate, you go to what you’re thinking, not what I’m thinking.
“The tension in an organization is you want people thinking about what they are doing. They are not marionettes. You need the feedback from people to say, ‘Did you mean this or did you mean that?’ One of the things you learn as you are developing an organization is you say, ‘This is what I’m thinking and this is what I’m trying to get done.’ People say, ‘Yeah, I got it.’ And then you say, ‘Would you explain it back to me so that I know you really do understand?’”
There are brilliant minds who serve as teachers and professors and bring a great deal of worldly experience to the classroom. But if they are unable to convey it to their students, it’s useless.
It’s much the same way in business.
“You have to think about how you lead, not just what you know,” Wexner says. “I could know things technically, but I may not be able to lead. Good leaders, they see themselves as teachers. They have to know what it is they know. Then they have to get it to a teachable point of view.
It was an aspect of leadership that was a challenge for Wexner at first.
“You know and you’re telling people, but my frustration was they’re not learning,” Wexner says. “They said, ‘Well, you’re not teaching them.’ You have to see yourself more as a teacher. You have to be able to distill what it is you know and what you’re thinking, whether it’s the values of your organization or things about quality or products, into a point of view where you can teach it. Part of teaching is for you to have a clarity of what it is and why. If I just tell you something and I can’t give you the reason, I don’t think it’s nearly as effective.”
Know it before you speak it
Wexner is hardly resting on his laurels after nearly 50 years in business. Limited Brands announced this year that it will open a Victoria’s Secret flagship store in London in 2012. The company’s brands have also launched their own Facebook sites to better reach their clients.
Fresh ideas are the lifeblood of a business and help it continue to stay relevant with a changing world. But you need to make sure the change is a good fit for your company before you implement it.
“People come in and say, ‘I really like what you’re doing. I’d like to come work for you. I would change it all,’” Wexner says. “I would say, ‘Maybe they’re right. Maybe as good as this appears to me, maybe it could be infinitely better. But my intuition is that this is working. I don’t think I want to let a stranger play with it. I don’t want it to get broken. You have to earn the right.”
Wexner illustrates his point by hypothetically placing himself as a new employee at Apple. In this imaginary role, Wexner says he suggests that the company use different fruits each month on its products, beginning with a banana.
“I’m sure they want to hire people who are creative and imaginative and can advance the company, but they have to earn the right,” Wexner says. “Do they understand the brand, their business and the customer when they are making suggestions? If they are seeing the world differently, is it in the context of something?”
The lesson is that in staying fresh, you can’t just hop on board any idea that is brought to your attention, just because it’s new and different. The idea has to be delivered with the context of organizational knowledge.
“I kind of like my own ideas, but have I really earned the right to have this idea?” Wexner says. “It may mean, ‘Well, it’s an idea. But I want to reflect on it.’ Sometimes I will argue against it. ‘I really like this idea, but if it failed, why would it fail? How would somebody else do it? How would a competitor deal with this?’
“I want to get other views. I could ask, ‘What do you think of it? What do you think of this idea? Help me critique it.’”
You need to have thoughtful people bringing you ideas and thoughtful people who can serve as a check against ideas that you get from outside your organization that just may not be a good fit for you.
“If I think Apple ought to be fruit of the month and next month it should be a banana, I’d like somebody to say, ‘You’ve lost your mind,’” Wexner says. “You don’t want people just sucking up and saying, ‘Yes, boss.’ They have to earn the right, and I think it’s an individual and a collective thing to judge.”
You need to spend time talking to your people about your business. Initiate conversations about where both you and they see your industry going to help stay tuned in to what your company needs to do to keep up.
“What do you do after everybody owns a hula hoop?” Wexner says. “It’s an easily copied idea. Successful people in their careers, whether they are entrepreneurs or working in enterprise, think about their own evolution and advancement in a way that they are always saying, ‘What if the dogs don’t eat the food? What if everybody had a hula hoop? What do we do next?’ Then they are able to extend their success.”
Despite all of the success he’s had, Wexner operates with a growing fear that his next idea won’t work.
“It’s probably just in my nature, but the more successful something is, the more successful I am, the greater the fear of failure,” Wexner says. “The more successful a product or a brand is, the greater the fear of failure.”
