World Business Forum 2007

O ctober 10-11, Radio C ity Music Hall®

New York C ity

Executive Summaries

Table of Contents

Chris Anderson 5 The Future of Sales & Marketing Jack Welch 7 Management & Strategy Patricia A. Woertz 13 Leasing O rganizational T ransformation Fred Smith 15 Innovation & Access Garry Kasparov 17 Strategic Thinking Herb Kelleher 19 Building a People- Focused Culture Michael Eisner 21 C reativity & Growth Carl Ichan 23 Unlocking Shareholder Value Dennis Nally 26 Corporate Accountability

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C HRIS ANDERSON The Future of Sales & Marketing U p o n f irst b lush , C hris A n d erso n se e ms t o d a ily , p ro fessio na lly , liv e lih o o d -d e p e n d in g-o n-it c o n tra d ic t h i mse lf. A s e d it or-in-ch ie f o f t h e slick C o n d é N ast m a g a z in e W ire d , w h ich b o asts a p a id c ircu la t io n o f o v er 6 5 0 , 0 0 0 , A n d erso n sp e n ds h is o ff-h o urs t a lk in g a b o u t th e e m erg e nc e , i m p ort anc e , p o w er, v ic t ory o f t h e n ich e c lass. B u t it ’s A n d erso n ’s h e l m a t th is v ery n o n-n ich e c o m p an y tha t c o n trib u t es so hu g e ly t o h is un d erst an d in g o f t h e sa m e , p u lle d t o g e th er in h is b re aka w a y b estse ller T h e L o n g T a il. A n d erso n ’s k e e n un d erst an d in g o f th e v ario us m ark e ts tha t cu lt ure serv es is a ll t h e m ore i m pressiv e o nc e h e m a ps o u t th e fra g m e nt a t io n o f e a ch in d iv id ua l m ark e t . T h e y a ll in e x ora b ly p o in t t o w ard th e sa m e c o nc lusio n—t h e “o n e siz e f its ‘m e ’ cu lt ure .” T h e p o w er o f o n e is th e n e x t b ig th in g . E xh ib i t A : Music T h e b estse llin g a lb u m o f a ll t i m e is b o y-b an d ‘ N Sy nc ’s 2n d a lb u m , re le ase d March 21, 2 0 0 0 . T h is p art icu lar a lb u m so ld o n e m illio n c o p ies in th e f irst d a y , 2 .4 m illio n in th e f irst w e e k , 1 0 m illio n a t t h e e n d o f t h e f irst y e ar. It is a lso th e last b estse llin g a lb u m . A n d erso n e x p la ins. T h e m usic in d ustry has n o t d e c lin e d—it ’s n o t th e d e a th o f t h e m usic in d ustry—n o t in w e ig h t , re le v anc e , v isib ilit y . T h e h i t m usic in d ustry , h o w e v er, is a d if f e re n t st ory , sa ys A n d erso n . N e w t e chn o lo g ies, lik e th e iP o d in f lash in g-lig h ts p art icu lar, h as a lt e re d th e su p p ly-an d-d e m an d lan dsc a p e . T h ere ’s m ore su p p ly . T h ere ’s m ore d e m an d . B u t less c o nc e n tra t e d aro un d just a f e w h its. T h ere is less d esire for t h e “o n e ,” b u t t h ere are m ore “o n e ’s.” C o nse q u e n t ly , t h ere are a lo t m ore “o n e ’s.” T h e b an ds tha t n e v er ha d a chanc e un d er the o ld syst e m—t h e h i ts-o n ly syst e m—ha v e a p rese nc e in th e n e w syst e m . E xh ib i t B : T e le v isio n It use d t o b e so si m p le . N o w th ere ’s c a b le , d ig it a l c a b le , h ig h-c a p a c it y d ig it a l c a b le , e t c .. W it h m ore ch o ic e , t h e a v era g e m ark e t share is o n a d o w n w ard slo p e . T h ere is a sp lin t erin g o f au d ie nc e . T h ere ’s a n e w cu lt ure o f T V au d ie nc e . T h ere are n ich es. In th e re c e n t p ast n ich es w ere—k in d a , sort a—a t t e n d e d t o b y c a b le chann e ls. N o w , b y Y o u T u b e . A n d t o A n d erso n ’s p o in t , n o d o u b t th ere ’s an e asy an d e ff ic ie n t w a y t o n ich e th e n ich e n o w . P erha ps y o u ’ll re a d a b o u t it in W ire d . T h e Sha p e o f T h in gs T h e 2 0 th c e n tury w as m an y th in gs. If y o u ’re an e d it or o f a ll- th in gs-cu lt ure , it w as o n e g ian t b e ll curv e .

O b je c t iv e : c a p ture th e m ark e ts tha t fa ll in th e m id d le . R esu lt : Suc c ess. T h is m e ans c o m p an ies w ere a b le t o re a ch th e g re a t est c o nc e n tra t io n o f p e o p le w it h th e le ast a m o un t o f le g w ork . A n d erso n f ilt e rs th e p o in t : t h e d o w nfa ll—o n e o f t h e d o w nfa lls?—of th e b e ll curv e is tha t t h e tra d it io na l chann e ls ran o u t o f ro o m . T h e n w ha t? T h e Sha p e o f T h in gs N o w T h ere is e n d less sh e lf sp a c e o n th e su p erm ark e t t ha t is th e In t ern e t . T h e lesso n , A n d erso n p o in ts o u t , is tha t if t h ere isn ’t an e n d t o so m e th in g , y o u w ill d isc o v er w ha t p e o p le re a lly w an t . T o w it : V it a m in W a t er. W h o le F o o ds. S t arb uc ks. T h e u p-an d-c o m in g D a g o b a C h o c o la t e ( org an ic , b y th e w a y ) . C ase S tu d y # 1: Z a p p os It ’s an unso p h ist ic a t e d w e b sit e . F irst an d se c o n d i m pressio ns: O v er w h e l m in g . T h ird , fo urth: T h ere are 75 0 , 0 0 0 k in ds o f sh o es o ffere d . T h e i m m e d ia t e curiosit y is tha t 75 0 , 0 0 0 d if f e re n t k in ds o f sh o es e x ist in th e f irst p la c e . B u t t h e lesso n is tha t if as a b usin ess y o u pro v id e a lo t o f o p t io ns—m ore than se e ms e v e n n e c essary , p erha ps—y o u ’ll d isc o v er a n e w n ich e , a n e w au d ie nc e , a n e w m ark e t , a n e w o p p ortun it y . T h ese o p p ortun it ies o nc e w ere re lie d u p o n b y th e b ig g er c o m p an ies. W ha t o nc e w as th e irs is n o w in q u est io n . T h e y c o m p e t e n o w b y o p en in g th e ir w a lle ts a n d p urchasin g th e n ich e c o m p an ies. C ase Stu d y # 2: A nh e user B usch A nh e user B usch cre a t e d a n e w d iv isio n c a lle d—g e t re a d y—L o n g T a il L ib a t io ns. T h is d iv isio n inc lu d es m icro bre w s, cra f t b e ers, re g io na l b e ers. T h e la t est is R e d brid g e—a g lut en-fre e n o n-a llerg e n ic b e er. A n d erso n jo k es tha t t h e f irst q u est io n m ig h t b e : “ W ha t d o es tha t t ast e lik e?” B u t th e se c o n d q u est io n is th e o n e tha t c o un ts: “ W h o drinks tha t?” T h e ans w ers t o b o th m ig h t surprise y o u . A n d tha t ’s A n d erso n ’s th esis. T h e T ip p in g P o in t W ha t , a ll o f a su d d e n , w as th e t ip p in g p o in t? T h ere w as a sh if t in o ur cu lt ure , a d e m o cra t i z a t io n o f t ast e . G o o g le p erha ps le d th e w a y . N o w th ere are b lo gs o f a ll f la v ors an d th ese are th e curre n t rin g le a d ers o f t h e n ich e

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m ark e ts. “T h ere are 7 0 m illio n b lo gs w it h m ore tra ff ic than an y o f t h e w e b sit es o f c o m p an ies g a th ere d h ere [a t Ra d io C it y Music H a ll] c o m b in e d ,” A n d erso n sa ys. A n d m ore than lik e ly , t h ese b lo g g ers b lo g for fre e . H o w c an c o m p an ies p ossib ly c o m p e t e? H o w c an c o m p an ies re m a in c o m p e t i t iv e… w h ile th e m ark e t sh if ts b it b y b it , n o t so slo w ly b u t st ill re m arka b ly t o th e narro w e n d o f t h e lo n g t a il? A n d erso n ’s re c o m m e n d a t io ns m ig h t so un d si m p le , b u t t h e y ’re n o t . F org e t B e in g A P ort a l A n d erso n shares w it h us W ire d .c o m ’s tra ff ic d e t a ils. T h o u g h just b are ly , t h e m a jorit y o f users v isit a p a g e o n th e sit e fro m an e x t erna l w e b sit e . T h is is n o t th e id e a l sc e nario . T h e less i d e a l sc e nario is th e re a liz a t io n o f w ha t c o m es in last p la c e , w h ich is in t erna l n a v ig a t io n . T h is un d erscrores A n d erso n ’s c la i m—n ich e v ie w ers arriv e a t t h e sit e fro m so m e o th er so urc e . T h e y d o n ’t lo o k t o W ire d .c o m for a ll o f t h e ir inform a t io n—t h e y fo un d it so m e w h ere e lse , an d v isit t h e sit e just t o le arn a b o u t it . T h e n th e y le a v e . T e ar D o w n T h ose W a lls A n d erso n insists tha t fre e an d o p e n inform a t io n w ill serv e c o m p an ies b est an d p osit io n th e m m ost p osit iv e ly for th e fu ture . B arriers t o e n try an d b arriers t o p art ic ip a t io n ig n ore th e b ro a d er c o n v ersa t io n . “P la y th e w e b pro p erly” an d re a p th e b e n e f its. L o ose n th e R e in o n C o n t e n t It g o es w it h o u t sa y in g—m ak e y o ur c o n t e n t a v a ila b le , w h e n it ’s a v a ila b le , an d m ak e it a v a ila b le in d if f e re n t w a ys. F or e x a m p le , w h e n y o u ha v e a n e w pro d uc t or a n e w d e v e lo p m e n t w i t h in y o ur c o m p an y , use RSS , cre a t e p o d c asts, in t e gra t e it in t o y o ur w e b sit e i m m e d ia t e ly . Users arriv e a t inform a t io n n o w fro m a ll d ire c t io ns an d m e th o ds. T h e o ld m e th o ds are n o lo n g er trie d an d tru e . G e t y o ur inform a t io n o u t t h ere . W ha t ’s O ld Is N e w A g a in O n W ire d .c o m , 4 0% o f its t ra ff ic is g e n era t e d b y st ories fro m its arch iv es. T h e m a th t e lls th e b usin ess se nse—t h e lo n g er c o n t e n t is a v a ila b le o n th e In t ern e t , t h e m ore t i m e it ’s a b le t o g e n era t e inc o m in g links, w h ich m e ans tha t it is m ore v isib le in G o o g le se arch resu lts. T h is c osts W ire d n o th in g , an d a llo w s th e m a g a z in e t o d isc ern an o ld st ory ’s v a lu e thro u g h m o n it orin g th e t ra ff ic t o it . L esso n : Min e y o ur arch iv es t o p lo t y o ur fu ture . T a k e C hanc es T ak in g a risk c an t ak e o ff in w a ys a c o m p an y m ig h t n o t e x p e c t . A n d erso n p rese n ts th e c ase o f C h e v y

