insigniam quarterly summer 2013 - enterprise transformation

VO L U M E 1 , I S S U E 2 | S U M M E R 2 013

TRANSFORMING DANONE:

Putting customers rst has helped the food

products multinational grow beyond $26 billion in revenue.

TRANSFORMATIONCAN AN ENTERPRISE CHANGE ITS SPOTS?

Can you control the uncontrollable?In an attempt to wrangle fuel

costs, Delta Airlines buys an

oil refi nery.

Why people matter in a merger or acquisitionFocus on just the bottom line

and your M&A will likely fail.

The key to successful transformationHow Corning made sure that

culture didn’t eat its strategy

for lunch.

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Transforming an enterprise with thousands of employees serving millions of customers in multiple countries with multiple product lines and far-fl ung supply chains can often

feel like herding a building full of cats. How do you herd a building full of cats?

Tilt the foundation, the very basic principles on which the enterprise relies.

— MICHAEL R. WALDMAN

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INSIGNIAM QUARTERLY 1SUMMER 2013

II’m sure you’ve heard of gorilla glass. It’s probably on the front of your smartphone,

and its strength has saved you from a broken phone more than once.

But it’s not just you and your smartphone that gorilla glass has saved. It also saved

Corning Inc. The breakthrough product is the result of a cultural transformation at

the specialty glass and ceramics maker.

For Peter Volanakis, Corning’s former COO, saving Corning was all about

having the right culture in place. It was a culture that allowed a product like gorilla

glass to lose money for 14 years before it found its way onto more than 100

million mobile devices. Inside this issue of Insigniam Quarterly, he shares the value

of a company’s culture in transformative environments and off ers his three keys to

transforming culture.

While the Corning story is defi nitely instructional and inspirational, it’s far from

unique. In our decades as international consultants, we’ve seen it time and time

again. A company wants a breakthrough transformation. It wants to grow, but it

can’t. Its culture is holding it back.

Throughout this issue, we talk about transformations, both big and small. From

Delta Airlines buying its own oil refi nery to control fuel costs to the keys to a

successful merger. And at the center of each of these transformations is culture.

Culture is the very core of how the people in an organization think, perceive

opportunities, and behave, and it either supports a transformation initiative or

culture stifl es it.

As the saying goes, “Culture eats strategy for lunch.” It doesn’t matter how well

thought out your plans are, if all the elements of your people are not on the same

page with your strategic needs, then your initiative will be for naught.

Consider the company featured on our cover, Danone. For the French food

products multinational, the culture change included a whole new leadership

approach, adapting its culture to emerging markets and listening to its customers.

Listening not in the cliché way that we all say we listen to customers. Danone is

actually bringing them into the R and D process.

That was a bold step, but it was necessary if Danone wanted to be a global player.

It’s time for a hard look at where you want to be and to ask yourself if it’s your

corporate culture that’s preventing your breakthrough transformation from taking

fl ight.

Shideh Sedgh Bina

Founding Partner, Insigniam

YOU HAVE A TRANSFORMATION STRATEGY, BUT IS YOUR ORGANIZATION PART OF IT?

LETTER

INS_0513_Letter.indd 1 5/20/13 4:06 PM

SUMMER 20132 INSIGNIAM QUARTERLY

18THE TRANSFORMATION ROADMAPGregory Trueblood, Insigniam

Are you ready for a change? Are evolutions in your

industry demanding it? Then it might be time to do

what Mohawk Fine Papers did and transform your

business model.

342013 EXECUTIVE SHADOWING STUDYErica M. Wood, Insigniam

For busy executives, time is money. A few simple

protocols can help them reinvest some of that

capital in innovation and increasing customer value.

38CHEW CAREFULLYShideh Sedgh Bina, Insigniam

Successfully merging two companies requires a

careful examination of the ingredients and how

they work together so as to prevent heartburn

down the road.

42THE KEY TO TRANSFORMATIONPete Volanakis helped lead Corning back from

the verge of bankruptcy, but to do that the former

COO had make sure the company’s culture didn’t

eat its strategy for lunch.

FEATURES

TRANSFORMINGDANONEPutting consumers fi rst

— even inviting them to

be a part of the research

and development

process — has helped

the French food products

multinational grow beyond

$26 billion in revenues.

COVER STORY28

TABLE OF CONTENTS

INS 0513 TOC.indd 2 5/20/13 4:07 PM

SUMMER 2013 INSIGNIAM QUARTERLY 3

EDITOR-IN-CHIEF Shideh Sedgh Bina

[email protected]

EXECUTIVE EDITORS Nathan O. Rosenberg

[email protected]

Michael R. Waldman

[email protected]

CHIEF FINANCIAL OFFICER Ralph Gotto

DIRECTOR OF WORLDWIDE Karen Turner

CLIENT SERVICES [email protected]

DIRECTOR OF SPECIAL PROJECTS Alexes Fath

PUBLISHER Gordon Price Locke

[email protected]

MANAGING EDITORS Elise Anthony

[email protected]

Jarrett Rush

[email protected]

CREATIVE DIRECTOR Kyle Phelps

[email protected]

PRODUCTION MANAGER Pedro Armstrong

IMAGING SPECIALIST John Gay

ACCOUNT SERVICE MANAGER Caitlin Faubion

EDITORIAL QUERIES

750 N. Saint Paul Street

Suite 2100

Dallas, Texas 75201

www.dcustom.com

214.523.0300

For Advertising Information, contact Jas Robertson at

214.937.9811 or [email protected]

Insigniam Quarterly is published by D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. Copyright 2013 by Insigniam. All rights reserved. Letters to the editors may be sent to Insigniam Quarterly c/o D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit www.insigniamquarterly.com.

Q U A R T E R LY

VOLUME 1, ISSUE 2 | SUMMER 2013

“You can have the fi nest strategy in the world, but it has to

be executed by people and it has to happen in a cultural

context. Culture is the context in which that strategy sits.”— PETE VOLANAKIS, FORMER COO AT CORNING

THE TICKERTransformation stories, books, and great ideas

TOP LINETransformation by the numbers

BLOOD, SWEAT AND TEARSGordon Price Locke, D Custom

Delta boldly tries to control the uncontrollable

BOARDROOM POVGordon Price Locke, D Custom

The right board with the right CEO is critical at each

stage of a company’s evolution

THE BIG PICTURESustainable transformation requires

only that you follow the map

CRIPPLED BY PROCESSBob Lutz, former General Motors Vice Chairman

In an excerpt from his new book, Lutz takes a look at

the fall of GM and the leadership of Rick Wagoner

IQ BOOSTKaterin Le Folcalvez, Insigniam

Creating a common cause can lead to results

04

08

10

12

16

24

48

DEPARTMENTS

On the coverDanone is transforming by

putting customers fi rst.

Insigniam and its publisher, D Custom, distribute this editorial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insigniam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or provided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose.

INS 0513 TOC.indd 3 5/10/13 4:48 PM

THE TICKER


THE TICKER

Polaris Industries (NYSE: PII), the maker of ATVs, snowmobiles, and related

vehicles, initiated a 10-year plan in 2008 to boost sales and net income margin

by focusing on its customers and innovation. Even before the start of the push,

the company had hosted idea contests, which initially required paper submissions.

To reinvigorate its idea contests, Polaris turned to Microsoft SharePoint and

innovation software engine Spigit to improve engagement. After implementing

that system in 2012, Polaris received 249 ideas, up from an average of 120 per year

in prior years. Further, Polaris employees increased their collaboration, voting on

good ideas and off ering suggestions to improve submitted ideas.

BY CHAD WATT

TECHNOLOGY REVIVES THE IDEA CONTEST AT POLARIS

SUMMER 2013

INS-0513-Ticker.indd 4 4/19/13 10:08 AM


Amazon (NASDAQ: AMZN) struck upon its AmazonPrime service after years of searching

for a customer loyalty program that was innovative and diff erent from all others.

The idea for Amazon Prime came from Amazon’s internal online suggestion box and

a company software engineer who proposed a free shipping service, according to a 2010

Businessweek article on the retail powerhouse’s service. Company board members and

CEO Jeff Bezos sculpted and improved the idea with Bezos ultimately giving a small team

a short deadline and access to all the company’s resources to implement the idea before

unveiling it on a year-end earnings call in 2005.

Now other retailers, online and offl ine, have been looking to emulate Amazon’s ultimate

customer loyalty weapon.

STAND UP FOR MEETINGSNext time you engage another executive or address your

team, don’t sit down. Meetings can be the most powerful

way to energize your employees, or they can be a huge drain

on time, resources, and morale. Tips for creating effective

meetings abound, but one thing that helps in any context is

simply standing up for the meeting. A University of

Missouri study from 1999 shows that sit-down meetings

were 34 percent longer and produced no better

decisions than stand-up meetings. Morning stand-up

meetings have become a hallmark of many fast-moving

technology businesses.

FROM POSTAGE METERS TO SOCIAL NETWORKS

A PRIME IDEA GOT ALL THE RESOURCES IT NEEDED

STAND UP FOSTAND UP FSTAND UP FSTAND UPSTAND UPSTAND UPSTAND USTAND

THE SUPER-ADHESIVE THAT DIDN’T STICKThe glue on the back of 3M’s (NYSE: MMM) Post-It Note, was initially deemed a failure. The pseudo-sticky stuff was part of an effort by the chemical and manufacturing conglomerate to make a super-adhesive.The Post-It glue didn’t stick for that application, but, thanks to 3M’s longstanding practice of allowing employees 15 percent of their time for creativity, 3M scientist Art Fry perfected the product based on an idea that he and a colleague had earlier discussed.

“It wasn’t an accident at all,” Fry told the Smithsonian Institute in 2008. “It was because we had the division vice president that committed money to develop new products. It wouldn’t have happened without that commitment.”

1,000new ideas have been implemented.

For Pitney Bowes (NYSE: PBI)

to go from its start in 1920 making a

newfangled device called a “postage

meter” for the US Postal Service to a $2.6

billion provider of software and hardware

focused on document management and

shipping, transformation has been crucial.

In the last fi ve years, the company has

worked to engage its entire workforce

in innovative thinking by applying new

technology, including social media, to

share, improve, and implement ideas.

The company has deployed two

internal online forums to generate

new ideas and foster more engagement

from the workforce. Since launching

its Yammer social networking platform

in 2009, more than 6,600 employees

worldwide have posted more than

41,000 messages, according to the

company website. Its IdeaNet internal

web community is built around “idea

challenges” giving employees a chance

to tackle challenges and implement new

strategies.

In its fi rst two years of operation,

employees tackled 52 idea

challenges and, through

2012, about 1,000 new

ideas introduced via

the system had been

implemented which have

generated revenue for the company.

SUMMER 2013

technology businesses.



THE TICKER

WORK AS ARTAuthor and marketing guru Seth Godin challenges

old-school business values of playing it safe, obeying

rules, and staying in your comfort zone in his new

book, The Icarus Deception. He deconstructs the myth

of Icarus, that fl ying too close to the sun and pushing

your limits is dangerous, even deadly. Godin challenges

readers and leaders to view work as art.