Every new idea that became great probably had quite a few people questioning whether it would ever work.
“Change implies taking a different tact,” Wexner says. “Most people will reject that new idea or a fair number will reject that new idea, because you’re describing an animal they’ve never seen.”
Wexner brings up the idea of people being willing to spend several dollars for a cup of coffee.
“We’re going to sell this product at a premium price, three or four times what anybody else sells a cup of coffee for,” Wexner says. “You’d say, ‘That’s the craziest damn idea in the world.’ But, in essence, you’re describing Starbucks.”
You need to constantly be asking yourself whether what you’re doing now is working for tomorrow.
“The world is always changing and you have to be sensitive to that,” Wexner says. “Whether it’s channels of distribution or the products you sell or how you organize or how you think. If you don’t keep that flexibility, you obsolete yourself.” •
HOW TO REACH: Limited Brands Inc., (614) 415-7000 or www.limitedbrands.com
Michael S. Dell is no longer the rock ‘n’ roll kid who became the youngest CEO ever on the Fortune 500, but he’s still hip to keeping up with the kids.
Dell, who founded Dell Inc. in 1984 with $1,000 and an idea to build relationships directly with computer buyers, today oversees a company with more competition in pricing, product and service than ever before.
More than 26 years into his gig as chairman and CEO, though, Dell, whose company did $52.9 billion in fiscal 2010 net revenue, still talks like that fresh-from-college kid about innovation in products and customer service. He talked about these points to a standing room only crowd at the Cleveland InterContinental Hotel’s Bank of America Conference Center in May. Speaking as part of the Cleveland Clinic’s Ideas for Tomorrow series, Dell spent nearly an hour talking about what makes his company tick.
The conversation started with thoughts on health care — including a moment of glee from the Cleveland Clinic folks that Dell Inc.’s properties are entirely smoke-free — and transitioned into how Dell keeps an edge on innovation. His first rule to keeping an edge: failing.
“When you get a business that changes very quickly, you get some of that naturally,” he says. “You just have to change. To be successful, what you have to do is have an acceptance of risk and you have to be pretty explicit about that, because if you don’t accept risk, you don’t get any innovation. And that means part of risk is you have to accept failure because not everything works.”
And when it doesn’t work, Dell gave some advice that should help soothe leaders coming off the rough landscape of the last few years: Failure can be your best lesson for your next big success. He pointed to a tripping point for Dell Inc. in the ’80s when there was a great flux in the price of pieces related to computer memory. The company’s system of holding onto a lot of inventory put it into an unfortunate bubble.
“It created a huge bubble for us at the time, and what we learned from that is you have to be really world class at managing inventory,” he says. “We went from being bad at that to being a lot better at that. Today, we typically have about eight days of inventory; the average manufacturer tends to have 40 to 50. We’re arguably one of the best in the world at managing inventory. And that became a huge competitive advantage that led to all kinds of growth for us. When things are going well, it’s hard to learn because you’re just growing, so you have to make mistakes. One of my guys says I’d rather try to do 10 things and get seven right than try to do five and get five right.”
Mistakes today are even more manageable, as Dell noted that the opportunity to discuss those problems with your customers through social media changes the landscape. Dell.com has more than 500 million users per year, and the company also is active in social media ranging from Twitter to YouTube. In all, Dell estimates that his company has 2 billion conversations per year with customers. His reasoning for the chunk of that coming from social media is simple business.
“The first thing you have to realize is the conversations are going to happen whether you are there or not, so you might as well pile in and get engaged in conversations and begin to understand,” he says. “What we found, for example, in social media, is it has reduced our time to understand new trends and problems.”
Dell followed this up with an example of a computer display released in Australia that showed a glitch on certain test programs. The immediate conversation about that on social media rushed up the company’s chain.
“We were able to solve that problem in about a week or two because we were paying attention to the different things out there, whereas previously, those things might stay out there for quite a long time and not get addressed,” Dell says.
Asked to expand upon points made during his conversation, Dell kept it simple and consistent: “Be willing to take risks and change,” he said.
“Imagine what something could be in five years and start putting the pieces together today.” •
HOW TO REACH: Dell Inc., www.dell.com