T ah o o . In an a t t e m p t t o d if f e re n t ia t e th e SU V an d b ran d an d e n g a g e w it h p o t e n t ia l cust o m ers, t h e c o m p an y launch e d an in t era c t iv e m ark e t in g c a m p a ig n in w h ich c o nsu m ers c o u ld cre a t e th e a d ’s t a g lin e . T h is c a m p a ig n w as launch e d as o il p ric es re a lly st art e d t o ra ise an d in a c li m a t e o f c o nsu m ers’ incre asin g e c o-se nsit iv it y . So w ha t ha p p e n e d? C o nsu m ers t o o k th e o p p ortun it y t o n o t e th e SU V ’s g as-g u z z lin g fe a tures an d p u b lic iz e d th ese a ds a ll o v er. N o d o u b t C h e v y e x e cu t iv es w ere e m b arrasse d a t such a p u b lic re b uk e . B u t inst e a d o f p u llin g th e a ds, t h e y re a li z e d th e resu l t—it lo o k e d lik e C h e v y in v it e d t h e c o n tra d ic t io n , t ha t C h e v y w as in it ia t in g a c o n v ersa t io n a b o u t th e c o n tra d ic t io n o f th e ir p ro d uc t w it h th e curre n t p o lit ic a l an d e n v iro n m e nt a l c li m a t e . A t t h e e n d o f t h e d a y , A n d erso n su m m ari z es, C h e v y b e c a m e au th e n t ic in a w a y tha t t ra d it io na l a d v ert isin g c o u ld n ’t ha v e d o n e…”an d m a d e it [ C h e v y ] re le v an t t o th e G o o g le g e n era t io n .” T h e F u ture A n d erso n brin gs h is p rese n t a t io n t o a c lose b y p rese n t in g M icroso f t ’s re c e n t suc c ess w it h a m ark e t in g t o o l t ha t n e it h er c o m es fro m insid e its w a lls n or e v e n fro m its e m p lo y e es. M icroso f t p a ys 4 , 0 0 0 b lo g g ers t o b lo g o n th e ir b e ha lf. T h is is th e p o in t , an d th is is cruc ia l. T h e b lo g g ers are in t era c t in g w it h th e cust o m ers—for a ll in t e n ts an d p urp oses, M icroso f t is c o m p le t e ly o u t o f t h e p ic ture . T h e id e a is tha t cust o m ers c an m ore e asily re la t e t o th e b lo g g ers w h o are p assio na t e a b o u t a c ert a in M icroso f t p ro d uc t than th e y c an t o so m e o n e w h o th e y kn o w w orks for M icroso f t an d is th ere fore p a id b y M icroso f t t o kn o w an d e n d orse M icroso f t , b u t m a y b e n o t t h e p art icu lar p ro d uc t th e cust o m er has a q u est io n a b o u t or an issu e w i t h . T h e In t ern e t is th e g re a t e na b ler h ere—t h e cust o m ers d o n ’t kn o w th e b lo g g ers are b e in g p a id—in a w a y , e m p lo y e d—b y M icroso f t b e c ause th e y in n o w a y “lo o k” or se e m t o b e . It se e ms lik e a w ord-o f- m o u th re la t io nsh ip , an d tha t ’s b e c ause i t is. T h is is th e fu ture o f m ark e t in g—t h is is th e fu ture o f h o w p e o p le f in d o u t a b o u t , re la t e t o , c o m e t o id e n t if y w it h th e p ro d uc ts an d serv ic es o f e v ery c o m p an y . E v ery cust o m er has a m e g a p h o n e an d is t a lk in g a b o u t y o u . It ’s y o ur o p p ortun it y an d resp o nsib ilit y t o kn o w w ha t th e y ’re sa y in g .

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JAC K WELC H Management & Strategy ( Q uest ion an d answ er session m o d era t e d b y Maria B art iro m o) Q : H o w d o y o u se e th in gs e c o n o m ic a lly sp e a k in g? A : I t h ink w e ’re d o in g v ery w e ll -- re c ord st o ck m ark e t , 4 .6% un e m p lo y m e nt , cre a t e d 9 m illio n jo bs in last 4 y e ars, b u d g e t d e f ic it o f 1.2% of G D P is lo w est in th e d e v e lo p e d w orld . W e ’re in th e m idst o f a slo w d o w n , ha v e t o han d le th is h o usin g crisis an d d e b t o u t th ere . W e ’ll slo w d o w n a b it , c orp ora t e e arn in gs w ill surprise us o n th e u psid e . C ost c o is u p 12% th is m orn in g . So m uch an gst o u t th ere …y o u cre a t e tha t! Q : I d o n ’t d isa gre e tha t t h e m e d ia g e ts h yst eric a l a b o u t th in gs, 2 / 3 o f A m eric an p e o p le in a p o ll b y W SJ sa ys w e ’re in a re c essio n , b u t w h y are p e o p le so n erv o us? A : I t h ink th ere ’s so m an y m e d ia o u t le ts a ll lo o k in g for an an g le , t ha t t h e y c an p o un d h o m e th e slig h t est b it o f n e g a t iv e n e ws an d n o p osit iv e n e w s g e ts re p ort e d . H o w m an y p e o p le w o u ld kn o w tha t o ur b u d g e t d e f ic it is lo w est in th e d e v e lo p e d w orld , an d tha t 1.2% of G D P is ha lf o f w ha t it w as in th e last 5 0 y e ars? Q : W h y d o y o u th ink Pres. B ush d o esn ’t g e t cre d i t for t h is? A : I t h ink h e ’s a m arg ina l c o m m un ic a t or. Q : H o w th e n sh o u ld h e b e c o m m un ic a t in g th is g re a t st ory an d g e t a lit t le o f th e cre d it for th is g re a t t i m e? A : T o d e fe n d h i m a b it , Ira q has o v ert ak e n th e psy ch e o f t h e p u b lic . Ma y b e a f iresid e cha t . W e ha d th is S C HIP b ill, H e a lt hc are for C h ildre n , h is fo urth v e t o w as d o n e un d er a b lank e t , h e w as h id in g . N o w w ha t ha p p e ns w h e n y o u v e t o a b ill la b e le d H e a lt hc are for C h ildre n . If h e b e lie v e d in it , an d ha d v a lid re aso ns for a v e t o , h e has t o d e f in e h i mse lf. If y o u d o n ’t , so m e o n e e lse w ill. H is o p p o n e n ts ha v e b e e n sh o w in g sick ch ildre n an d th e n scro o g e n o t su p p ort in g th e m . If y o u b e lie v e in it , g o o n na t io na l T V an d e x p la in ra t io na le -- w h y it ’s g o o d for p e o p le . H e c o u ld ha v e d e f in e d h i mse lf. T h e p o in t for us h ere is t o t a k e it as a lesso n . If y o u ha v e a c o n tro v ersia l d e c isio n , y o u ’d b e t t er g e t o u t fro n t an d m ak e it c le ar t o e v ery c o nst it u e nc y , an d n o t h id e . Q : W h o d o y o u se e e xh ib i t in g th e b est an d stro n g est le a d ersh ip? A : I’d g o a t it an o th er w a y , w h ose p o lic ies d o I f a v or? I p erso na lly b e lie v e tha t h is t a x b ill d ro v e th is e c o n o m y . L o o k a t E ast ern E uro p e ,

w h y w o u ld F ranc e , G erm an y b e lo w erin g t a x es. W e ’re t a lk in g a b o u t ra isin g th e m w h e n o ur d e f ic it is lo w er than th e irs. I f a v or G iu lian i’s p o lic ies, H illary ’s fa v or inc o m e re d istrib u t io n . O f t h e p o lic ies, I lik e G iu lian i an d R o m n e y ’s p o lic ies. Q : W ha t a b o u t fa c t t ha t t o p 1% of c o un try m ak es w e a lt h cre a t io n , an d rich p e o p le p a y 15% an d rest o f c o un try is p a y in g 3 0%?. A : H o w m uch o f th e 5% d o th e y p a y? W o u ld y o u b e lie v e th e t o p 25% p a y 65% of th e t a x es. W e ha v e 4% re a l p erso na l e arn in gs g a in in the last se v era l q uart ers. F ast est it ’s b e e n in 2 0 y e ars. W e ’re in la t t er st a g es o f re c o v ery , p erso na l inc o m e o f w ork in g p e o p le has g o n e u p in re a l t e rms 4%. W e ’v e g o t w it h g lo b a li z a t io n , w e ’re ra isin g st an d ard o f liv in g e v ery w h ere . W h y d o y o u th ink C h in ese an d U .S. ha v e a c loser re la t io nsh ip? B e c ause o f t ra d e . T h e m ore in t erd e p e n d e n t w e are b e c ause o f t ra d e th e b e t t er th e chanc e o f p e a c e . E x a m p le o f Pak ist an . N u m b er o f jo bs w e ha v e in In d ia w as m ore i m p ort an t . In t erp la y o f c orp ora t io ns w it h In d ia w as m ore i m p ort an t t han th e st a t e d e p art m e n t cha t t er, In d ia c o u ld n ’t a fford t o sa y w e are a nuk e c o un try an d w e ’ll use it . W e are ra isin g liv in g st an d ards o f 2 0 m illio n C h in ese e v ery y e ar. Q : Sp e n d in g cu ts? T h is is th e w e ak sp o t? A : In th e last 12 m o nths, sp e n d in g has o n ly g o n e u p 2 .6%. W e ha v e p u t a lid o n th is issu e . N o w , t h e y ’ll sa y tha t ’s th e m a x w e c an d o . Q : B a ck t o C h ina , a m ark e t w h ere US c o m p an ies w an t t o g e t in , se e ms w e g e t t o a c ert a in p o in t an d th in gs shu t d o w n , d o w e n e e d t o b e t o u g h er t o C h ina? A : W e are e x p ort in g t o ns o f th in gs t o C h ina , w e are b u ild in g w it h c o m p e t it iv e C h in ese c o m p an ies. W h e n I re t ire d 6 y e ars a g o fro m G E , w e ha d just o v er a b illio n d o llars o f b usin ess th ere . G E w ill d o o v er $ 6 b illio n th is y e ar. In d ustria l c o m p an ies, c o m p ut er c o m p an ies are d o in g w e ll t h ere . I t h ink C h ina is in an e v o lv in g p ro c ess. T h is rh e t oric o f y e llin g a b o u t th e ir curre nc y w ill n o t a ff e c t t h e m . Q : W ha t is m ost i m p ort an t m ark e t p e o p le n e e d t o g e t in t o g lo b a lly sp e a k in g?