In thinking about art, “good enough” is never

acceptable for Godin, who argues that leaders who

treat their work as art and strive to create something

remarkable will fl y higher than Icarus’ father would

have ever imagined.

Computing giant IBM (NYSE: IBM) stages

innovation-focused events, called “jams” to explore

new ideas and focus on solving specifi c problems. The

process of IBM’s jams have evolved since their start in

2001 to more focused and curated discussions, said

Liam Cleaver, director of the IBM Jam Program Offi ce,

in a company interview.

Innovation Jams in 2006 and 2008 redefi ned

markets and products for the company, but it was the

company’s 2003 ValuesJam which was a key infl ection

point in how employees and managers interact with

each other and collaborate to make the company a

better place.

At the time, IBM was in limbo, transitioning between

its heritage as a maker of business machines and

computers into a software, hardware and services

provider. Thousands of IBM employees shared heat

and discordant views of the company and where it

was headed. As the Jam continued, according to a

2004 Harvard Business Review article, the discussion

shifted from criticism to construction.

Those thoughts, some harsh, helped newly installed

IBM CEO Sam Palmisano move forward with the

reinvention of the company.

IBM’s share price today is up 137 percent from the

time of the ValuesJam, and the company has extended

its Jam methodology beyond the traditional business

realm to topics including helping U.S. military veterans

excel in college and assisting South Africa in engaging

the nation’s underemployed youth population.

INSTITUTIONALIZING INNOVATION AT IBM

GIVE AN INTROVERT A CHANCEAuthor and self-described introvert Susan Cain writes that introverted

leaders often deliver better outcomes than extroverted leaders. Research

from Adam Grant at the Wharton School of Business at the University of

Pennsylvania shows that introverts are more likely to let their employees

run with ideas. Cain writes about the power of introverts in her 2012

book, Quiet: the Power of Introverts in a World that Can’t Stop Talking.

INS-0513-Ticker.indd 6 5/20/13 4:09 PM

Annual budgets and staff growth aren’t the only things you should be

planning for. A good content strategy can focus your company’s marketing

efforts and generate the kinds of leads that help boost both your bottom

line and your brand reputation.

Do you want to get three times the customers? You need a better plan.

Learn how you can transform your marketing at

dcustom.com/contentstrategy.

If you want to generate more revenue, maybe you need a new plan.

3X CONTENT MARKETING PRODUCES THREE TIMES THE LEADS PER DOLLAR THAN TRADITIONAL MARKETING AND ADVERTISING.


The percentage of U.S. employees not engaged or actively not engaged during the third quarter of 2011 according to the Gallup Q12 poll. This number has been roughly unchanged over the last decade.

71%BY THE NUMBERS

COMPILED BY MATT BECHER

125 %

Improvement in M & A success rates when people are made a priority.—Insigniam.com

The percentage of

mergers that earn back

their capital.

— Technical Information

Associates, Inc.

The percentage that IBM shares rose during Sam Palmisano’s

years as CEO at IBM, 2003 to 2008

— allthingsd.com

> 33%

77%

8 INSIGNIAM QUARTERLY SUMMER 2013

TOP LINE

INS-0513-topline.indd 8 5/20/13 4:10 PM

$350,000,000,000

The percentage of employees who were engaged

in their work and also said they had a boss who

made them feel hopeful about the future. This

is important because employee engagement

is directly linked to things like customer

engagement, productivity, and profi tability.

— Gallup Business Journal

Amount of money actively disengaged employees cost

the U.S. economy in lost productivity annually.

— Gallup

“Culture drives your

business, period.

It’s not the other way

around. Get your

culture right, hold

fi rm to your values,

and the fi nancial

results will follow.”— Ingar Skaug

$250 million to $5 billion increase in revenue after tragedy

69%

69%

31%

% of employeees engaged in work because of their boss.

% of employeees who are not engaged in work because of their boss.


The amount revenue increased at Wilh. Wilhelmsen during Ingar Skaug’s

20 years as CEO. Skaug took over leadership of the Scandinavian shipping

company after its top two levels of leadership were killed in a plane crash.

The secret to the company’s success even after such a tragedy, according

to an article at Forbes.com, was the culture at Wilhelmsen.

INS-0513-topline.indd 9 5/20/13 4:12 PM


IBY GORDON PRICE LOCKE

MAKING THE UNCONTROLLABLE CONTROLLABLE

It is easy for most executives

to recite road warrior stories.

They almost always include an

airline in their tale. Bad service,

baggage headaches, delays, airport

congestion, prices. Now there is

something new to talk about —

the airline that is not afraid to

make a bold move.

Delta Airlines (NYSE: DAL)

has put its “rules of the road”

culture to work again and again

using employee and leadership

ingenuity to rule the skies.

Delta tackled its merger with

Northwest in 2010 with championship speed. It has emerged as a top-

ranked airline with passengers, beat profi t projections in 2012, and is

now turning an eye toward controlling something that’s always been

considered uncontrollable — fuel costs.

Most analysts see air travel as commoditized transportation and that

price is what matters. While competitive pricing is surely important, Delta

has proved that service transformation is too. Delta has now found another

Vinay Dube talks about Delta’s bold move to wrangle fuel costs by purchasing an oil re nery.

BLOOD, SWEAT & TEARS

INS_0513_BloodSweatTears.indd 10 4/19/13 10:09 AM

SUMMER 2013 INSIGNIAM QUARTERLY 11INSIGNIAM QUARTERLY 11

diff erentiator — a $150 million transformational investment in

supply chain control, owning it’s own oil refi nery.

It is apparent Delta’s culture is getting enterprise-wide

transformation right by embracing the initiatives necessary

to make it happen over and over again. Vinay Dube, Delta’s

Senior Vice President for Asia Pacifi c, shares his point of view.

Dube is an experienced executive and has witnessed his share

of change, risk, failure, and success. Dube paints a picture of

how Delta’s leadership arrived at the decision to purchase an

oil refi nery, amidst likely scrutiny of analysts

and pundits in the air travel industry.

BEING OPEN TO BUSINESS AS

UNUSUAL

For many years, airlines have had to circle

around a known set of controllables to run

their businesses. Fuel costs was not one of

those. The lack of control was looked at

diff erently at Delta. Dube says, “Roughly

40% of your revenues go to pay for oil, and

at Delta Airlines that is about U.S. $10 billion

to $12 billion a year. Up to 20% of that

cost is for refi ning crude oil — that was the

opportunity.” The airline purchased an oil

refi nery in 2012 and created a wholly owned

subsidiary, Monroe Energy, to run it. It is now

at full production.

BIG LEADERS MAKE BIG PROMISES

Transformational initiatives are not always

obvious. “Is my day-to-day diff erent? No.”

Dube says. “But it is transformational for the

airline’s employees in many ways. … We have

a unique business culture, and this decision

cements for the employee that big leaders are

willing to make big promises.”

Culturally, employees feel that Delta’s

leadership is looking out for them.

“Something like this helps surmount the

typical cynicism that exists between employee groups at most

airlines, it shows management is willing to try diff erent things,

willing to stick it out, walk down our own path,” says Dube.

KEEP IT IN PERSPECTIVE

To make decisions like this Dube says, “you have to keep

things in perspective.” While volatile, the run up in fuel prices

are nothing compared to the large increases in refi ning costs.

The cost to take some measure of control was $150 million,

roughly the cost of one wide-body aircraft. “The perspective

was not to do nothing,” Dube says, “it was if it does not work

and we have to shut the refi nery down and resell the asset, they

would have gambled 2% to 3% of one year’s fuel bill. For an

airline that is used to small and large business transformation,

that seemed to attract them like a magnet.”

REMOVE BARRIERS TO CHANGE

Delta proved that looking at the same problem and never

exploring a diff erent point of view can

be damaging. Everyone had to have the

same take-away — they didn’t have to live

with the problem in order to move past a

number of barriers to what initially seemed

counterintuitive.

MAKE FRIENDS WITH RISK

“No other airline has done this before,” says

Dube. “We can buy a bad aircraft and return

it. Since we have 750 aircraft, no analyst will

really say anything like you bought one bad

airplane. Yet, our risk was similar to the cost

of one aircraft. Thus, because it is diff erent,

we can easily be criticized and a $150 million

decision can be reacted to like it is a billion-

dollar decision.” Delta’s decision allows

employees and leaders to focus on running an

airline while they enjoy the reward of lower

fuel costs in 2013 and beyond.

THE RIGHT CULTURE

CREATES SPEED

Delta is accustomed to constant change.

“An airline can’t control the health of the

economy for example,” Dube says, “which

largely determines the passenger market,

however, the question that emerged was: is

there a way we can control this uncontrollable,

called fuel costs?”

The employee culture, shareholders, and top leadership

allowed Delta to consider something quite radical — what

aspect of oil costs can we impact for the better? That path to

execution was all about speed. “Every employee here is part

of a values-based culture. They know our rules of the road at

Delta, which says not everything can be explained or detailed

out for you and unpredictable or diff erent things can happen

along the way — use thorough thinking, good judgment, and

don’t linger on it too long, take action,” says Dube.

ROUGHLY 40% OF YOUR REVENUES GO TO PAY FOR OIL, AND AT DELTA AIRLINES THAT IS ABOUT U.S. $10 BILLION TO $12 BILLION A YEAR

INS_0513_BloodSweatTears.indd 11 5/21/13 10:20 AM


L

WHY TRANSFORMATION LIVES OR DIES IN THE BOARDROOM

Large companies, whether public or private, evolve as

they adapt to sustain growth and profi tability. Successful

evolution requires the CEO-to-boardroom dynamic be

healthy and focused on driving a business forward with

speed and transparency.

B.C. Forbes, founder of Forbes magazine, once said, “A

business, like an automobile, has to be driven in order to

get results.” To better understand the dynamics between the

board and the C-suite, we turned to two seasoned veterans

of the boardroom, both remarkable

in their accomplishments and

unique in their points of view.

Dr. Philip Neches, co-founder of

Teradata (a $2.6 billion company,

according to 2012 annual revenue reports), former board

member of International Rectifi er, and current board

of trustees member for Caltech; and Charlie Kemper,

managing director of Revel Partners and board member of

the association of New York City Venture Capitalists.

COMMITTEES OR COLLABORATORS

The traditional view of a board and the CEO is that

of guiding a company’s fi nancial choices. The hope is that

BY GORDON PRICE LOCKE

The right board members with the right CEO are critical at each stage of a company’s evolution.

THE BOARDROOM

INS_0513_Boardroom.indd 12 5/10/13 3:29 PM


the CEO and boardroom are also watching the nuances of

whether a company’s strategy is working long term.

The boardroom is a world of committees, and, while

committee work can get boring, it is critical that as a

company evolves, the board is on its toes. When a strategy

is off kilter it can be missed early on, but if the board is

engaged, that will not go unnoticed. “What makes a board

eff ective in this high-stakes, high-tension environment is

the ability to know when something that was working isn’t

working anymore in time to address it,” says Neches.

That doesn’t always mean making a change at the top.