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A : D e p e n ds o n th e c o m p an y , p ro d uc ts … C h ina an d In d ia o ffer g re a t o p p ortun it ies, Russia is sc ary as h e ll. Q : Pu t in -- T o ld h e has t a k e n st ak es in c o m p an ies. A : A bso lu t e ly , h e is th e luck iest m an a liv e , o il w e n t t o $ 8 0 a b arre l, y e t m anufa c turin g is w h ere it w as. D istrib u t in g tha t w e a lt h t o lo ts o f p e o p le . P e o p le are f e e lin g b e t t er, Russia has g o t its m o jo b a ck . T h e y ha t e d th e d e c a d e w h e n th e y w ere n ’t re le v an t . T h e y w ere irre le v an t , an d n o w th e y are b a ck a t t h e t a b le b e a t in g th e ir ch ests an d fe e lin g g o o d a b o u t th e mse lv es. I w o u ld f in d it sc ary if I w ere n o t in th e o il re la t e d b usin ess t o m ak e a c a p it a l in v est m e n t th ere . It ’s a d ic e y p la c e . Q : D o y o u th ink Pu t in st e ps d o w n in 2 0 0 8? A : H e ’ll p u t h is frie n d in , h e ’ll b e Pri m e M in ist er, an d m ore i m p ort an t t han e v er. T h e p e o p le in th e stre e t are liv in g b e t t er than th e y ha d . T w e n t y or so y e ars a g o in R e d Sq uare , y ou ’d se e lin es w it h p e o p le try in g t o g e t fo o d or c lo th in g . T o d a y y o u se e D ior, C han e l, a ra ck o f incre d ib le st ores, an d p e o p le are w e arin g th ese b e au t ifu l o u t f its. R e a l m o n e y . O il h as d e liv ere d t o Russia an incre d ib le g if t . Q : N o t just Russia , t h is m o n e y is f lo w in g in t o th is c o un try , d o y o u w orry tha t so m e o f t h is m o n e y is f lo a t in g a w a y , t h e D u b a i C o m p an y , e t c . Is th is c o m p an y p ro t e c t io n ist? A : T h e D u b a i t h in g w as n o th in g . Most o f o ur sh ips g o thro u g h D u b a i p orts n o w , an d n o w w e sa y it ’s w ro n g t o ha v e th e m h ere . Q : Sh o u ld th e y b e a llo w e d t o o w n 2 0% o f N A S D A Q ? A : A bso lu t e ly . Q : W ha t are y o ur th o u g h ts o n in v est ors in v est in g th ere? A : T h e y ’v e g o t e n orm o us w e a lt h , t h e y b e t o n o ur e n tre pre n e ursh ip o n th is c o un try . I’d w orry m ore if t h e y p o ure d m o n e y in t o Ja p an or G erm an y . T h e y c o m e h ere b e c ause w e ’v e g o t p e o p le in th is ro o m w h o are e n tre pre n e urs, d riv in g n e w id e as, an d c o nc e p ts – th is is a p la c e tha t ’s g ro w in g . Q : P e o p le sa y US is losin g it ’s c o m p e t it iv e n ess, b usin ess is g o in g t o Shan g ha i, w ha t d o y o u th ink a b o u t it? A : B o th th in gs are tru e , b u t th is c o un try isn ’t losin g its c o m p e t it iv e n ess. L o o k a t b io t e ch an d o il, an d a erosp a c e in d ustries. W e ’re n o t losin g o ur e d g e . In Massa chuse t ts, w e lost o ur

c o m p e t it iv e n ess in th e le a th er in d ustry , it w e n t t o t h e C aro linas. B usin ess g o es t o w h ere it c an b rin g m ore v a lu e . I d o n ’t se e us losin g c o m p e t it iv e n ess. L ast fo ur y e ars w e ’v e g ro w n G D P 3%. $1.4 trillio n d o llars o f g ro w th , last fo ur y e ars is o n e ha lf t h e curre n t siz e o f t h e C h in ese e c o n o m y . Pu t in t o p ersp e c t iv e , w h e n w e gro w 3%, w e g ro w $ 4 0 0 b illio n . Q : Is Manufa c turin g n o m ore i m p ort an t in th is c o un try as it w as? A : It ’s an o v erst a t e d nu m b er an y w a y . W as 18% 2 0 y e ars a g o , an d n o w d o w n t o 12-13% . N a tura l e v o lu t io n . Q : D e tro it is un d er p ressure , w ha t are ans w ers for au t o m ak ers? A : B e t t er c ars. More inn o v a t io n , sh o u ld ha v e le d h y brid brig a d e . D ig it a l e q u ip m e nt f e ll a p art in Massa chuse t ts, an d th e y are n o w p art o f H P , an d th e y are g o n e fro m Massa chuse t ts. T h e y d id n ’t c o m p e t e e ff e c t iv e ly . C o m p e t it io n is a b o u t W IN N IN G , t h ere ’s a b o o k a b o u t tha t b y th e w a y! (It a ll g o es t o charit y .) Q : L e a d ersh ip … y o u are w e ll kn o w n for ch o osin g gre a t le a d ers, st ick in g w it h th e m an d fost erin g th e m , h o w d o y o u f in d le a d ers? A : It ’s a f e e lin g , t h e o ld 4 Es – e n erg y , a b ilit y t o e n erg iz e o th ers, e d g e , e x e cu t e -- a ll w ra p p e d u p in p assio n an d c arin g . T hre e o th er th in gs: au th e n t ic it y , c o m fort a b le in o w n sh o es, are th e y re a l. Se c o n d th in g : c an th e y se e aro un d c orn ers, t o u g h est t o un d erst an d . A n y o n e c an se e th e c o m p e t it o r, b u t w ha t a b o u t t o m orro w an d 5 y e ars fro m n o w . W ha t ’s c o m in g aro un d th e c orn er, n o t w ha t ’s stra ig h t . T h ird th in g : resilie nc e , e v ery o n e g e ts kn o ck e d o n th e ir ass e v ery n o w an d a g a in . Y o u ha v e t o b e a b le t o g e t b a ck o n th e h orse . N o c o m p an y or c are er is a stra ig h t lin e . A u th e n t ic it y , resilie nc e , an d a b ilit y t o se e w ha t ’s n o t o b v io us c o m in g aro un d th e c orn er. Q : H o w d o y o u le arn h o w t o an t ic ip a t e? A : I liv e try in g t o f ig ure tha t o u t . I t h ink it ’s a b orn curiosit y . If y o u ’re n o t curio us, y o u w o n ’t se e w ha t ’s aro un d th e c orn er. E x a m p le : Ra y K urz w e il -- If y o u c an last 1 0 y e ars t o g e t t o 2 0 17 , t h ere w ill b e an e x p o n e n t ia l chan g e , lik e th e in t ern e t , lif e e x p e c t anc y w ill b e tha t w a y . F or th ose a lo n g th e curv e , h o w d o y o u m ak e th e n e x t 1 0 y e ars. If y o u ’re 4 0 it ’s g o o d , b u t m y a g e it ’s n o t so h o t . Q : W ha t ’s th e n e x t st e p? A : H u bris. C o m p an ies g e t t ha t w a y t o o , t h is is o ur w a y -- t h e w a y w e d o it . A c o m p an y is

W orld B usin ess F oru m 2 0 0 7 Pa g e | 9

g re a t w h e n it is a le arn in g org an iz a t io n , insa t ia b le d esire t o g e t id e as. If y o u c o u ld suck o u t th e b est id e as o f t h e p e o p le n e x t t o y o u th e n y o u ’d b e sm art er. T ha t ’s h o w c o m p an ies ha v e t o th ink , g o d o w n an d se e th e o th er c o m p an y an d w ha t th e y are d o in g . E x a m p le : So u th w est A irlin es, m ost p e o p le m ak e th e t o ur b u t d o n ’t g e t t h e m a g ic sauc e . Y ou ha v e t o b e o p e n w h e n y o u g o t o a p la c e . P e o p le are p ro u d t o share th in gs w it h y o u . T h e a m a z in g th in g is th e p rid e p e o p le ha v e in sh o w in g y o u th e ir g o o d w orks. P e o p le g o t o w ork an d y o u c o m e o u t t o ask th e m q u est io ns, t h e y c o u ld n ’t b e m ore e x c it e d . So b e curio us, se arch for n e w id e as e v ery d a y . D o n ’t b e a fra id t o ask , an d g o f in d o u t h o w o th ers are d o in g it . Q : W ha t is th e n e x t b ig th in g , w ha t w o u ld y o u g o in t o b usin ess t o d a y? A : I’d g o in t o an are a I lo v e d . T re n d iest is th e m erg er o f info- t e chn o lo g y an d nan o-t e chn o lo g y , stu d y in g hu m an g e n o m e , t ra c e d ise ases, a b ilit y t o un d erst an d th e b o d y thro u g h info an d m e d ic in e c o m in g t o g e th er w ill b e incre d ib le . N o f ie ld in B io t e ch tha t isn ’t a w inn er. B u t I m ig h t n o t lo v e B io t e ch . D o w ha t turns y o ur crank . Y o u ’d b e b e t t er d o in g w ha t y o u lo v e than g o in g t o so m e p la c e tha t has a h ig h gro w th ra t e . (st arts q u est io ns fro m th e au d ie nc e)

Q : I d if f e re n t ia t e m y t e a m un d er au t o m o t iv e b usin ess, b ase d o n th e crit e ria o f jo b d escrip t io ns, b u t h o w o f t e n sh o u ld y o u a c t o n th e 1 0%, I g iv e a w e e k ly u p d a t e , b u t h o w o f t e n sh o u ld I a c t o n th e lo w er 1 0%, w h e n d o I p u ll t h e t rig g er, 2 q uart ers in a ro w , o nc e a m o n th , e v ery y e ar? A : D if f e re n t ia t io n is id e n t if y in g th e t o p p e o p le , t h ose w h o are th e m id d le , an d th e n d e a lin g w ith th e b o t t o m w e a k p erform ers. N o ans w er t o rig h t t i m e . Y o u ’v e t o ld th e m w h ere th e y are , h o w t o i m pro v e , w ha t t o e x p e c t . I a p pra ise m y p e o p le fo ur t i m es a y e ar -- e v ery q uart er -- t e ll t h e m if I lik e w ha t th e y are d o in g an d w ha t t h e y n e e d t o i m pro v e . If in 12-18 m o nths w e c a m e t o an a gre e m e n t tha t it ’s t i m e t o m o v e o n , t h e y ’d ha v e a so f t lan d in g an d sh o u ld g o so m e w h ere e lse . W it h Sa les, y o u lo o k a t t h e nu m b ers w e e k ly? Q : If y o u ’re in th e b o t t o m 1 0% an d i m pro v in g , y o u are sa fe . A : B u t 2 m o n ths, y o u m ig h t b e c o m e N e u tro n Ja ck . T w o m o nths se e ms a lit t le hast y .

Q : It ’s th e m ana g e m e nt tha t ’s n o t e asy t o re p la c e . A : Inform a l q uart erly , h an d w rit t e n a l w a ys. Y o u an d th e p erso n w it h 15 m inu t e t a lks, 4 t i m es a y e ar o n tha t re v ie w . Y o ur a c t io ns o n c o m p e nsa t io n w ill t e ll a lo t . If n o resu lts, y o u w ill re a ch a gre e m e n t tha t it ’s t i m e t o m o v e o n . My b ig g est g rip e a b o u t b usin ess is n o b o d y sh o u ld b e a m ana g er an d ha v e p e o p le tha t w ork for t h e m n o t kn o w in g w h ere th e y st an d . N o n e o f y o u sh o u ld w ork for a series o f b osses tha t ha v e n ’t t o ld y o u w h ere y o u st an d . Q : Se c o n d- y e ar M B A stu d e n t , y o u sp o k e a b o u t o il an d g lo b a l i m p a c t an d Mr. G re e nsp an sp o k e a b o u t … i m p a c t o n g lo b a l e c o n o m y , w ill it a ff e c t o ur d o m est ic e c o n o m y in th e lo n g run? A : U .S is n o t fa llin g b e h in d I b e lie v e . T h e e n erg y la b a t MIT has as m an y e n tre pre n e uria l p ro je c ts in th is are a , as an y , in a lt e rna t iv e e n erg y so urc es. I’m sure C a lT e ch is d o in g th e sa m e th in g . E n orm o us v e n ture c a p it a l g o in g in t o th is f ie ld . Q u est io n is w ha t d o I t h ink a b o u t g lo b a l w arm in g? Q : Im p a c t an y t e ch b o o m w ill h a v e o n th e g lo b a l e c o n o m y? A : W ill b e slo w , b u t h o p e fu lly w ill g e t us e n erg y in d e p e n d e n t . I’d lik e t o se e nuc le ar p o w er g e t t er a b e t t er shak e in th is d e b a t e . W h y sh o u ld th e F re nch ha v e 7 0% an d Ja p an ese ha v e 55% nuc le ar p o w er. W e o u g h t t o b e a b le t o b e sm art e n o u g h an d ha v e sa fe g uards, w h ile w e d e v e lo p th ese a lt e rna t iv e so p h ist ic a t e d t e chn o lo g ies. A ll t h ese th in gs w ill c o m e a lo n g , b u t nuc le ar is th e fast est answ er. I w ish I d id n ’t ha v e a G E la b e l o n m e , I’d t a lk a b o u t h o w th is c o un try w ill f a ll b e h in d . I t h ink w e w o u ld b e b e t t er o ff t o t a k e nuc le ar fro m 2 0% t o 4 5-5 0%. Q : R e c e n t ly b e c o m e 8 th g ra d e m a th t e a ch in ro u g h sch o o l in Ph ila d e lp h ia , t h e ch ildre n are c o nst an t ly b e in g cha lle n g e d t o d o w ha t w e w o u ld n ’t t h ink a b o u t d o in g in m a th , b u t I w an t t o in t e gra t e b usin ess p ra c t ic es in m y c lassro o m , w ha t are y o ur th o u g h ts o n b usin ess an d e d uc a t io n an d th e re la t io nsh ip? A : I t hank y o u for w ha t y o u are d o in g in tha t are a , a g re a t c o n trib u t io n . Presu m p tu o us for m e t o t e ll y o u . W h ere y o u ’re p la y in g , m a y b e th ere are m o d e ls fro m Jun ior A ch ie v e m e n t t o b rin g in t o th e c lassro o m -- it ’s t a k e n k ids an d bro u g h t th e m b usin ess e d uc a t io n . So I’d t a lk t o th e Jun ior A ch ie v e m e n t p e o p le .

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Q : I c o m e fro m R o m an ia , w ha t d o y o u a d v ise m ana g ers t o d o w h o a c t in fast chan g in g e n v iro n m e n t , R o m an ia is g ro w in g 6-7% a y e ar, m an y b usin esses g ro w in g 3 0 -4 0% a y e ar, an d m an y p e o p le are h e a d hun t e d a w a y for jo bs A : Y o ur jo b is t o b e c o m e a t a le n t m a g n e t , p ro v id e m ost e x c it in g p la c e g o in g , a t le ast e q u iv a le n t w a g es or b e t t er, d e le g a t e m ore , m ak e th e e n v iro n m e nt th e p la c e t o b e . My e x p erie nc e in H un g ary an d C z e ch oslo v ak ia , y o u ha v e t o d e le g a t e an d trust m ore , le t p e o p le g ro w as w e ll, y o u ’ll h a v e a b e t t er chanc e t o k e e p p e o p le . L e t t h e m gro w an d c e le bra t e e v ery v ic t ory . In a p la c e lik e y o urs, g ro w in g lik e th is, t h ere o u g h t t o b e k e gs o f b e er, a t m osp h ere w h ere y o u c an hard ly w a it t o g e t t h ere . W e ha d m ore p ro b le ms in H un g ary w it h th e b osses, sit t in g o n p e o p le . T h e n as o th er c o m p an ies c a m e t o th e c o un try w e ha d t o sha p e u p . C re a t e a t m osp h ere o f e x c it e m e n t , t h e sa m e th in gs M icroso f t has fo u g h t w it h o v er th e y e ars, n o w G o o g le is g o in g thro u g h , cre a t e a p lan , y o ur i m a g ina t io n t o m ak e y o ur p la c e th e e x c it in g p la c e in R o m an ia . Q : I a m curre n t ly D ire c t or o f O p era t io ns o f a sm a ll m anufa c turer o f a larg er c o n g lo m era t e . W ha t a d v ic e w o u ld y o u p ro v id e t o o ur d iv isio n w h ile w e are q u ick ly e x p an d in g in t erna t io na lly ; t ry in g t o b a lanc e stru g g le for le an org an i z a t io n an d le v era g e reso urc es. W ha t w o u ld y o u d o t o m ana g e u p th e org an i z a t io an l chart? A : T o u g h est jo b y o u ha v e is n o t t h e p erso n runn in g th e $1 0 0 MM o p era t io n , b u t st ar t in g a t t h e $1 0 0 , 0 0 0 o p era t io n in th e n e w c o un try . C an ’t le t th e H R p e o p le or an y o n e e lse t o d e f in e th e q ua lit y or le v e l o f t h e jo b , sc o p e o f jo b , b y nu m b er o f sa les an d inc o m e y o u ha v e . Pu t t h e b est an d b rig h t est in t o th e n e w v e n ture in t o th e n e w lan d . C o m p an ies o f t e n m ak e th is m ist ak e , an d p u t p e o p le w h o are 2 y e ars fro m re t ire m e n t in . Y o u w an t th e h o t t est y o un g g u y y o u ’v e g o t . W h e n w e m o v e d t o A sia , w e t o o k th e h o t t est y o un g g u y in H o n g K o n g an d th e n in B e ijin g . H e w as th e P ie d P ip er, n o w h e ’s runn in g B o e in g . Y o ur jo b is t o n o t just lo o k in y o ur o p era t io n , t ha t c o n g lo m era t e has p e o p le y o u ’v e m e t , se e n , hun g aro un d w it h – g o a f t er t h e m an d m a k e th e c ase w h y th e y ha v e t o g o . Maria : D o n ’t y o u w orry y o u ’ll lose tha t p erso n ’s stre n g th w h ere h e is. O k a y , t h e n d o n ’t e x p an d !