“Sometimes there is no bad guy, no certainty, nothing

wrong to audit and no one to replace,” says Neches. “Those

are the most diffi cult discussions, because the CEO and the

board have to manage through lack of progress without

clear indicators.”

Kemper says there are two kinds of boards, open and

collaborative or closed and rigid.

Diff erent boards are eff ective during

diff erent evolutionary stages of a

company’s life, and as a company

begins to transition from one stage to

another a change in board members

and/or a company’s C-suite may become necessary.

Kemper sites Google as an example. “The young guys

that started Google were great at innovative product

development. They brought in a ‘gray hair’ experienced at

leading growth and execution. When they were ready to

innovate and reinvent again years later, that CEO stepped

aside and one of the founders, now seasoned, along with a

mature and eff ective board, took over the reins.”

UNCERTAINTY IS THE ENEMY OF

TRANSFORMATION

Neches says successful CEOs and boards accept the fact

that emotion, when used appropriately, creates openness

and results. “A CEO has to be willing to be vulnerable.

They can’t know all the answers, they just need to recognize

something needs to change and can use the board to help

resolve that the current course isn’t the right one.”

In times of uncertainty, it is easy to

play it safe. Kemper says many boards

default to lower risk, shorter term

thinking he characterizes as “fi ve yard

drives versus 80 yard passes.” Neches

states that “boards are fraught with

IN TIMES OF UNCERTAINTY, IT IS

EASY TO PLAY IT SAFE

“WHAT MAKES A BOARD EFFECTIVE IN THIS HIGH-STAKES,

HIGH-TENSION ENVIRONMENT IS THE

ABILITY TO KNOW WHEN SOMETHING

THAT WAS WORKING ISN’T WORKING

ANYMORE IN TIME TO ADDRESS IT.”

DR. PHILIP NECHES



friction when things seem off track and people can get

entrenched, drink their own Kool Aid, and it gums up

discussions that need to happen.”

THE BOARDROOM IS A PLACE

TO GET VERSUS GIVE ANSWERS

Neches told a great story of why leaders are conditioned

to have all the answers. “Do you know how long it takes

for an elementary school teacher to start to answer a kid’s

question on average?” he asked. The answer, “One second.

As leaders, we sometimes feel we have to answer everything

in the face of uncertainty, just like the elementary school

teacher.” And that, Neches says, can lead to some bad

boardroom behaviors.

Neches shared that when he was brought into NCR

Microelectronics, part of a $6 billion company, to look at

the company’s product portfolio. It was profi table, but not

profi table enough. The company needed a breakthrough

in that business area to earn back its cost of capital in a

$500 million business line. Neches’s recommendation may

seem straightforward — focus more capacity on high-

margin products where the company had good intellectual

property — but getting there was a tough process. In the

end, NCR Microelectronics met its objectives, but the

decision had a lot of upfront uncertainty. By asking the

right questions, a transformation breakthrough happened.

THE CEO’S DILEMMA

Being a CEO is a lonely job, and often there is no one

to talk to. Successful companies have boards that are not

just having meetings for the sake of having meetings.

Neches says that CEOs should expect questions and

expect to listen. “A board that asks hard questions is one

that is engaged and interested,” he says.

Neches says the board has to have the ingredients of

a productive boardroom if transformational ideas are to

move from the boardroom and into action. “The board

can’t just be a refl ection of the CEO’s ideals,” he says. “The

board members all need to be heard and understood, and

the respect for diff ering opinions has to be there.”

THE ROLE OF CULTURE AND THE BOARD IN

TRANSFORMATIONAL INITIATIVES

It may all boil down to the climate the CEO has created

with the board. It may also have to do with the culture [or

makeup] of the board itself.

“There has to be a balance of board members,” Kemper

says. “It is always good to have some board members who

DR. PHILIP NECHES

Co-founder of Teradata, former board member of International

Rectifi er, and current board of trustees member for Caltech

1 Reverse the

order of your deck

— Start with the

conclusions, as you

can better gauge the

selling job you have

to do.

2 Go in to listen

more than to talk —

If you have a healthy

BOD environment,

make them part of the conversation to make the

best decision around the idea.

3 Don’t have all the answers — While it is great

to anticipate and be prepared, the harder the

questions, the higher the level of engagement

from board members.

CHARLIE KEMPER

Managing Director of Revel Partners and board member of the

association of New York City Venture Capitalists

1 Look at

the audience

background — Are

board members

from operating

companies, venture

investors, fi nancial

types or industry

experts?

2 Pay close

attention to risk

mitigation — Charismatic CEOs can err on the

side of upside dialogue, thorough thoughts on the

downside will create more success with the board.

3 Don’t forget to touch on execution —

Explain how your leadership team and middle

management will embrace and execute.

CRITICAL ADVICE IN PREPARING TO SELL TRANSFORMATION INITIATIVES

FACING THE BOARD?

THE BOARDROOM



are shareholders as well as industry experts and those with

fi nancial expertise.” Kemper cited AOL as an example of

not getting the right balance between the type of CEO

they have and the mix of board members needed to hit its

transformational needs.

Kemper also stressed culture. “For most companies,

looking at new opportunities to expand, management,

and the culture they build is the number one enabler or

inhibitor. The board and the CEO have to get it right from

the start by empowering middle management, encouraging

a culture appropriate for what needs to be accomplished

long term.”

Kemper said that while it is the CEO’s job to sell

transformation, the board also has several jobs in ensuring

that its CEO is successful. He off ered four points of

advice. “The board members should be an open line

of communication, be coaches. They should help the

CEO recruit the right leadership, and use their business

development savvy to help prioritize large growth eff orts

in addition to helping the CEO think through strategic

partnerships.”

Neches perhaps summed it up best in refl ecting on a

key cultural value that is part of the success of the C-suite

and board relationship at Teradata, a company he founded

34 years ago and helped lead. “It is for employees to have a

sense of missionary zeal in what the company is doing and

the good it could provide the world, and it is still alive and

well today.”


THE BIG PICTURE

YOU ARE HERE

Interview a cross section of employees to reveal beliefs,

assumptions, and hidden drivers of performance.

Articulate a transformation framework, including Breakthrough Outcomes.

Welcome to Sustainable

Transformation.


MAPPING TRANSFORMATION

The greatest cities in the world were changed and shaped by their

subway systems. The systems shaped the cities’ cultural norms,

vitality, and growth. Transformation can do the same for your

enterprise if you know how to implement and follow the map.

REVEAL

FRAMEWORK CREATED

PROJECTS L

AUNCHED

Establish a Leadership Coalition, a cross-level, cross-functional group

that directs and monitors the organization’s transformation.

Determine a Keystone Project,

a mega project which will cause a

state change.

INS_0513_Infographic.indd 16 5/10/13 3:30 PM

Create Breakthrough Projects with specifi c measurable results.

Rapidly redesign work so that the transformation

can be sustained.


CHANGES IMPLEMENTED

Begin Breakthrough Competencies Trainings. Develop leadership competencies needed for the transformations and implement coaching.

REVEALThe fi rst step to transformation is knowing

what beliefs could be holding you back.

EXECUTIVESSecond, determine how you are going to

break free of those beliefs and transform.

WORK TEAMSThird, create breakthrough projects that

engage employees in the transformation.

ALL EMPLOYEESFinally, develop training needed

to sustain the transformation.

1

2

3

4

Start an Enrollment Campaign that will engage

key constituencies in the transformation.

Intentionally engage and train middle management.

Develop leaders to lead from a new framework.

INS_0513_Infographic.indd 17 5/10/13 3:30 PM


THE TRANSFORMATION

ROAD MAP

INS-0513-transformativeroadmap.indd 18 5/1/13 10:51 AM


Ready to change? You might want to start with your business model.

By Gregory Trueblood



Borders never capitalized on the market’s embrace of

the e-reader. Kmart didn’t recognize the customer service

changes that were taking place in the retail industry.

Mohawk Fine Papers, a privately held paper

manufacturer founded in 1931, was recently faced with a

change-or-die decision thanks to a radically transforming

marketplace. For several years, digital technology had been

altering the ecosystem of Mohawk’s distribution-channel

partners, known as “merchant” distributors, and its end-

user customer base of large off set printing fi rms.

Technology was also spurring a shift from print to

online publishing. Global competitors off ering cheaper

services had emerged. The company’s

distribution partners were having a

tough time adjusting, were cutting

back on marketing to end-users, and

were reducing inventories to save

money. Two years ago, it became

starkly apparent that these trends

endangered Mohawk’s survival.

“In just one year, 2011, we realized

that conditions were changing even

more quickly than we had seen

before,” says Thomas O’Connor,

Mohawk’s CEO. “For example, it

was clear that our next generation

of buyers would want to buy our

products on their smartphones.”

And those buyers would prefer

to buy directly from Mohawk.

That’s quite a contrast from the

historic sales channel model of

distributors interacting with

most end-users and fulfi lling

their orders. O’Connor issued

a challenge to the company to

revamp the business model —

and quickly.

As an organization like

Mohawk realizes that profound

changes are required to meet

a shifting market landscape,

widespread internal support

for taking bold steps begins

to build. Despite the inherent

organizational forces that

resist dramatic change, once

management commits to

renovating of the business model, momentum for action

grows stronger. The key challenge at this point is to

implement a process that can generate innovative ideas that

lead to the best possible revamped business model.

There are few templates, though, for unleashing business

model innovation in a large corporation — an institution

designed more to produce conformity rather than

transformative ideas. One exercise that has proven eff ective

aims to encourage participants to make suggestions far out

of the mainstream — some of which might even seem

outlandish. It begins with the study of the business model

map.

THE BUSINESS MODEL MAP

The business model map

identifi es the major aspects of a

business — internal and external

— and diagrams the company’s

relationships with customers,

suppliers, and key business partners.

From these ingredients, we can

graphically describe the company’s

recipe for success, and more

importantly, fi nd ideas for a new

formula.

Business model transformation

begins with searching for gaps

he greater the change in

an industry, the greater

the need to change old

business models. The

complexity of large businesses makes that

task difficult. How can you take a disciplined

approach to business model transformation?

That’s a question several companies have

failed to answer as their industries evolved.

BUSINESS MODEL TRANSFORMATION BEGINS WITH SEARCHING FOR GAPS BETWEEN MARKET SOLUTIONS AVAILABLE AND CUSTOMER NEEDS

T

INS-0513-transformativeroadmap.indd 20 5/10/13 3:32 PM


CUSTOMER

VALUE PROPOSITION

KEY ACTIVITIES

0102

03

COSTSTRUCTURE

05

CUSTOMER RELATIONSHIP

06

KEY RESOURCES

08

KEY PARTNERS

09

DISTRIBUTIONCHANNELS

07

BUSINESS MODEL MAP

REVENUESTREAM

04



between market solutions available and customer needs …

even if those needs haven’t been articulated by customers.