Q : A s a c o lle g e se n ior g e t t in g re a d y t o g ra d ua t e , w ha t are th e o bst a c les y o u se e fa c in g m y g e n era t io n an d h o w d o w e o v erc o m e th ese? A : W e th ink y o ur g e n era t io n is th e m ost e x c it in g t o d a t e . W e t o o k 35 b usin ess sch o o ls an d m e t w it h e x c it in g e n tre pre n e urs, I d o n ’t f in d th is g ro u p e n t it le d , I f in d th e m e n erg iz e d , n ose a g a inst th e g lass, w an t in g t o w in , m ore e n tre pre n euria l, n o t w an t in g t o slo t in t o b ig c o m p an y a t m osp h ere . Y o u ha v e an e x p an d in g e c o n o m y , lo w un e m p lo y m e n t , jo bs are p le n t ifu l, y o u ha v e t o g o th ere an d just d e liv er. W h e n y o u g o t o y o ur n e x t jo b , an d y o ur b oss sa ys g e t t h ese 2 th in gs in ord er, y o u f in d 2 m ore an d m ak e it 4 . Y o ur jo b is t o t e a ch th e m th in gs th e y d o n ’t kn o w . A l w a ys g iv e y o ur b oss m ore than th e y ask for. If y o ur b oss asks y o u a q u est io n , b y d e f in it io n , t h e y kn o w th e ans w er, t h e y just w an t y o u t o c o nf irm it . G o b a ck a t t h e m w it h a b ro a d er insig h t , b ig g er insig h t . Y o u ’ll stun th e m . O v er- d e liv er is th e b ig g est t h in g y o u p u t o n y o ur fore h e a d an d g o d o it , g o o d luck . Q : S t a t e m e n t y o u m a d e e arlier a b o u t h o w i m p ort an t y o u m a d e a b o u t e x e cu t iv es t o b e curio us an d n o t in v e n t it h ere , h o w w o u ld y o u e v a lua t e o ur curre n t e x e cu t iv e b ranch t o d a t e , h o w d o y o u e v a lua t e o ur curre n t a d m in istra t io n in o p e nn ess an d curiosit y an d w h o d o y o u b e lie v e e xh ib it t h is? A : I v o t e d for th is a d m in istra t io n t w ic e an d I’d g iv e th e m lo w m arks o n curiosit y , o p e n t o n e w i d e as an d try in g n e w th in gs. O n n e w c an d id a t es, I d o n ’t kn o w e n o u g h , b u t I w ill b y th e t i m e I v o t e . Y o u ’v e g o t t o ha v e so m e o n e o p e n t o a chan g in g w orld f ille d w it h g lo b a l d y na m ics, a ll o f us ha v e t o p u t tha t in t o o ur c a p w h e n w e e v a lua t e th e c an d id a t es. I d o n ’t ha v e th e answ er o f t h e n e w o n es. Q : I’m a se c o n d y e ar M B A a t B a bso n in M A . I h a v e a fa m ily c o m p an y I p lan t o t a k e o v er a f t er I g ra d ua t e in m anufa c turin g . Y o u m e n t io n e d C h ina , d o y o u ha v e an y insig h t o n chan g es tha t m ig h t ha v e i m p a c t o n sm a ller c o m p an ies w h o o u tso urc e t o C h ina …? A : Luck y y o u t o b e t a k in g o v er th e fa m ily c o m p an y . O u tso urc in g has t o b e c o m e p art o f y o ur su p p ly cha in . If it ’s just g e t t in g so m e th in g ch e a p w h ere y o u d o n ’t ha v e q ua lit y c o n tro l it isn ’t w orth d o in g . Y o ur b est b e t w ou ld b e t o g e t n e ar b ig c o m p an ies, f in d o u t w h o th e y use in C h ina in su p p liers, w h o are v a lua b le tha t ha v e ch e ck e d o u t , w h ere th e y ha v e th e ir q ua lit y p e o p le lo c a t e d , an d se e if y o u c an p ig g y b a ck o ff t h e ir su p p liers. F or a sm a ll

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c o m p an y t o g o o v er th ere y o u are runn in g a b ig risk w it h o u t a kn o w le d g e b ase . T a lk t o th e G E ’s, t h e B o e in gs, A p p les, D e lls w h o d o it e v ery d a y o v er th ere an d f ig ure o u t w ha t th e ir p ro d uc ts are th ere an d se e h o w it w o u ld f it w it h y o ur p ro d uc ts. Maria : W ha t is th e m ost i m p ort an t lan g ua g e t o stu d y in sch o o l? A : C h in ese is a g re a t lan g ua g e . I t h ink it ’s an a d v an t a g e , y o u ha v e t o b e lie v e tha t C h ina an d US an d In d ia are g o in g t o b e th e g a m e . A lso an y L a t in A m eric an , Sp an ish an d Man d arin are th e t w o . Q : H a v e y o u e v er t h o u g h t o f a c ou p le o f t erms in O v a l O ff ic e? A : I’d b e th e w orst p o lit ic ian . Q : Y o u m e n t io n e d au th e n t ic it y , g re a t le a d er, t o p p riorit y , w it h le a d ersh ip , c an y o u t a lk a b o u t a m o m e nt in y o ur lif e w h ere y o u fe lt a g re a t er c a llin g , t h e t ransform a t io n fro m I t o W e tha t y o u ha d a g re a t er p urp ose? A : I w as luck y t o w ork for a c o m p an y tha t ha d lo ts o f d if f e re n t d iv isio ns. E arly o n I w as p ro m o t e d t o a jo b tha t w as o v er m y sc o p e . I re a liz e d it w as a b o u t th e t e a m , t h e b est p e o p le y o u c an a bso lu t e ly t o uch . F in d in g th e b est p e o p le an d le t t in g th e m f lo urish an d g e t t in g a k ick o u t o f t h e ir suc c ess. G re a t est t h in g y o u ’ll g e t o u t o f le a d ersh ip is se e in g o th ers f lo urish . A lo t o f y o un g M B A s o f t e n fa il o n th is p o in t . W h e n th e y g e t p ro m o t e d , t h e y d o n ’t re a li z e it ’s n o t a b o u t th e m an y m ore , it ’s a b o u t th e ir p e o p le . T h e y fa il t o un d erst an d tha t t h e y w ill g e t p ro m o t e d fro m th e re f le c t e d g lory o f t h e ir p e o p le . P e o p le ha v e t o un d erst an d tha t g ro w in g p e o p le is w ha t w ill m ak e y o u g re a t . H a v in g th e m re a ch d re a ms th e y n e v er th o u g h t p ossib le . I un d erst o o d tha t in m y e arly 3 0 ’s. Maria : W ha t if y o u ha v e so m e o n e o n th e t e a m w h o is w ork in g for th e mse lv es an d n o t th e t e a m? A : T ha t ’s w h y y o u ha v e th e 4 a p pra isa ls a y e ar. If it d o esn ’t chan g e th e n e x t t i m e , or th e n e x t t i m e , y o u ’ll h a v e t o g ro w . Mak e a p pra isa ls re a l, t e ll t h e m w h ere th e y st an d , h o w y o u fe e l a b o u t th e m an d w ha t th e y ha v e t o d o t o w in . Q : I w an t t o ask y o u a b o u t t rust in g y o ur g u t an d y o ur inst inc ts for b e in g a g o o d le a d er. A : G u t is n o th in g m ore than p a t t ern re c o g n it io n , y o u ’v e se e n it b e fore , e x p erie nc e d it in so m e form or an o th er. A c o un t er-in tu i t iv e answ er -- g u t t o m e is e x tre m e ly v a lua b le o n d e a ls, d e c isio ns t o in v est . O n p e o p le , I t h ink

y o ur g u t is p re t t y b a d b e c ause y o u b ase it o n p erso na lit y , sm e ll, f e e l. I t h ink y o u w an t a lo t o f o p in io ns an d in p u t for t ha t . G e t t in g p e o p le in t o a jo b is v ery v ery hard , so y o ur jo b is t o g e t as m uch in p u t fro m th ose aro un d y o u , w h o ’v e w ork e d for th e m , sa t b esid e th e m . G u t is g re a t o n d e a ls an d le arn in g m ore a b o u t p e o p le fro m se v era l in t erv ie w ers is b e t t er o n p e o p le . Q : T w o th in gs, o n e is c e le bra t io n an d o n e is e d uc a t io n . T h e y b o th ha v e sa m e e n d in g an d th e y b o th m e an a c t u p . A c t iv e , c e le bra t in g , t h e p ro c ess o f e d uc a t io n . E d uc a t io n is th e m ost b asic b usin ess in an y c o un try , it ’s us an d a ll aro un d us. W e c an ’t c o n t inu e t o se p ara t e o u t b usin ess c o m m un it y an d e d uc a t io n c o m m un it y . A : W h e n I re t ire d fro m G E w e ha d 4 5 , 0 0 0 m e n t ors aro un d th e w orld m e n t orin g k ids. W e chan g e d th e e d uc a t io n syst e m in N e w Y ork , an d B an g a lore , In d ia . B usin ess has t o w in so th e y c an m e n t or an d g iv e b a ck t o th e c o m m un it y . C le ar re c o g n it io n tha t t h e b usin ess o f b usin ess is e d uc a t io n as w e ll as b usin ess. A ll sch o o ls in N e w Y ork are in v o lv e d w it h b usin ess le a d ers in N e w Y ork . B usin ess is in t ert w in e d w it h e d u c a t io n , b u t a g a in w e b e a t o n o ur e d uc a t io n syst e m . In re a lt y , t h e y d o a p re t t y g o o d jo b . W it n ess th e fa c t t ha t e v ery g re a t sch o o l c o u ld f ill t h e c lass th e y f ill t h e fresh m an c lass w it h 5 o th er c lasses. T h e c o o p era t io n o f b usin ess h e lp in g t o m ak e it w ork . Q : C o m m e nts o n d iv ersit y o f inc lusio n in th e w ork p la c e? A : B usin esses w an t t o re f le c t w ha t its cust o m er b ase lo o ks lik e . Pra c t ic a l d riv e b y b usin esses t o g e t p e o p le o f d if f e re n t g e n d er an d c o lor in th e p la c e , w ill m ak e th e m m ore suc c essfu l g o in g for w ard . Q : I c o m e fro m far a w a y , 2 4 h o urs f lig h t t o g e t h ere , fro m sm a ll p la c e in In d ian O c e an : Maurit ius. H ig h t o urist resort , g lo b a li z a t io n is ha v in g in d ic a t iv e e ff e c t , as an islan d e c o n o m y h o w sh o u ld w e … A : My e x p erie nc e w it h Maurit ius is t h a t t h e y c a p ture d its g re a t est asse t – its b e au t y an d resort c a p a b ilit y . Ma k e it a d est ina t io n for m ore than a f e w rich p e o p le , a p la c e w h ere a D isn e y w orld t y p e th in g -- w h ere p e o p le w an t t o g e t t h ere an d se e it . Y o ur b ig g est asse t is y o ur b e au t y . So y o u ’re t a lk in g a b o u t g lo b a li z a t io n , y o u ha v e re a l asse ts, y o u ’v e b e e n g iv e n th is b e au t ifu l lan d , an d y o u ha v e t o ask y o urse lf if y o u ’v e c a p ture d its esse nc e in

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m ak in g it a d est ina t io n for m an y p e o p le an d n o t a f e w w it h p riv a t e je ts. Mak e it t o b e an a bso lu t e m ust b e th ere p la c e . I ha v e n o t se e n a ra p id esc a la t io n o f t ha t in 15 y e ars. Maria : Use w ha t y o u ha v e is th e p re m ise . Q : T h o u g h ts o n re la t io nsh ip b e t w e e n b usin ess le a d ers an d n o t for p ro f its, an d b a ck . A : W e w ro t e a c o lu m n an d th e n g o t ha m m ere d o n it . W e ha v e frie n ds w h o w ork in n o n-pro f its w h o w an t e d t o c o m e b a ck t o b usin ess an d ha d a t o u g h t i m e , an d w e lu m p e d g o v ern m e n t an d n o n-pro f its in c are lessly . W e d id n ’t m ak e th e d ist inc t io n c le ar e n o u g h . B u t I st ill t h ink b usin esses are w ary o f t a k in g p e o p le b a ck o th er t han p ro fessio na ls w h o ha v e b e e n in th e g o v ern m e n t tha t c an h e lp th e m . D ru g c o m p an ies w ill t a k e b a ck re g u la t ors, F C C la w y ers w ill b e w e lc o m e d b a ck . A s far as a

m id d le le v e l jo b it ’s m ore d if f icu lt . T h e in t era c t io n o f b usin ess w it h crit ic a l fun d d riv in g , S lo an K e t t erin g h ere in N e w Y ork for e x a m p le w orks w e ll. P e o p le lo v e t o g iv e b a ck an d b usin ess o f t e n d riv es it . Q : W ha t is th e resp o nsib ilit y o f n o t-for-p ro f it b a ck t o b usin ess? A : T o d e liv er q ua lit y c are , t ha t t h e d o llars th e y are ra isin g are b e in g w ise ly sp e n t . G iv e th e c o m m un it y a t ransp are n t v ie w o f w h ere th e m o n e y w e n t an d w ha t it has d e liv ere d . Q : B usin ess o f B ase b a ll, h o w resp o nsib le is Jo e T orre for th e N Y Y ank e es? A : Jo e is w it h o u t p re c e d e n t th e b est m ana g er in b ase b a ll t o d a y . C lass a c t in e v ery w a y , an d h is b oss has b e e n a t ru e h orse ’s ass in thre a t e n in g h i m p u b lic ly a f t er 12 y e ars o f g re a t p erform anc e .

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PATRICIA A. WOERTZ Leading O rganizational T ransformation D esp it e b e in g “ O utsid e th e c o m p an y , o u tsid e th e in d ustry , o u tsid e th e fa m ily , o u tsid e th e g e n d er e x p e c t a t io ns,” as sh e t o ld F ortun e Ma g a z in e in O c t o b er 2 0 0 6 , Pa tric ia W o ert z , C E O o f a grib usin ess g ian t A D M , is an d w ill re m a in v ery m uch th e c e n t er o f t h e b usin ess w orld ’s a t t e n t io n . T h e fo ur “o u tsid es” are t ru e : Sh e is w o m an in an a lp ha- m a le ro le (sh e sa ys it ’s n e v er b e e n an issu e a g a inst h er) . N o , sh e is n o t a m e m b er o f th e fa m ily tha t has run th e c o m p an y sinc e 197 0 (n e it h er is sh e a m e m b er o f e it h er o f t h e fa m ilies tha t st art e d th e c o m p an y 1 0 5 y e ars a g o) . N o , sh e w as n o t a m e m b er o f t h e fa m o usly insu lar c o m p an y p rior t o b e na m e d its C E O . A n d y es, sh e w as han d-p ick e d fro m a c o m p le t e ly d if f e re n t in d ustry ( p rior t o th is p ost , sh e w as E V P a t C h e vro n C orp ora t io n) . T h e e le p han t in th e ro o m is tha t A D M n e e d e d t o t ransform i tse lf, n e e d e d t o b e c o m e a p la y er in th e a lt e rna t iv e e n erg ies m ark e ts. A stro n g h o ld in th e a grib usin ess se c t ors, A D M n e e d e d t o d iv ersif y t o c o m p e t e an d t o e x t e n d its stro n g f inanc ia l m o m e ntu m t o t o m orro w ’s o p p ortun it ies. B u t b e fore sh e st ar ts t a lk in g a b o u t h er e x p erie nc es a t A D M so far, sh e t e lls f irst a b o u t h er st ory o f surv iv a l, o n e o f h er t w o th e m es o f le a d in g chan g e . Surv iv e It w as h er form er jo b , a t C h e vro n . T h e c o m p an y ha d just e x p erie nc e d i ts w orst y e ar in th e c o m p an y ’s h ist ory . 2 0 , 0 0 0 e m p lo y e es w ere a b o u t t o h e ar so m e d ish e art e n in g n e w s, b u t W o ert z o b v io usly w an t e d th e m t o b e a b le t o k e e p g o in g , t o k e e p th e ir h e a ds h ig h . So inst e a d o f just g iv in g o n ly th e b a d , d isa p p o in t in g n e w , sh e fo cuse d o n th e t an g ib les— w ha t th e e m p lo y e es c o u ld d o t o i m pro v e th e sit ua t io n , urg in g th e m t o re p e a t t h ose t in y th in gs tha t t a llie d t o g e th er a l w a ys m ak e a surprisin g ly p osit iv e , ra th er b ig i m p a c t . Sh e ask e d th e m t o fo cus o n w ha t th e y c o u ld c o n tro l— w ork in g sa fer, o p era t in g re lia b ly , an d d e liv erin g th e p ro m ise d f inanc ia l resu lts. If t h e y c o n t inu e d d o in g th ese th in gs, t h e rest w o u ld fo llo w . Sh e sp o k e p erso na lly w it h th e 25 0 -stro n g le a d ersh ip t e a m ; it w as i m p ort an t t ha t t h e e m p lo y e es c o u ld se nse th e ir c o nf id e nc e an d c o m m it m e n t t o a ch ie v in g th e g o a ls. A f t er f iv e m o nths, “ t h e chan g es w ere syst e m ic .” A f t er t h ese f iv e v ery d if f icu lt , v ery unc ert a in m o nths, t h ere w as a n e w b usin ess

m o d e l, a n e w le a d ersh ip t e a m ( th e in it ia l t e a m o f w h ich W o ert z ha d t o le t g o b y 1, 0 0 0 p e o p le ) , a n e w org an i z a t io na l struc ture an d g o a ls. D esp it e t h e d if f icu lt ies, t h e ir c o n v ic t io n ha d p a id o ff. W o ert z ha d le d C h e vro n ’s transform a t io n t o m ore than just an o il c o m p an y , b u t o n ly , sh e ’s q u ick t o p o in t o u t , b e c ause th e le a d ersh ip t e a m w as p assio na t e a b o u t th e p ossib ilit ies. In th e n e x t y e ar’s a d dress t o e m p lo y e es, W o ert z w as a b le t o ann o unc e th e m th e c o m p an y ha d m ore than a ch ie v e d its g o a ls—it d id so a fu ll y e ar ah e a d o f sch e d u le . It w as th e n tha t W o ert z ask e d , w ha t ’s n e x t? A D M answ ere d . T hriv e H er curre n t cha lle n g e a t A D M is o n e tha t se e ms incre d ib ly d if f icu lt , e x c e p t tha t it ’s W o ert z w h o is in charg e . It ’s W o ert z w h o is t o le a d th is fo o d g ian t t o its a lt e rna t iv e e n erg ies fu ture . Sh e lists th e in t erre la t e d o p p ortun it ies as A D M has id e n t if ie d : m ore fo o d ; e n erg y ; e n erg y se curit y ; an d e n v iro n m e n t a l i m pro v e m e nt . W o ert z is charg e d w it h d e t erm in in g A D M ’s ro le in th ese fo ur w orld tre n ds—an d a lso A D M ’s o p p ortun it y , w h ere it c an thriv e , W o ert z ’s se c o n d th e m e o f le a d in g chan g e . In sh ort , A D M pre d ic ts tha t b y m id-c e n tury , t h e g lo b a l p o p u la t io n w ill h a v e g ro w n b y 5 0 p erc e n t , b u t t ha t t h e d e m an d for fo o d w ill d o u b le . E n erg y is o f c o urse d riv e n b y d e m an d an d g e o gra p h ic an d p o lit ic a l li m it a t io ns o n tra d it io na l e n erg y so urc es w ill re q u ire a n e w c a ch e o f so urc es. E n erg y se curit y b e c o m es an issu e as th e d esire for sust a ina b le e n erg y su p p lies incre ases. A n d it g o es w it h o u t sa y in g tha t e c o-se nsib ilit ies ha v e b e c o m e re f in e d—c o nsu m ers an d A D M-sp e c if ic cust o m ers m ore an d m ore d esire g re e n p ro d uc ts an d g re e n so lu t io ns, p erio d . W o ert z has p osit io n e d A D M a t t h e b est p ossib le p osit io n t o c a p ture th ese g lo b a l n e e ds an d c a p it a li z e o n th e m . It isn ’t just “ b usin ess,” h o w e v er. W o ert z se es th e o p p ortun it y as h o list ic . A D M is p osit io n in g itse lf as th e c o m p an y tha t c an an d w ill sust a in th e h o list ic n e e ds o f t h e e v ery d a y c o nsu m ers—fo o d , h e a t , lig h t , m o b ilit y , sa fe t y , a h e a lt h y e n v iro n m e n t .