To identify those gaps, a team of 10 to 30 people

representing multiple business functions (or from within a

single division if the business model refocusing is solely for

one division) dedicate a few days to brainstorm. Mohawk’s

transformational team consisted of key management

personnel from product development, customer service,

sales, and fi nance, and a board of directors made up of

retired CEOs. A transformational team identifi es the

potential gaps that the organization could exploit with a

new business model through several perspectives:

Value driven

Customer driven

Finance driven

Resource driven

Value-driven solutions create new

value propositions that currently do not

exist, and require innovation of other

elements on the map. You can get at these

points by asking questions such as:

What do people have to “put up

with” or fi x about our product that

we could address?

What would people want but

don’t ask for because they think it’s

impossible?

Mohawk addressed this perspective

by realizing that some customers want

to make purchases by smartphone, and

responded with beefed up e-commerce

off erings.

Customer-driven solutions are based

on customer needs, which often tap into

new customer categories. You can get at

these by asking questions such as:

What kinds of new customers could we reach?

Can we sell to new demographics: young men, or

perhaps single parents?

To market our products, should we focus on repeat

buyers or look to increase sales from occasional buyers?

Can we reach customers ‘priced out’ of the market?

What about premium-minded spenders?

In Mohawk’s case, answers included establishing more

direct contact with end-users, which meant a whole new

world for the sales staff . There’s now a focus on selling to the

end customer rather than to wholesalers/distributors. New

customer categories include professional photographers and

consumers through custom photography printing products.

Finance-driven innovation is based on new kinds of

revenue streams, cost structures, and pricing mechanisms

can also unlock new markets. Questions include:

What other ‘methods of use’ are available to our

customers? (i.e., rent, lease, sell, subscription)

How would reducing or increasing the average time

between purchases or the average dollar amount spent

on a purchase impact our business model?

What kinds of cost structures does the company rely

on that we can change (scope, scale)?

For Mohawk, serving smaller orders directly addressed

this perspective. The company’s new online photo sharing

business opened a new revenue stream

from the consumer world. The company’s

website off ering printing services for

calendars and books has entirely new

pricing mechanisms to serve a previously

unfamiliar market, as Mohawk used to

be solely focused on large publishers and

wholesalers.

Resource-driven innovation originates

from an organization’s existing infrastructure

or partnerships to expand or transform the

business model. Questions include:

What is our most important asset?

How might that asset be used to satisfy

new market needs?

A longtime supplier to the printing

industry, Mohawk used its expertise in

printing to expand into materials other

than paper. For example, the company

bought a plastics company that sells

magnets and signs customized with photos,

a product line with a higher profi t margin

than paper.

As brainstorming wraps up, participants discuss which

ideas seem the most likely to produce changes that can

transform the business. The next step is to develop an

implementation plan that could radically transform the

company in as quickly as a few months.

THE NEW MOHAWK

With a revamped business model, Mohawk is a

profoundly changed organization. That is symbolized

by a decision to drop “Fine Papers” from its name on all

its marketing materials and corporate communications

media. Branding itself simply as “Mohawk,” the company,

A LONGTIME SUPPLIER TO THE PRINTING INDUSTRY, MOHAWK USED ITS EXPERTISE IN PRINTING TO EXPAND INTO MATERIALS OTHER THAN PAPER



which was already dabbling in e-commerce, went all in last

year — providing more online options aimed at creating

“a seamless purchasing experience for all customers from

merchants to printers to small businesses,” the company

says. This strategy lets Mohawk fulfi ll small orders that are

not profi table for their distributors.

“The distributor continues to be a channel partner,

but we have many new customers now,” O’Connor says.

Mohawk also consolidated its core paper lines, taking 22

paper grades (brands) down to six, making for a simpler,

clearer presentation of brands and products to customers.

Mohawk is now smaller and makes fewer products, but

is more profi table than it has ever been. Between 2011 and

2012, Mohawk reduced its top line by $50 million, but

increased operating profi t by 26 percent through a strategy

that includes selling higher margin products.

Mohawk’s oldest premium grade paper is called

Superfi ne. It was introduced in 1945 and is the paper-

of-choice for the fi nest limited edition books, illustrated

art books, museum catalogs and corporate literature

— like annual reports. In 2012, Superfi ne experienced

a 51% sales growth, due in part to the growing digital

print market and a unique product enhancement — a

proprietary surface treatment called i-Tone — which

improves ink performance on Superfi ne when run on

digital press equipment.

That the company could make critical course

corrections quickly is a testament to the ability of top brass

to analyze industry turmoil and then create and implement

a transformative business model.

Gregory Trueblood is a California-based Insigniam consultant.

Mohawk used its expertise in printing to expand into markets other than paper, like buying a plastics company and offering magnets and signs, a product line with a higher profi t margin than paper.



GGeneral Motors. There may not

be another company in the last 20

years that was in more desperate

need of a transformation than

the auto giant. Having once sold

enough cars to make up more than

50 percent of the U.S auto market,

the company became the picture of

“too big to fail” and lost nearly $40 billion in 2007.

Bob Lutz had a unique vantage point. As a member of the GM executive team,

he was inside the C-suite and saw how CEO Rick Wagoner tried to turn things

around. In Lutz’s new book — Icons and Idiots: Straight Talk on Leadership — he looks

back at his almost 50 years in the car business and the good, bad, and ugly of the

leaders he worked for.

This excerpt is from Lutz’s chapter on Wagoner, a good leader that Lutz says was

crippled by bad timing, bad luck, and a company that was still weighed down by

unnecessary costs.

In his new book, former GM Vice Chairman Bob Lutz takes a hard look at the auto giant and shares some thoughts on the leadership of its former CEO Rick Wagoner and what might have caused the once mighty industry leader to fall.

CRIPPLED BY PROCESS

BY JARRETT RUSH

INS-0513-icons&idiots.indd 24 5/10/13 3:33 PM


It’s tough to write about Rick Wagoner, mostly because I

like him so much. In contrast to other executives I’ve known

in my career, Rick Wagoner showed little in the way of

“peculiarities.” As a leader, he was always polite, kind, and ready

to hear opposing views without anger or even visible irritation.

His executive suite was modest, as was his style: he eschewed

executive trappings and even excessive compensation,

believing, correctly, that he was not an imperial ruler but a

servant of the shareholders and thus simply a hired hand.

All of this genuine humility, devotion to the company,

and self-eff acement was improbably packaged into a physical

presence that suggested the opposite: Rick stood a square-

shouldered six foot fi ve, with no visible fat. A lifelong athlete,

he had played freshman basketball at Duke University and

earned a degree in economics in 1975. He attended Harvard

Business School and received his

MBA in 1977.

Rick then joined GM as an analyst

in the New York Treasury Offi ce, or

NYTO. This operation, far removed

from the automobile business as

most of us know it, has long been the

breeding ground for future GM CEOs. In

fact, in the pantheon of former GM CEOs

in my memory, only one non-Treasury

Offi ce executive was ever able to wrest the

brass ring from the eternal clutches of the

bean counters, and that was Bob Stempel,

an engineer. His tenure ended badly and

abruptly, so the selection criteria went right

back to “T.O. alumni only ... others need

not apply.”

Wagoner’s rise was rapid; he headed

GM’s important Brazilian operation in the

mid-1980s. He became GM’s youngest

chief fi nancial offi cer in 1992 and president

of North American Operations in 1994. In

1998, he assumed chief operating offi cer

responsibility, serving under CEO Jack

Smith.

It was during his years teamed with Jack that Rick did

some of his fi nest, yet little-heralded, work. GM at the time

was known on Wall Street as a “great destroyer of capital,” and

it was true. Huge, unwieldy, duplicative in all it did, GM had,

over the years, developed a self-perpetuating, self-reinforcing,

and self-nourishing bureaucracy that cost more and more and

produced less and less.

Jack and Rick realized that the situation was unsustainable.

They set about with enormous determination and energy

whittling the gluttonous organization down to size.

This is not the glamorous part of the car business, the part

where one creates new styles, sees them through to production,

attends introduction meetings, and speaks before enthusiastic

dealers or an interested press. No, the restructuring eff ort is a

dirty, nasty business: eliminating divisions, groups, functions,

titles, most held by longtime colleagues

and friends. Countless weeks were

spent listening to counterproposals, or

to why the “other guys” should be shut

down, not one’s own operation. There

were no thanks, no cheering, and little

attention from the media. It was just

GM AT THE TIME WAS KNOWN ON WALL STREET AS A “GREAT DESTROYER

OF CAPITAL”

GM had, over the years, developed a self-perpetuating, self-reinforcing, and self-nourshing bureaucracy that cost more and more and produced less and less.

INS-0513-icons&idiots.indd 25 4/19/13 10:05 AM


endless drudgery, like hacking through a piece of property

covered in underbrush with surgical instruments, trimming

away the unwanted weeds while carefully maintaining

operational capability. It was like, as one wag once commented,

“rewiring a Boeing 747 in fl ight.”

The eff ort, arduous and long as it was, proved successful.

Several engineering groups became one. Fourteen diff erent

purchasing organizations were unifi ed, bringing procurement

discipline to GM for the fi rst time ever. Organizationally, GM

was the equivalent of a 350-pound man who had painfully

shed 150 pounds.

Rick’s ability to argue, persuade, and persist was instrumental

in the relative success of the “back to basics” initiative. It

was, perhaps, inevitable, given the extreme focus of the two

top executives on the restructuring eff ort, that the actual

“automobile business” part of the corporation was delegated

to lower operating levels and did not receive the extent of

senior management attention that I have always maintained

is necessary for success. GM had, in fact, a recent history of

introducing cars that were mediocre, mostly

competitive but without a clear-cut purpose

or “reason to buy.” To me, it was a fairly

clear case of an essentially unsupervised

organization with no cogent direction that

found consensus among the various internal

stakeholders and produced vehicles that met

the all-important internal targets but failed to

resonate with customers.

The lack of true product focus and the

damage it can cause had not always been

evident to Rick Wagoner. In one interview

during the 1990s, when asked why GM had

so many fi nance people in top positions and,

apparently, no “product guy,” Rick carefully

explained that this “product guy thing” was

vastly overrated: if you had good designers,

good engineers, and good manufacturing

people, they would ensure product success. I

remember reading that interview and thinking

“... and symphony orchestras don’t need

conductors, and professional sports teams can

do without coaches.” It just doesn’t work.

Many product disappointments and outright

fl ops later, Rick, not a “car guy” himself

but enormously intelligent, realized that a

key element was missing and, to everyone’s

amazement, hired me as vice chairman for

Product Development.

My appointment put lie to the oft-cited “incrementalism”

and “caution” attributed to Rick. Those two traits were indeed

signifi cant, but Rick was also comfortable with the occasional

bold, strategic move, even if it entailed risk. Bringing someone

like me on board who was critical, vocal, opinionated, direct,

a willing object of media attention, and capable at times of

eclipsing less visible bosses was contentious in the GM system,

and many of the “lifers” predicted chaos and disaster resulting

from my tenure.

Rick Wagoner’s support of my eff orts to revitalize product

development was exemplary, a clear demonstration of one

of his most endearing characteristics: steadfast loyalty to his

handpicked subordinates, leaving them with the certainty of

the boss’s backing. Sadly, this otherwise laudable leadership trait

can cut in both directions: Rick, in many instances, was devoid

of objectivity when it came to people with whom he had

served a long time, who had moved up the ranks with him,

or whom he had known as early as his Treasury Offi ce days.