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W it h W o ert z ’s sk ill an d tra ck re c ord in brin g in g w orlds t o g e th er, t h is d o es n o t se e m un lik e ly . Sh e is c o m m it t e d t o m ak in g sure A D M m ore than a ch ie v es th ese g o a ls. Sh e ’s c o m m it t e d t o A D M le a d in g th e m . E a ch c o m p an y m ust ch o ose t o le a d th e ir fu ture , n o t just o p era t e in it ( e it h er suc c essfu lly or unsuc c essfu lly ) . Sh e stresses: A c o m p an y c an re c o g n i z e w ha t n e e ds t o b e d o n e or w ha t g o a ls th e y w an t t o a ch ie v e , b u t t h is is n o t th e sa m e as le a d in g t o w ard th ose g o a ls. W o ert z se es th e n e x t g e n era t io n o f le a d ers d e e p ly c o m m it t e d t o th e p o w er o f b usin ess. Sh e b e lie v es p e o p le an d c a p it a l in lo ckst e p c an m ak e p ro fo un d d if f e re nc es in th e w orld . Sh e is e arn est b u t it d o esn ’t a larm th e e v id e nc e ; h er ch o ps are le g e n d ary . Sh e ’s e arn est b e c ause sh e n o t o n ly is sh e is in c o m p le t e c o m m an d , b u t sh e has a l w a ys e n v isio n e d h erse lf as such an d se e ms so na tura lly q ua lif ie d t o le a d a c o m p an y t o a fu ture v ery d if f e re n t t han th e p ast it has kn o w n . H o w w ill W o ert z le a d th is t ransform a t io n? F irst ly , i m p ort an t ly , b y fo cusin g o n th e p e o p le , m ak in g sure th e y kn o w th e y m a t t er an d f ig ure sig n if ic an t ly in th e c o m p an y ’s fu ture , W o ert z

sa ys th e c o m p an y is “le t t in g p e o p le kn o w n o th in g is m ore i m p ort an t t han a c o lle a g u e g o in g h o m e in th e sa m e c o n d it io n as th e y c a m e .” Mak in g sure th e ir v isio n an d th e v isio n o f t h e c o m p an y m ore an d m ore c o m es in t o fo cus an d a lig ns. Sh e ’s e m p hasi z in g le arn in g an d d e v e lo p m e nt for e v ery o n e , n o m a t t er t h e ir se n iorit y or rank , t o un d ersc ore th e v a lu e o f a t e a m . “It ’s g o in g t o b e hard , t a k es g u ts, c o n v ic t io n , an d sle e p less n ig h ts….b u t th e jo urn e y t o a b e t t er fu ture w ill b e w orth it if y o u le a d it w it h p assio n an d c are for th e p e o p le .” W h o c o u ld sa y it b e t t er? W o ert z su ms u p h er a p pro a ch t o le a d ersh ip w it h fo ur w ords: B e , K n o w , D o , C are . “’B e ’ is a b o u t b e in g y o urse lf, le a d in g fro m y o ur v a lu es. T h ere is n o su bst it u t e for le a d in g fro m y o ur c ore v a lu es. ‘K n o w ’ is t o kn o w y o ur p e o p le an d w ha t m o t iv a t es th e m . K n o w y o ur jo b , y o ur c o m p e t it io n . ‘D o ’ is b e b iase d t o w ards a c t io n . D o i t—t a k e th ose chanc es an d risks. ‘ C are ’ a b o u t p e o p le . W h e n p e o p le kn o w y o u tru ly c are a b o u t th e m , a ll chan g e an d suc c ess c o m es.” It w o u ld se e m tha t W o ert z ’s p e o p le kn o w tha t sh e c ares.

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FRED SMIT H Innovation & Access If w e w ere a llo w e d b u t o n e st a t e m e n t a b o u t F e d E x ’s i m p a c t o n o ur liv es, it m ig h t suff ic e t o sa y th e c o m p an y has b e e n v erb if ie d . Its p art ic ip a t io n in o ur e v ery d a y , its d o in g w ha t is esse n t ia l in t o d a y ’s c o nn e c t e d w orld—is a v erb . T h e c o m p an y has b e c o m e so suc c essfu l as t o su p p lan t t h e d escrip t io n o f w ha t it d o es. If y o u n e e d t o se n d so m e th in g or an y th in g urg e n t ly or c asua lly , y o u d o n ’t se n d it . Y o u F e d E x it . W h e th er y o u use F e d E x t o F e d E x th is so m e th in g or an y th in g—t h o u g h y o u lik e ly d o—is a l m ost b esid e th e p o in t . T h e b ran d is th e m e ans. T h e f irst o v ern ig h t e x press d e liv ery c o m p an y in th e w orld , an d th e larg est in th e U n it e d St a t es, F e d E x w as fo un d e d b y F re d S m it h in 1971. C o nc e iv e d o f d urin g h is t i m e in th e m ilit ary—S m it h w o u ld c are fu lly o bserv e th e p ro cure m e n t an d d e liv ery p ro c e d ures o f su p p lies— F e d E x b e g an its o p era t io n w it h a f le e t o f 14 je ts d e liv erin g t o 25 c it ies. N o w , o f c o urse , y o u c an sh ip t o— F e d E x t o , t ha t is—an y w h ere in th e w orld (o v ern ig h t it if y o u p le ase ) . B u t S m it h d id n ’t use h is t i m e in fro n t o f t h e W orld B usin ess F oru m au d ie nc e t o t o u t h is suc c esses or h is c o m p an y ’s. H e sp o k e , inst e a d , a b o u t th e g re a t est luxury in th e w orld an d F e d E x ’s d e m o nstra t e d c o m m it m e n t t o p ro v id in g it for as m an y p e o p le as p ossib le . It is th e luxury o f A c c ess. A c c ess c an m e an m an y th in gs an d is a b ro a d , c lu msy th in g t o m e asure . F it t in g ly , t h e c o m p an y tha t c an a c c ess v ir tua lly an y p o in t o n th e g lo b e is o n e b est p o ise d t o p ro v id e i t . T o F e d E x , A c c ess m e ans a c o n t inu o us c y c le o f e x p ansio n—m ore t o o ls, m ore p rosp erit y , m ore ch o ic es. T h e In t ern e t is th e m e ans. D ist anc es, p e o p le , id e as far an d n e ar are b rid g e d an d b ro u g h t t o g e th er b y a c c ess t o th e In t ern e t . “ A n esse n t ia l forc e in th e m ark e t p la c e ,” S m it h sa ys A c c ess g rossly a ff e c ts h o w in d iv id ua ls in t era c t w it h o n e an o th er an d w it h b usin esses. F e d E x sh o u ld kn o w—it h e l p e d cre a t e th ese o p p ortun it ies tha t d e f in e w ha t S m it h c a lls th e “ A c c ess G e n era t io n .” T h is g e n era t io n “e x p e c ts G o o g le t o d e liv er inform a t io n in a nan ose c o n d , an d A p p le t o d e liv er th e ir N an o o v ern ig h t .” T h ere is v ery c o m m o n , g o o d b usin ess se nse t o F e d E x ’s fo cus o n A c c ess. A c c ess h e lps d e t erm in e d e c isio ns in th e m ark e t p la c e ; t h e incre asin g e x p ansio n o f a c c ess t o g o o ds, serv ic es, an d id e as is th e d riv er o f chan g e for

p e o p le an d b usin esses th e w orld o v er. O n a larg er sc a le , a c c ess t o inform a t io n has a llo w e d an e x chan g e o f g lo b a l c o m m erc e n e v er p ossib le b e fore . S m it h p u ts w ords t o th e th o u g h t p ro c ess snak in g thro u g h th e au d ie nc e ’s m in ds. T h e c orre la t io n b e t w e e n d e v e lo p in g an d p o or c o un tries’ a c c ess t o inform a t io n an d th e ir d e cre ases in p o v ert y m ore than e x ist—t h e y ’re c le ar. H e o ffers In d ia as an e x a m p le . In th e 2 0 y e ars sinc e In d ia b e g an o p e n in g m ark e ts, it sa w its p o v ert y le v e l d e cre ase fro m 51 p erc e n t t o 27 p erc e n t . In 2 0 y e ars’ t i m e , 2 4 p erc e n t o f In d ia ’s p o p u la t io n w as b ro u g h t o u t o f p o v ert y . T h is is p o w erfu l stuff. If A c c ess a llo ws for d ra m a t ic re v iv a ls in th e liv es o f a na t io n ’s c it iz e ns, i m a g in e w ha t it c an d o for th e b usin ess n e x t d o or. Shari’s B erries is a c ase in p o in t . Shari m a k es d e lic io us ch o c o la t e-c o v ere d stra w b erries. W it h a c c ess t o th e In t ern e t , w ord g o t o u t tha t t h e y are d e lic io us. A n d w ord g o t o u t , an d w ord g o t o u t . F ina lly , w it h a c c ess t o a re lia b le su p p ly cha in an d o v ern ig h t sh ip p in g , Shari w as a b le t o th ink b ig g er. F e d E x w ork e d w it h h er t o d e v ise a p a cka g e tha t w o u ld b est p ro t e c t th e stra w b erries d urin g transit . Shari n o w se lls m illio ns o f h er ch o c o la t e-c o v ere d stra w b erries a y e ar. W it h o u t th e a c c ess o f t e chn o lo g y an d th e a b ilit y t o sh ip h er p ro d uc t re lia b ly t o w h ere v er—an d th e b e t is tha t sh e ’s sh ip p e d e x a c t ly t o w h ere v er—Shari’s B erries w ou ld n o t t hriv e . A c c ess incre ases a b usin ess’s re a ch , stre n g th e ns th e su p p ly cha in , e nc o ura g es inn o v a t io n , sp urs c o n t inu e d gro w th , b ro a d e ns cust o m er b ase a cross na t io na l an d in t erna t io na l b o un d aries, fu e ls c o m p e t it io n—t h e list si m p ly g o es o n . If y o u ord er an iMa c , S m it h c o n t inu es, its ch ips w ill b e p ro d uc e d in T a i w an , t h e un it m a d e in K ore a , w it h o th er p arts m a d e fro m aro un d th e w orld , an d it arriv es fro m Shan g ha i o n y o ur d o orst e p . R e g ard less, A c c ess is th e re aso n y o u ha v e y o ur iMa c so q u ick ly an d so (re la t iv e ly ) ch e a p ly . A c c ess c o nn e c ts p e o p le , e m p o w ers th e m , an d g iv es th e m ch o ic es. Im pro v es q ua lit y o f lif e , o ff ers o p t io ns t o h e a lt hc are , c le an w a t er an d san it a t io n , incre ases lif e e x p e c t anc ies, an d lo w ers infan t m ort a lit y ra t es. A re th e o p p ortun it ies a fford e d b y A c c ess e n d less? S m it h d o esn ’t sa y , b u t if y o u c an i m a g in e it…

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T h e q u est io n , o f c o urse , is h o w w ill w e—b usin esses, c o nsu m ers, c it iz e ns—resp o n d t o chan g es as a resu lt o f incre ase d A c c ess? B ase d o n F e d E x ’s stu d y an d its 3 0 -y e ar h ist ory , S m it h o ffers h is o bserv a t io ns an d su g g est io ns as th e au d ie nc e jo ts n o t es furio usly . F irst , c o nn e c t y o ur b usin ess in e v ery w a y p ossib le w it h y o ur m ark e t . T h is inc lu d es jo in in g o n lin e c o m m un it ies. T h is inc lu d es m ak in g e a ch user a b le t o cust o m iz e y o ur w e b sit e a c c ord in g t o h is or h er h ist ory , a c t iv it y , an d d esire d e n g a g e m e n t w it h y o ur c o m p an y . S m it h ’s se c o n d su g g est io n is t o o p e n u p . Just lik e tha t , o p e n y o ur m in ds an d b usin ess t o i m pro v e th e m . O p e nn ess a llo w s for g re a t er c o lla b ora t io n an d p artn ersh ip an d m ak es for n e w p ossib ilit ies w it h in th e m ark e t p la c e . A w illin g n ess t o th ink n e w , an o p e nn ess t o th ink i m a g ina t iv e ly—t h ese a t t it u d es c an n e v er b e c o m m o d it i z e d . L ast ly , S m it h o p in es tha t b usin esses sh o u ld share e x p ert ise an d inform a t io n w it h o th ers, g iv in g th e m a c c ess t o y our th o u g h t p ro c ess.