It was painful to see Rick protect and support many offi cers

INS-0513-icons&idiots.indd 26 4/19/13 10:05 AM


who, to my eyes, personifi ed the large corporation culture of

“look good, sound good, prepare well for meetings, and never

disagree with the boss.”

It wasn’t until after Rick’s departure in 2009 that the

hammer fell on many of these experienced, slick, intelligent,

but ultimately near-useless members of the Wagoner team. A

collective sigh of relief marked their departures,

Rick was defi nitely a procedural executive. He was blessed

with truly exceptional intelligence, mostly left-brain analytical

but, unlike in Red Poling, combined with an understanding of

right-brain value. Rick liked to reduce complex interlocking

issues to understandable, repeatable processes. Given the

impenetrable thicket and lack of executive discipline that he

inherited, this unquestionably provided clarity and value.

The good thing about focusing on process is that it ensures

repeatability and predictability.

The bad thing about over-focusing

on process is that it discourages

creativity, experimentation, and new

solutions. Yet, in large organizations,

many derive comfort from following

“the process,” even if they know the

result will be mediocre at best. Rick,

with his well-ordered mind, liked

process and was not comfortable in its

absence.

On one occasion, eager to show Rick

the benefi t of free-fl owing creativity, I

asked Design to put on a presentation

of any and all ideas for future vehicles

the most talented of the designers could

come up with for new, untried ways to

put the public on four wheels. It was a great exercise, and as

always in acts of spontaneous creation, no “focus groups” had

been involved because they could no more have imagined

these cars than focus groups of cell phone users could have

come up with the iPhone.

We presented it all to Rick, who was fascinated. He just had

one question: “How do we know whether these directions

we’re going in are correct?” I assured him that we would all

recognize a potential home run if we saw one, but that these

“what if ’’proposals had to be seen as the products of the

fertile imagination of talented designers; they were not fi rm

“product proposals” but rather “thought provokers” or “idea

starters.” Rick still had a problem. How did we know we

were exploring in the right direction? He then outlined his

idea: What if we were to create a high-level panel of leading

thinkers, artists, architects, fashion designers, people who were

young, sharp, cool, and trendy? Expose them to these design

“stimuli” in a scientifi c way, tabulate the results, and we would

soon see if we were headed in the right direction.

“Rick,” I said, “here we are trying to demonstrate one way to

generate new ideas through an unfi ltered creative process. But

you are so quantitatively data focused, you immediately want

to measure, sift, analyze, and generally left-brain-control what is

supposed to be a pure right-brain exercise.” Rick laughed and

said, “I guess you’re right. ... I always want to see data.”

And see data he did. Under Rick’s leadership, many

quantifi ed “metrics” were established and pursued, the theory

being that if we succeeded in achieving every operational goal,

success as a car company would be ours. Thus, the company

relentlessly pursued “Assembly Hours per Car” (which drove

the manufacturing people to move a lot of subassemblies out of

the plants to suppliers, at a higher cost) and “Time to Market,”

a metric that drove some half-baked

“solutions” like the Pontiac Aztek, the

rapidly developed answer to a question

nobody had asked. A compliant team

of executives will usually compromise

common sense and judgment (both hard

to explain) in the interest of “making

the objective,” for therein lies safety,

approval, and possible advancement.

We had metrics on “Average Cost per

Stamping Die,” “Bill of Material Reuse”

(percentage of known, trusted parts from

the previous model incorporated in the

new one), and “Percentage of the Supply

Base in New Sources” (a euphemism for

countries like China, Taiwan, etc.).

All of these initiatives, and there were dozens, are in and

of themselves useful. But too much emphasis on them in the

case of personnel evaluations and/or compensation will just

about guarantee that the organization will fi nd ways to hit (or

even beat) every single metric without any real operational

improvement, cost reduction, or improvement in timing

having taken place. Of particular concern to me was the lack

of focus on product excellence. To be sure, you can create

a car with a 90 percent BOM (Bill of Materials Reuse),

develop it quickly using low-cost dies with components

from “New Sources,” and assemble it in 18 man-hours. But

is this a car that will be successful, will wow the customer

with styling and features? Or is it just a “numbers car” — a

vehicle that met all internal criteria, but failed to resonate

in the marketplace? In GM’s case, it was, with depressing

regularity, the latter.

INS-0513-icons&idiots.indd 27 5/10/13 3:33 PM

ORM BY CHR

ISTINE PER

EZ

SUMMER 201328 INSIGNIAM QUARTERLY SUMMSUMMSUMMSUMMSUMMSUMMMSUMMSUMMMMSUMMSUMMSUMMSUMMMMMUUMMSUMMMUMMSUMUMUMSUMMSUMMSUMMUMMUMMSUMMSUMMSUMMSUMMUUMMSUMMSUMMUMMUMMUMMUMMUMMSUMMSUMMSUMMSUMMMMMUMMMMUMMUMMSUMMSUMMSUMMSUMMMSUMMMMMUMMSSUMMSUUMMSS EREEEEEEERERERER ER ERERER R 22R 222222EEE 2EEER EERREREREEEEEEER EEEEEEEEEEEER 0130028 INSIGNIAM QUARTERLY

INS-0513-danone.indd 28 5/9/13 11:21 AM

ING DAD N NEO

Putting consumers rst — even inviting them into the R&D process — has helped

the French food products multinational grow beyond $26 billion in revenues

SUMMER 2013 INSIGNIAM QUARTERLY 29SUMMER 2013 INSIIIGNIAGG M QUARTERLY 29



where there’s strong demand for bottled water and products

in Danone’s three other major divisions: Fresh Dairy Products,

Baby Nutrition, and Medical Nutrition.

COLLECTIVE AMBITION

Transforming not just the waters group but the entire

enterprise of Danone required companywide buy-in.

Executives from various divisions got together with the

goal of defi ning the company’s values and developing a set

of “leadership ingredients,” principles represented by the

acronym CODE: committed, open, doer, empowered. Next,

the process was expanded to include all employees.

“Everyone, from the top executives to people out in the

fi eld to assistants, had the opportunity to contribute to the

vision for the company and its transformation journey,”

Penchienati says. “Sharing that ambition creates strength.

We said, ‘This is the future we want to build. What are the

diff erent steps we can take to achieve it together?’”

Various transformation projects were identifi ed and

prioritized, with multifunctional teams assigned to each.

Employees at all levels were given the opportunity to

In addition to its world leadership in fresh dairy products,

Danone is one of the major players duking it out to quench

the thirst of consumers. The industry has a current global

market value of more than $60 billion and continues to grow

briskly. Its success — No. 2 globally, behind Nestlé —helped

make Danone a Pepsico buyout target in the mid-2000s.

(That, in turn, sparked an uproar among French politicians,

who were eager to hang on to their national treasure.)

Danone had just fended off the hostile takeover when the

economic recession hit. Instead of becoming paralyzed by

challenges, the company responded by pursuing an enterprise-

wide transformation, a process that involved change at the

individual, strategic, and organizational levels.

“We wanted to create a new strategy for the company,

never really thinking of the crisis but thinking only of the

future,” says Véronique Penchienati, general manager of

Danone Waters France in Paris. “We said, ‘Let’s leave behind

our fears and doubts, and let’s follow our intuition and desires

for what we want to be as a company.’ ”

At the time, Danone also was beginning to ramp up global

expansion, particularly in emerging, high-growth countries,

Founded in 1899 and based in Paris

PRODUCES AND DISTRIBUTES PRODUCTS

WORLDWIDE THROUGH FOUR OPERATING

DIVISIONS: Fresh Dairy Products, Waters, Baby

Nutrition, and Medical Nutrition

MAJOR BRANDS: Evian, Volvic, and Aqua waters;

Dannon line of yogurts (Activa, Danimals, Oikos);

Fortimel and Nutricia nutrition products

EMPLOYEES: About 100,000 worldwide

2012 SALES: €20 billion ($26.7 billion)

For companies like Danone — the food products multinational based in Paris and maker of brands like Evian and Volvic — bottled water has become liquid gold.

produc

DANONE



participate, encouraging dialogue,

knowledge-sharing, and creativity, and

strengthening the sense of collective

ambition.

INNOVATE EVERYWHERE

For Penchienati, the transformation

process catalyzed one burning imperative

in her mind — innovate everywhere.

That means innovation in everything

from the way products come to

market to connecting with consumers

and including them in the circle of

innovation.

Consistent with its mission of “bringing

health through food to as many people as

possible,” Danone’s products are designed

to promote health and nutrition across all

age groups and cultures. Instead of trying

to predict what people want or presume

their habits, Danone went directly to

the source and made consumers part of

some of its R&D teams.

THREE FOCUSES

FOR THE FUTURE

Looking ahead, Penchienati says

Danone is focused on three key things:

ongoing innovation, connecting with

consumers, and adapting, whether that

means new markets, consumer trends,

or business conditions. “We need to be

a step ahead of what is happening, so

we can continue to lead our own transformation,” she says.

“That is a key challenge and a key motivation.”

FOR PENCHIENATI AND THE WATERS GROUP

THAT MEANS:

Focusing on products — This means not just a

focus on marketing or package design, but also how

those products are made.

Danone has expanded a program that started in

1992 around the Evian spring. Danone worked

with local stakeholders to make sure that non-

polluting businesses were encouraged and supported

around the spring’s catchment area. That model was

expanded to include other springs that supply other

brands in the waters group.

TOP: In addition to its fresh dairy products, Danone is one of the major players duking it out to quench the thirst of consumers worldwide.BOTTOM: Véronique Penchienati, general manager of Danone Waters France

INS-0513-danone.indd 31 5/10/13 3:34 PM


To spur the cultural shift and enterprise

transformation at Danone, Insigniam

developed a “leadership college” that

brought together executive management

in cross-operational areas on multiple

levels. The “coursework?” A set of

principles developed by the company’s

senior executives that they called

“leadership ingredients.” These key

qualities were represented by the acronym

CODE —Committed, Open, Doer,

Empowered.

Sharing the recipe for transformation

with other managers was an equally

important task. To begin, the executive

management group saw each country’s

business unit (CBU) as an independent

opportunity for improvement and growth.

The culminating effect would result in

overall transformation.

The program helped headquarters build

strong rapport with the general managers

at each CBU, starting discussions from the

individual unit’s mindset and priorities.

By coming together for conversations

and training, leaders created a

strategic framework to help various

units and managers reach strategic

alignment. These managers

now had actionable tools to craft

a turnaround within their unit.

Breakthrough thinking allowed

them to view themselves not only

as in charge of a business, but as

ambassadors of a new culture. They

would now act as cultural referees,

watching their employees perform

their roles and encouraging them

to take on new attitudes, change

limiting work habits, and the like.

The Leadership College: Building a framework for transformation

Danone is also working with consumers around the world to

preserve local resources, that includes planting — with the

help of 420,000 school children and parents in Poland — 1

million trees in the mountains where leading water brand

Žywiec Zdrój is collected.

This is in-line with another enterprise transformation outcome:

a company-wide movement to reduce its carbon footprint.

Danone has done that by a whopping 40 percent, across all brands,

between 2008 and 2012. “It’s a source of pride for all Danoners, as

everyone took part, from packaging to logistics,” Penchienati says.

“We want to continue to grow the company, but in a sustainable

way. That’s the core of our company and our uniqueness.”

Creating a dialogue — Penchienati is determined that

the France Danone waters group create a dialogue with its

consumers. Like her counterparts in Danone Latin America

Waters, she wants the waters group to be able to adapt with the

needs of the communities it serves as those needs change.

For example, their key Latin American brands, Bonafont con

Jugo in Mexico and Villa del Sur Levité in Argentina, created

a completely new segment of fl avored waters, or aquadrinks

by making the time and investment to

dialogue with consumers. The consumer in

Latin America is drawn to soda drinks. The

huge marketing investments of behemoths

Coke and Pepsi created a “thirst” for

carbonated beverages that overshadowed

any of Danone’s traditional, non carbonated

off ers. These new drinks created a new

segment, one that simply didn’t exist

yet quickly attracted customers who

were traditionally soda drinkers.

Sales of Villa del Sur Levité have

tripled since 2008, and in 2011

the brand became Argentina’s

No. 2 non-alcoholic beverage

by volume.

P r o m o t i n g

hydration — Penchienati

says that the waters group also

recognizes its responsibility

to promote hydration beyond

its brands.

An outreach program in the

waters group, Hydration for

Health (H4H), was developed

to expand consumer-

company dialogue. Most

nutrition programs typically

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INS-0513-danone.indd 32 5/20/13 4:14 PM


focus on food intake, but

the quantity and quality of

fluids people drink every

day can have a significant

impact on their wellbeing.

H4H is a robust initiative

that involves educational

programs and tools

(including an iPhone app), scientific research and

conferences, an awards program, and an online hub

for health professionals. All employees are given the

opportunity to go out into the field, once they’re

trained, and educate and engage with consumers.

“We have been doing this for two years, and this year

we had more than 150 Danoners who took part in

the program,” Penchienati says. “Connecting with

consumers, having real conversations with them and

keeping them connected, is very important.”

BOTTOM-LINE IMPACT

The H4H program has helped enhance Danone’s stature

as a leader in the public health realm—and in the über-

competitive waters market. In 2012, the company’s waters

division saw a 10 percent increase in sales, to €3.6 billion

(the equivalent of $4.6 billion in U.S. dollars). That bottom-

line success has been replicated in Danone’s other divisions,

Fresh Dairy Products (up 2 percent), Baby Nutrition (up

11.6 percent), and Medical Nutrition (up 5.9 percent).

Last year, the company cracked

€20 billion in revenue (€20.9

billion, or $26.7 billion) for the

first time. A significant part of that

growth has come from emerging,

non-European markets, what

Danone calls the “MICRUB”

countries—Mexico, Indonesia,

China, Russia, the United States, and Brazil. In 2012,

the company saw 51 percent of revenues from these non-

European countries. For 2013, Danone is shooting for

worldwide sales growth of at least 5 percent, and to keep

cash flow steady at about €20 billion.

It aims to achieve this by cutting costs and chasing profits

versus market share. Barron’s reports that this change in

strategy could lead to robust profit starting in 2014, and

a powerful rally in Danone’s shares. The company has

the right ingredients for success, with both cultural and

demographic trends supporting strong demand for products

in all four of its business lines.

Penchienati, who has held various roles at Danone

since 1999, says the intentional focus on change and

the widespread participation were critical factors in the

reinvention process. “Two or three years ago, this was just

an idea on paper; now it is reality, a part of real life,” she

says. “It’s the greatest pride for all Danoners to see what

we have accomplished together. We’re very proud of the

business results—and the way we achieved them.”

INDIVIDUAL

TRANSFORMATION

When one shifts the way in which

they view the world, as well as

their view of their colleagues,

business, and assumptions

about how things seem to be, the

individual gains access to new

possibilities, opportunities, and

interpretations that can produce

extraordinary breakthroughs in

thinking, action, and results.

STRATEGIC

TRANSFORMATION

Most commonly, the speed

of change of companies

trails the speed of change

of the marketplace. Aligning

commitments of the business

with the requirements of the

existing and future marketplace

helps the enterprise be a

match for the market and be a

leader setting the pace in the

competitive landscape.

ORGANIZATIONAL

TRANSFORMATION

Aligning the structures,

processes and procedures, ways

of doing business, and corporate

culture with a new commitment

and future for the business

provides pathways for individuals

and groups to generate new

ways of working, innovative

approaches to doing business,

and greater opportunity to be

a match for the needs of the

market and the customer.

Source: Insigniam

Enterprise-wide Transformation

IT’S THE GREATEST PRIDE FOR ALL DANONERS

TO SEE WHAT WE HAVE ACCOMPLISHED TOGETHER


We found that when it comes to how company leaders spend their time, it’s all talk.

BY SHIDEH SEDGH BINA AND ERICA M. WOOD

2013 EXECUTIVE SHADOWING STUDY

INS-0513-shadowing-execs.indd 34 5/20/13 4:15 PM


how can executives and senior leaders reduce their current

workloads and invest more time in generating innovation

and creating greater value for customers? Insigniam

consultants shadowed 15 leaders from a health care system

— including President, EVP, VP and directors — for three

days to capture a minute-by-minute, behind-the-scenes look

at how they spent their time in order to determine how

to increase effi ciencies. It quickly became evident that the

fi ndings from this study would not be specifi c to healthcare

executives but were common to executives from practically

all industries.

SUMMARY OF KEY FINDINGS

The fundamental core of the work throughout the

day for the executives was interaction with other people.

Whether those interactions were via emails, meetings,

reading reports, conference and video calls, fi elding phone

calls and voicemails or casual interactions in the halls, 100%

of the executives’ time was spent in one kind of conversation

or another, the majority being unplanned.

Insigniam discovered that there were quite a few internal

practices in managing these interactions that could be

installed to help executives reclaim some hours in the day,

including ineffi cient meeting management and a lack of

email and activity protocol.

66% of scheduled meetings attended were not

meetings led by the executive.

Email took up a large amount of executives’ time

due to the volume of messages that needed to be read

and answered. Open-door policies also contributed to

executives being interrupted.

48% of tasks that could be delegated were not, because

leaders felt it was quicker to complete tasks themselves

rather than hand them off to someone else.

Leaders also did not schedule time for themselves to

complete tasks that were asked of them and relied on

their memories for meeting content and to follow up

on requests.

1,339 hours of all employee time — not just

executives — was spent in

meetings. This adds up to 140

10-hour workdays over the

45 day period that Insigniam

shadowed these executives.

Insigniam concluded that

implementation of a few additional

eff ective, effi cient practices would free up more time for

the leaders. These practices included:

“No meeting time zones” for director-level and above

System-wide meeting management protocol

A standard slot of time for system-wide activities (i.e.

rounding, offi ce hours)

System-wide email protocol

Scheduling and honoring time to complete tasks and

preparations for meetings, travel, etc.

Structures for rising leaders to take on certain tasks

TIME

On average, each of the leaders that Insigniam shadowed

worked 10 hours per day. Their average daily start time was

7:30 a.m. and the average daily end time was 5:30 p.m. In

addition, 46% of leaders devoted between 30 and 90 minutes

to daily travel.

However, 28% of leaders spent at least 30 minutes

working at night and 41% spent at least 30 minutes working

on the weekends. Leaders typically used this time to read

and respond to emails that they were unable to attend to

during the day or the workweek.

INTERACTIONSInsigniam observed 81 planned one-on-one interactions,

130 unplanned one-on-one interactions, 33 planned

meetings with 15 or more participants, three unplanned

meetings with 15 or more participants, 68 planned meetings

with between three and 14 participants, and 22 unplanned

meetings with between three and 14 participants.

More than half of the executives’ interactions were

unplanned or interruptions, and 63% of them involved

face-to-face contact or an in-person meeting. Multitasking

was only observed in 5% of interactions, and 91% of those

multitasking activities were reading or responding to emails.

TYPES OF INTERACTIONS26% percent of the interactions were short, between one

and four minutes. However, longer interactions between

30 and 44 minutes and 60 and 90

minutes accounted for 10% and 12%,

respectively.

The total time for all the

participants in the meetings observed

over the 45 day period — including

all planned or unplanned interactions

ON AVERAGE, EACH OF THE LEADERS THAT INSIGNIAM SHADOWED WORKED 10

HOURS PER DAY

THE CHALLENGE:



involving three or more people — occupied 1,339 hours

of total employee time, which is the equivalent to

140 10-hour workdays.

LENGTH OF INTERACTION

In terms of delegation, 95% of observed interactions were

required to be done by the person who was being shadowed.

Ninety percent of requests were also required to be brought

to that person. When asked why the request or interaction

could not be delegated, 48% of executives responded that

they thought it would be more effi cient if they did it

themselves.

CONCLUSIONS AND RECOMMENDATIONS

Through shadowing these executives,

Insigniam was able to determine a

number of recommendations that created

opportunities for increased effi ciencies in

the workplace, allowing executives the

chance to free up time from less critical

activities and focus their eff orts on ways to

innovate, improve business practices, and

work on developing new leaders.

MEETING TIME

Meetings occupied 1,339 hours of

total employee time over the 45-day

period executives were observed. In 66%

of meetings attended, the leaders did

not lead the meeting. In many instances,

leaders were at meetings as non-interactive

participants, in attendance to be aware of

information rather than off er insight.

Implementing meeting management

practices would have a material impact on

freeing up time. A “no meeting time zone” was suggested

for director-level employees and above so that leaders

could have dedicated time for focus on innovation, talent

development, and more. Other practices include basic, yet

often overlooked, principles for meeting management:

Sending an agenda with the meeting invitation to

determine need for attendance

Communicating about meeting attendance necessity

Sending detailed minutes of meetings so that

attendance for information is not mandatory

Sending a representative who can take detailed notes

and relay information to whomever necessary

EMAILING

The mass of emails to read and respond to was also

occupying large amounts of time. System-wide email protocol

is another lever for freeing up time.

Possible practice: Setting expectations in the email by using

terms such as Request, Inform, Urgent, Delivery, Response, Share,

Off er, or Action in the subject line of each email. In the fi rst line

of the email include dates for delivery of response for the email,

or include if no response is required.

CONTROL OF TIME

Many of the leaders we shadowed did not schedule time to

complete tasks that were asked of them. They very often relied

on their memory for meeting content and to follow up on

requests.

Possible practices: scheduling as “do not

disturb” meeting time in the calendar for

work that has to get done such as planning

and prep time, travel time, and other action

items.

INTERRUPTIONS

Many leaders worked with an open door

policy, inviting interruption. Unanimously,

this was done so that their staff felt taken

care of and heard. Many leaders worked

reactively rather than proactively.

Possible practice: Implementing daily or

weekly offi ce hours would allow for leaders

to maintain this open door atmosphere

while honoring their calendars and other

accountabilities.

DELEGATING TASKS

Forty-eight percent of interactions that

could be delegated were not. Using the justifi cation that “I

can do it faster,” most leaders thought it to be more effi cient to

complete it themselves, rather than turn it over to someone else.

Within each department shadowed, there were several rising

leaders. Creating structures and practices for these leaders to

take on secondary tasks would create more time and openings

for those we shadowed to focus on primary accountabilities.

That’s where change starts. For executives in all industries,

time is literally money. With a few adjustments to how those

leaders use their time — like implementing standard, system-

wide protocols and delegating tasks that can be done by others

— they can spend that capital more wisely, reinvesting it in

creating innovation and value for customers.

OF THE INTERACTIONS WERE SHORT, BETWEEN ONE AND FOUR MINUTES

26%



KINDS OF INTERACTIONS

1-4 minutes 5-9 minutes 60-90 minutes 10-14 minutes

30-44 minutes 15-19 minutes 45-59 minutes 20-24 minutes

91-120 minutes 25-29 minutes 3+ hours

Thought it would be more effi cient if I did it

They aren’t available Don’t Know

Don’t trust them to do it right

TIME SPENT WORKING AT NIGHT

None < 30 Minutes

61-91 Minutes 2-3 Hours

30-60 Minutes None 30-60 Minutes

61-91 Minutes 91-120 Minutes

2-3 Hours < 30 Minutes

TIME SPENT WORKING ON THE WEEKEND

KINDS OF INTERACTIONS

Planned Unplanned Interruption Face to Face Meeting: Live

Teleconference Prep

Phone Email

TYPES OF INTERACTIONS

REASON FOR NOT DELEGATING

39%

53%

43% 44%

26%

48%41%

19%

12%

11%

10%

5%

5%

4%

4% 7%

3%2%2%

19%

1%

9%

11%

16%

42%

15%

11%

12%

12%

6%6%6%

11%

11%

33%

INS-0513-shadowing-execs.indd 37 5/2/13 9:41 AM

BY SHIDEH SEDGH BINA

CHEW CAREFULLYSuccessfully merging two companies requires a careful examination of the ingredients and how they work together so as to prevent a case of heartburn down the road.

INS-0513-shideh.indd 38 5/1/13 10:49 AM

INSIGNIAM QUARTERLY 39

en years is a long time to

suff er from indigestion.

But that’s just what the

GM of a Hong Kong

company says happened

to him in the decade that

followed his company’s

several hundred million

dollar acquisition by an

international media company based in North America. On

paper, the deal promised to open new markets around the

world and deliver huge economies of scale for the merged

entity. And, yet, after the merger, the combined company

struggled to achieve the fi nancial results that had been

expected. What went wrong? “The (American) company

came in and ate us,” says the Hong Kong executive. “But even

10 years later they still haven’t digested us.”

Plenty of executives who’ve been through M&A deals can

likely relate to that uneasy, queasy feeling. Combining two

diff erent fi rms can often seem like a great idea on paper, but

too often — and for far too long — the execution of those

deals has failed. Consider the evidence from just a few of the

studies of M&A aftermath.

1970s: A Federal Trade Commission study fi nds that most

M&A deals done in the mid-1970s resulted mainly in steep

declines in operating profi ts among the merged fi rms.

1990s: A study by researchers at Southern Methodist

University found that, from 1990 to 1997, in mergers worth

$100 million or more, just 11% of the deals produced their

anticipated revenue gains.

2000s: A 2004 Bain & Company survey found 70%

of mergers and acquisitions produced only declines to

shareholder value. More recently, a 2007 study by Hay Group,

a management consulting fi rm, and

the Sorbonne, found that more

than 90% of corporate mergers and

acquisitions in Europe didn’t meet

their objectives. That study, titled

“Dangerous Liaisons,” concluded

that mergers and acquisitions failed,

in large part, because the combined

companies didn’t adequately address corporate culture issues.

That’s exactly what happened to the Hong Kong executive

whose company hadn’t been digested properly. The cultural

diff erences between the Asian and western companies

were barely addressed prior to the fi rms’ combination.

Unfortunately, that, too, is not uncommon in M&A deals.

Indeed, Hay Group found that only 27% of the companies

it surveyed had bothered to analyze the cultural compatibility

of the fi rms they were planning on combining.

And that was true even though more than half the

companies Hay Group surveyed said they believed neglecting

to audit “non-fi nancial assets” — including culture — would

put any M&A deal at risk of failure.

Think about that for a second. Executives are smart people.

They know that M&A deals are driven by economics, that

they need to provide some kind of scale in operations, or

opening access to new markets. But many executives also

profess to know that the success of these combinations depend

on the work of the people in each organization. In practical

reality, mergers and acquisitions have a profound and material

impact on the people in both of the combining companies

— from the senior leadership to the frontline worker. Written

and unwritten rules change, strategy is often dramatically

altered, new managers are put into new jobs with new teams,

diff erent leadership styles, changes in compensation, the list

of variables that impact the mindset, the culture and thereby

the performance of people in any enterprise is miles long.

Any executive can tell you about these dependencies and

ramifi cations. So why, then, does 85% of the money spent in

closing M&A deals go to assessing fi nancial and operational

integration, while just 15% is spent on assessing people issues?

The answer may be that executives know how to crunch

the data on the value of their hard assets but are often

uncertain how to gauge their more

intangible assets, like their people

and their culture. The Hay Group

certainly found that to be true. It’s

survey found that 70% of executives

believed it is too hard to get good

insight into the corporate culture

of companies they’re looking to do

T

ONLY 27% OF THE COMPANIES HAY GROUP

SURVEYED HAD BOTHERED TO ANALYZE THE CULTURAL

COMPATIBILITY

SUMMER 2013

INS-0513-shideh.indd 39 5/10/13 3:36 PM

40 INSIGNIAM QUARTERLY

M&A deals with.

And, yes, it is hard. It takes time

and energy and focus (and, of course,

money) to fi gure out the cultural

concerns of a M&A deal and to get

those cultural issues on track before

the two fi rms legally combine. But

it’s not impossible. And, it’s defi nitely

worth the investment.

AVOIDING INDIGESTION

When an M&A deal doesn’t

completely address cultural issues

during due diligence, just about

anything can go wrong. For instance,

one merging entity may simply impose a new strategy onto

the other. When that happens, the merged entity may fi nd

itself with groups of employees working with confl icting

principles and frameworks for operating and, therefore, unable

to execute on common business objectives.

Something similar happened when Quaker Oats Co.

bought Snapple for $1.7 billion in 1994. Both fi rms wanted to

make money by selling beverages to consumers. But Quaker

valued a sales channel that focused on big volume sales in

supermarkets. Snapple derived practically all of its success

from its agile and entrepreneurial network of independent

distributors. In managing for economies of the new, larger

scale post-merger Quaker discarded Snapple’s independent

distributors. This led Snapple products to disappear from the

shelves of convenience stores and other small retailers that had

been diligently serviced by the independent distributors. And

that just happened to be where most Snapple beverages were

sold. No surprise, then, that a little more than two years later,

Quaker dumped Snapple back onto the open market for just

$300 million, taking a $1 billion write-off , the largest by any

business up to that time and virtually destroying the career

of then Quaker CEO William Smithburg. Quaker never

recovered it’s footing and was eventually bought by PepsiCo.

There’s a way to get better alignment around shared

values in a post-M&A environment. Start with a team of

key stakeholders — not just C-suite executives — from both

companies and task them with creating a new company

with a newly constituted

culture. The process works

in fi ve phases. In brief,

they are:

PHASE 1: STRATEGY

/ LEADERSHIP

CULTURE

ASSESSMENT

Gather input from a

wide range of stakeholders

Quaker Oats’ purchase of Snapple is a perfect example of how to not execute an M&A project. The failed merger cost Quaker more than $1 billion.

1 LANGUAGE: Vocabulary, content, and key phrases

create a network of conversations that constitute the

enterprise.

2 CUSTOMER ORIENTATION: How is the customer

viewed, served and interacted with?

3 VALUES: What are the qualitative objectives? What is

held in high regard?

4 ACCOUNTABILITY: Are people organized for results,

processes, or tasks? What are the incentives?

5 TRADITIONS, RITUALS, AND ARTIFACTS: What are

status symbols? What gives a sense of belonging and

pride?

6 LEADERSHIP DYNAMICS: How does the workforce

view leaders, and what is the leadership style?

7 UNWRITTEN RULES FOR SUCCESS: What are the

taboos, status symbols, pathway to success?

8 DECISION RIGHTS AND PROCESS: Who makes what

decisions, at what pace and by

consulting whom?

9 LEGACY: Have there been any

close calls or major successes?

What were the founders’ values

and philosophy?

Distinctive Elements of Corporate CultureIt is important to assess each of these nine

distinctive elements from three dimensions:

WHAT ARE THE STATED/FORMAL

PRINCIPLES?

WHAT ARE THE ACTUAL PRACTICES

WITH EACH ELEMENT?

WHAT ARE THE UNSPOKEN

BACKGROUND DRIVERS?

1 2 3

SUMMER 2013


(who can be interviewed confi dentially and with online

surveys) to understand the distinctive elements of the culture

of each legacy company. [See box at left] The report should

include the high value, high impact cultural assets of each

fi rm. This assessment of both company cultures can also be

done during due diligence to ascertain fi t.

PHASE 2: MERGER LEADERSHIP COALITION

Create a coalition of leadership from both companies,

including leaders from diff erent levels, broad geographies

and a variety of functions. The charge of the leadership

coalition is to lead, monitor and

execute the cultural integration.

Using the assessment and the assets

identifi ed in the assessment as a

tool and together with executive

management, the leadership

coalition should come to a shared

understanding of a vision for the

new enterprise both in terms of

strategic objectives and aspirations.

Based on that, the leadership

coalition defi nes the broad

elements of the corporate culture

that can support the execution of

that strategic plan and intent.

PHASE 3: CULTURE

IMPLEMENTATION AND

ACID TEST

The Leadership Coalition drafts the cultural framework

for the vision, including a mission statement, a statement

of values, and principles. It sketches out the key culture

and implementation initiatives needed to accomplish the

breakthroughs that the new organization wants to achieve.

The cultural framework can be something completely new;

it can borrow from elements of the legacy companies or

can completely adopt the framework from one of the fi rms.

The key point is that this framework has been derived in

the context of the future of the new company and not as

an allegiance to the past. Once drafted, the coalition leads a

process with various stakeholders to refi ne and ratify the

cultural framework for the new company.

PHASE 4: CATALYTIC PROJECTS

Start implementing the new culture through a series

of short-term projects involving people from both of the

companies. The projects produce important measurable

results that would not be predictable without the combined

enterprise but can only be produced by reinforcing the new

culture. Some of the projects can be “people oriented,” such

as building new processes; some can have objectives that

realize the opportunity for enhanced value that instigated the

combination, such as capturing new markets or new product

development.

PHASE 5: ENROLLMENT CAMPAIGN: EMBEDDING

THE NEW CULTURE IN DAILY PRACTICES

The leadership coalition commissions a grass roots

team to launch a campaign to

engage the work force into

the new corporate culture.

People will need to know the

new organization’s values and

how it addresses their personal

needs. The most eff ective teams

have membership from all

the key constituencies in the

enterprise and represent diff erent

geographies. Each member of

the team designs and executes a

campaign that they know would

be most eff ective with the group

they represent. In our experience,

these team members always

come up with more creative, low

cost activities than any corporate

group can conceive of. They

know how to engage the hearts and minds of their peers and

have credibility with their constituency. This is an essential

part of the process and will require constant monitoring. But

it ensures that, in the end, a truly new company with a new

understanding of its mission has been formed.

All of that may not sound much like the typical M&A. But,

remember, the typical M&A doesn’t generally work. Often

M&A deals are put together by teams of investment bankers

and top-level executives who are so focused on making the

numbers behind the deal attractive to investors that they don’t

adequately address the people inside the organization who

have to make the deal work. But guess what we’ve found in

mergers and acquisitions where corporate culture issues have

been made a top priority? In those deals, the overall success

rate of the M&A shoots up by a third. And that’s a bottom

line number that should make the bankers, the investors, the

executives, and everyone at the new company happy.

INSIGNIAM QUARTERLY 41

WHY DOES 85% OF THE MONEY SPENT IN CLOSING M&A DEALS GO TO ASSESSING FINANCIAL AND OPERATIONAL INTEGRATION, WHILE JUST 15 PERCENT IS SPENT ON ASSESSING PEOPLE ISSUES?

SUMMER 2013



1 2 3

8 97

Start with colored paper. Fold a square in half on the diagonal one direction then fold in half on the diagonal the other way.

Fold up a little less than 1/3 from the top.

Pleat the beak in a little to get that waterfowl look!

Another outside reverse fold for the head.

Just taking a break here to say how far the tail sticks out all depends on step 2.

INS-0513-keytotransformation.indd 42 5/10/13 3:37 PM


4 5 6

By Jeff Wuorio

How Corning made sure that culture did not eat its strategy for lunch

Grab the back fl ap and pull down for the tail.

Fold the long edge up to the top on each side.

Grab the inner fl ap and reverse fold that puppy all the way to the end of the fl ap, so that it is even with the bottom of the model.

Fold the model in half, and turn 90 degrees.

Enjoy your transformation!

Reverse fold up the neck. Part of neck is inside the body. You know the neck is done correctly when it touches at the underlying layers in the front.



Part of Corning’s resurgence came as a result of

Volanakis’ leadership of the company’s entry into the

now-burgeoning liquid crystal display market. Corning’s

“gorilla glass” — a pliable and impact-resistant glass — is

found on more than 100 million mobile devices.

In both cases, Corning was in the heart of sweeping

change — one a struggle back from the edge of fi nancial

collapse, the other a signifi cant refocus of the company’s

developmental eff orts. And, in both instances, culture

transformation was the philosophic and operational

fl ywheel that helped Corning chart a successful course.

“After the collapse of the telecommunications

industry, we had to reenergize our values and culture.

Our revenue had dropped from $7 billion to $3 billion in

just 18 months,” says Volanakis, who spent nearly 30 years

in various positions with Corning. “When we started

the bendable glass project, there were no customers and

only a few notions of potential applications. Corning lost

money for 14 years in LCD glass before turning a profi t.

“I think that tells you something about a culture that

encourages very large technology bets and sticking with

them even in the face of daunting losses.”

As president and chief operating offi cer, Peter Volanakis steered Corning Inc. (NYSE: GLW) past a brush with bankruptcy when the telecommunications industry imploded some 10 years ago.



CULTURE’S CRITICAL TO TRANSFORMATION

Although it may have a simplistic bumper sticker

ring to it, the phrase “Culture eats strategy for lunch”

underscores the critical value of a company’s culture in

transformative environments. And, as Volanakis notes,

transformation doesn’t have to be characterized by

sweeping, dramatic types of change.

“Transformation is taking place constantly,” he

says. “Increasing your customer base is a form of

transformation.”

Looked at one way, culture transformation can be a

Corning’s “gorilla glass” is

on more than 100 million

mobile devices, but the

company lost money on

LCD glass for 14 years

before turning a profi t.



question of scale. For certain forms of change, such as

introducing a new product or service, an accompanying

change in corporate culture need not occur at the same

time. But major corporate overhauls rarely take place

without concomitant culture change.

“If you have a solid culture in place, you have an

easier time of enacting simple changes,” says Lily Sarafan,

president and chief operating offi cer of Home Care

Assistance, a provider of in-home care services. “Major

transformations absolutely require a shift in corporate

culture because it requires buy-in from everyone from

every rank in the company.”

DEFINING CULTURE

One of the challenges of understanding the importance

of a company’s culture is that the term itself is highly

subjective, resisting any sort of consistent defi nition. For

Volanakis, culture derives from clearly defi ned values

that are as actionable as they are understandable.

“It starts with values. You need to know who you are

— what’s your DNA?” he says. “Values provide a context

for a broader culture. And those can’t just be words on

paper or a kind of poster art. They need to exemplifi ed

every day by the leaders of a company.”

Volanakis points to the value of the individual as a core

tenet of Corning’s overall culture. And, consistent with

the importance of values that are a matter of practice and

not just theory, Volanakis cites the extensive education

and training of new Corning employees in China — part

of a strategy of increasing globalization underwritten by

the value of investing in company personnel. Revenues

from activities in China are fast approaching $1 billion.

A solid culture can also help organizations adapt to

circumstances outside of their control. As Sarafan notes,

the health-care industry is poised to undergo a sweeping

introduction of regulatory changes. She’s confi dent that

Home Care Assistance’s clearly defi ned culture will allow

the company to absorb those changes with a minimum

of disruption.

“My belief that we’ll make a smooth transition has

very much to do with our infrastructure and corporate

culture,” she says. “That’s because we have buy-in, not

just within the offi ce team but our caregivers as well.

We’ve included them in the process of developing a

culture all along.”

NEGATIVE CULTURE

Although corporate culture is a powerful vehicle for

stewarding change of all sorts, it isn’t necessarily positive

by defi nition. For example, a corporate culture that

emphasizes outstanding customer service might seem

like an inarguably positive value. But, if that emphasis

compromises the company’s commitment to employee

quality of life, it can be diffi cult to determine whether

the organization’s overall culture is truly benefi cial or not.

“It’s important to remember that culture can also evolve

KNOW WHO YOU ARE.Identify your core values, beliefs, and priorities. Without those as your base, any decision

you make may be ill-directed.

LIVE YOUR BELIEFS. Instead of just saying, “We value people,” show it through development programs, a

commitment to promoting from within, and competitive compensation.

ENCOURAGE BUY IN.You, as a leader, believe in your core tenets, but if those around you don’t, your company

won’t be able to effectively withstand change or challenge.

VOLANAKIS’ 3 KEYS TO TRANSFORMATIONReady to transform your company’s culture? Do these three things fi rst.

INS-0513-keytotransformation.indd 46 4/30/13 9:15 AM


in a negative fashion,” says Charles

H. Matthews, executive director of

the University of Cincinnati’s Center

for Entrepreneurship Education and

Research. “And, leadership often

doesn’t know whether their culture

is a good thing or a bad thing. That’s

a question that can get lost in the

conversation.”

Still, other landmines are those

instances where the “conversation”

never takes place at all. Since culture is

a highly singular component — what

works for one corporation may be

utterly inappropriate for another —

it’s simply not a matter of replicating

another organization’s culture. Another

potential problem is the perceived

nature of culture. For some executives,

taking the time to defi ne and

identify a suitable culture may seem

unproductively abstract. As Sarafan

notes: “You can’t put corporate culture

in a cost-benefi t analysis.”

CULTURE AS A FAILSAFE

But the benefi ts are undeniable.

Since a solidly defi ned culture implicitly mandates

both the understanding and embrace of everyone in an

organization, that sort of affi nity can prove a failsafe for

possible change that simply doesn’t fi t.

“Everybody’s a volunteer. People generally don’t

come to work every day just for a paycheck. They

need meaning and identifi cation with a company,” says

Volakanis. “If you’re trying to achieve something and

something happens that’s out of the ordinary with regard

to the culture, people should stand up and say ‘That

doesn’t feel right.’ ”

But even a situation that absolutely mandates a

signifi cant adjustment in culture doesn’t always allow for

immediate action. Sometimes, notes Gregg Fairbrothers,

adjunct professor of business administration at the Tuck

School of Business at Dartmouth College, crises such

as severe cash fl ow issues or an impending lawsuit take

priority. That doesn’t water down the importance of

examining culture — rather, fi rst things fi rst.

“Occasionally, the question of culture change needs to

be addressed later,” he says. “But, once you’re out of rough

waters, without the right company culture, you’re just

going around in circles.”

CULTURE EVOLUTION

Just as a major operational or infrastructure change

can’t happen overnight, nor can signifi cant culture

evolution quickly win the support of everyone within an

organization. In fact, it’s probably better that it doesn’t.

“It doesn’t have to be immediate buy-in,” says Safran.

“Buy-in is a process, it’s explanation — it’s a very

challenging process. If you have discussion and feedback

from others, you end up with more nuanced and

fi nalized ideas.”

For some, culture may, indeed, “eat strategy for

lunch.” For others, they occupy the same plate on a

complementary and supportive menu.

“You can have the fi nest strategy in the world, but

it has to be executed by people and it has to happen

in a cultural context,” says Volanakis. “Culture is the

context in which that strategy sits. This is how we treat

each other, how we deal with customers, how we grow.

Culture is the context in which everything happens.”

“Major transformations absolutely require a

shift in corporate culture because it requires buy-in from everyone from every

rank in the company.”— Lily Sarafan, president and chief operating

officer of Home Care Assistance

INS-0513-keytotransformation.indd 47 4/30/13 9:16 AM

IQ BOOST

BY KATERIN LE FOLCALVEZ

When leaders strive only for results — getting a new product to market in 10 months, for instance — they become directive. That can get things done, but it’s not the whole solution.

The best companies leverage top performance not with orders, but by creating the conditions where people want to do their best. This requires a mutual commitment between employee and employer. The employer must commit to the employee growing his or her capacity and prowess, and the employee must, in turn, commit to delivering the employer’s strategic goals.

Managers are often very good at communicating responsibilities to their people, and at evaluating performance in regular reviews. But the best companies do more than that. They also coach employees.

For those rms, it’s not just about evaluating performance, it’s about making sure each individual employee has a bigger future and understands how he or she ts into the whole organization, how what he or she is doing is important to everyone in the rm.

CREATING A COMMON CAUSE CAN LEAD TO RESULTS

Katerin Le Folcalvez is a partner at Insigniam. Based in France, she has extensive experience in Asia, the Middle East, and Europe. She has worked in the investment banking, fi nance, foreign relations, hospitality, food, and retail industries, among others.

INS_0513_IQBoost.indd 48 4/19/13 10:07 AM

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insigniam quarterly summer 2013 - enterprise transformation

Leadership & Management

culture change

culture didnt

companys culture

right culture

culture eats strategy

corporate culture thats

gorilla glass

transforming danone