T h e un lik e liest o p p ortun it y m a y d e v e lo p for y o ur b usin ess. T h is ha p p e n e d t o F e d E x se v era l y e ars a g o , w h e n it e n t ere d in t o a un iq u e p riv a t e a gre e m e n t w it h th e U .S. P ost a l Serv ic e . T h is a gre e m e n t st ip u la t e d tha t F e d E x p ro v id e a ir t ransp ort a t io n for t h e USPS’s m a il an d e x press m a il. T h e b o o n for cust o m ers is i m pro v e d serv ic e an d lo w er c osts for t h e USPS. In turn , F e d E x is a b le t o use th e e q u ip m e nt w h e n it sits id le . It w as a w in- w in-w in arran g e m e n t . If t h ese so m e t i m e-c o m p e t i t ors ha d n o t o p en e d u p an d o ffere d th e ir c ore stre n g ths t o e a ch o th er, it w o u ld n o t ha v e b e e n p ossib le . It is w it h th ese a t trib u t es o f o p e nn ess, t ransp are nc y , an d a c c o un t a b ilit y t ha t S m it h c o n t inu es t o le a d h is c o m p an y an d p osit io n it for th e fu ture . It is w it h th ese a t t rib u t es tha t h e h o p es t o cu lt iv a t e o th ers t o cra t e th e ir o w n o p p ortun i t ies in b usin ess. In th e m e an t i m e , h e sa ys “ t h e ‘ A c c ess G e n era t io n ’ m arch es o n .” F or b usin ess t o b e suc c essfu l w it h th e m , “ W e ha v e t o b e sure tha t w it h th e ir iP o ds an d In t ern e t th e y h e ar o ur c orp ora t e d ru m b e a ts.”

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GARRY KASPAROV Strategic Thinking H e i m m e d ia t e ly a d dresse d T h e Q u est io n . T h e Q u est io n is tha t w h ich h e has b e e n ask e d unfa ilin g ly sinc e b e c o m in g th e w orld ’s y o un g est W orld C h ess C ha m p io n in 19 85 an d h o ld in g th e t it le un t il 2 0 0 0 . “ W ha t ’s th e se cre t t o m y suc c ess? “T h ere are m an y m y ths a b o u t m y lif e an d h o w I a ch ie v e d th is suc c ess. A m o n g th e m are tha t I sp o k e e ig h t or t e n d if f e re n t lan g ua g es, a t e sp e c ia l ‘bra in fo o ds,’ h a d a p h o t o gra p h ic m e m ory…” A s e v ery o n e kn o ws, t h e tru th is o f t e n m uch si m p ler—b orin g , if y o u w ill—t han th e v ario us f ic t io ns w e cre a t e t o c o m e t o t erms w it h a g re a tn ess tha t se e ms t o o g re a t . T h e se cre t , K asp aro v ’s tru th , is “n o t a se cre t a t a ll,” h e sa ys. Ra th er, h is suc c ess w as th e resu lt o f a c o m b ina t io n o f a t t ri b u t es—t a le n t an d stra t e g y . N o m a t t er h o w re d uc t iv e it se e ms, t h ere ’s a lesso n th ere . B e y o n d T h e B o ard K asp aro v f in ds h is transit io n t o p o lit ics q u it e na tura l. A g gressiv e n ess inform e d h is g a m e a t t h e ch ess b o ard , b u t stra t e g y d e f in e d it . H e f in ds th ese t w o a t trib u t es n e c essary for th e trick y g a m e o f p o lit ics. H e se es n o th in g w ro n g w it h b e in g th e a g gressor, t h e o n e w h o a t t a cks—esp e c ia lly , h e a d ds, “ w h e n y o u are f ig h t in g a re g i m e tha t ig n ores p e o p le w h o sp e ak so f t ly .” T h e b ig st ick K asp aro v c arrie d a t th e ch ess b o ard is incre asin g ly a m ore fa m iliar sig h t as h is c a m p a ig n for th e Russian p resid e nc y g a ins tra c t io n . T h e q u est io n h e p oses is: “Is it in e ffe c t iv e or just un p o p u lar t o b e a g gressiv e?” E v ery o n e w an ts t o d o th e ir b est an d e n d u p o n t o p w it h o u t ha v in g t o w orry a b o u t a c tua lly w inn in g , K asp aro v a ckn o w le d g es. W it h a slig h t sm irk h e a d ds, “ B ut n o o n e g ro w s u p d re a m in g t o b e v ic e p resid e n t .” K asp aro v la ys h is c ards o u t tha t th ere are t w o t y p es o f a t t a ck : 1) D ire c t assau lt ; an d 2) C re a t e th e re a c t io n . It ’s i m m e d ia t e ly c le ar w h ich t y p e K asp aro v p re fers. T h e f irst o p t io n re q u ires n o e la b ora t io n . T h e se c o n d re q u ires a so p h ist ic a t e d an d c o nf id e n t han d as it is w h ere stra t e g y c o m es in t o p la y . C re a t in g th e c o n d it io ns for a re a c t io n a llo w s th e a g gressor b e t t er c o n tro l o f t h e e n v iro n m e n t , an d th e c o m p e t it or w ill e v e n tua lly lose g ro un d . T h is cre a t es th e o p p ortun it y for t h e d ire c t a t t a ck , an d th e a g gressor is o b lig a t e d t o p ro c e e d lest

t h e c o m p e t it or re g a in fo o t in g an d c o un t era t t a ck . In b usin ess, t h is w o u ld a m o un t t o g iv in g y o ur c o m p e t it io n a chanc e t o c a t ch u p t o th e a d v anc es y o u m a d e . Im a g in e if a f t er cre a t in g th e iP o d , t h e n th e N an o , t h e Shuff le , A p p le ha d si m p ly sa t o n its han ds? O n e o f t h e nu m ero us c o m p an ies v y in g for th e o p p ortun it y t o e v e n b e c a lle d a c o m p e t it or t o A p p le w o u ld ha v e e v e n tua lly o ffere d th e N an o . A n d an o th er, t h e Shuff le . B u t A p p le p re-e m p t e d its w o u ld-b e c o m p e t it ors, n o d o u b t c ann ib a li z in g sa les o n th e orig ina l iP o d , b u t e q ua lly un d o u b t e d ly re c o v erin g th ose sa les m an y t i m es o v er w it h th e a d d it io na l m ark e t re a ch o f t h e n e w pro d uc ts. A p p le d id n ’t m iss a b e a t—b e c ause th e y w ere in c o n tro l, c a llin g th e sh o ts, cre a t in g th e c o n d it io ns for a re a c t io n w it h e a ch n e w pro d uc t launch . A ssure d ly , t h is c o nf id e nc e has t o b e so m e t i m es c o m p ose d o f b ra v a d o , a t le ast for g o o d m e asure . T h e a t t a ck er’s a d v an t a g e , K asp aro v sa ys, d ist inc t ly c o m es t o th ose unafra id t o trust th e ir d e c isio ns, t o th ose w h o ha v e th e c o ura g e t o fa il. T h e w e ig h t o f w ha t K asp aro v is an d isn ’t sa y in g is e v id e n t in th e ra p t a t t e n t io n o f th e cro w d . Is sa y in g : I d o m ina t e d c o m p e t it iv e ch ess for 2 0 y e ars. I w o n hun dre ds u p o n hun dre ds o f g a m es. I lost d o z e ns o f t h e m , as w e ll. D o z e ns o f t i m es I w as stu m p e d , c o u ld n ’t f in d a w a y o u t , forc e d t o a b ort m y e fforts. Isn ’t sa y in g : I a m risk in g m y lif e in m y f ig h t for t h e Russian p resid e nc y . B u t sinc e h e has assure d us tha t fa ilure is a c c e p t a b le , as lo n g as o n e isn ’t c o n t e n t w it h it , w e are c o nf id e n t—b u o y an t , e v e n—t ha t h e w ill suc c e e d in w ha t h e “Isn ’t” sa y in g . In th e sa m e w a y tha t b lin d c o ura g e c an p ro p e l y o u a lo n g th e b e t t er p a th , so t o o c an le arn in g fro m crit ic ism . T h is is a crit ic a l a t t rib u t e o f a t ru e le a d er, le arn in g h o w t o a bsorb crit ic ism an d chann e l w ha t e v er i m p a c t it has o n y o u t o w ard m ak in g b e t t er d e c isio ns. O n e m ust ha v e c o ura g e t o ha v e a v isio n , an d t o se t a b o u t a ch ie v in g tha t v isio n . K asp aro v c it es th e A m eric an e n tre pre n e urs T h e W rig h t B ro th ers. N o o n e w ill arg u e a g a inst th e ir v isio n—t h is is p reserv e d in w orld h ist ory . B u t

W orld B usin ess F oru m 2 0 0 7 Pa g e | 18

th e ir v isio n w as sh ortsig h t e d . T h e y c o u ld n ’t se e th e b usin ess p o t e n t ia l o f f lig h t . A m an w it h th e na m e o f W illia m B o e in g sa w th e p o t e n t ia l. H e d id n ’t ha v e th e t e chn ic a l b a ck gro un d , so h e c o nc e n tra t e d o n stra t e g y . H e h ire d e n g in e ers an d in v est e d in rese arch . A n d w h e n C harles L in d b erg h t o o k f lig h t in 1927 , B o e in g w as re a d y , w a it in g , an d a lre a d y w inn in g . T h e t a k e a w a y is tha t t h o u g h b e in g f irst is an o b v io us g o o d th in g an d sa ys a m u lt it u d e o f p osit iv e th in gs a b o u t th e p erso n or c o m p an y , it w ill o n ly p a y o ff t o b e f irst if y o u ’v e a so un d stra t e g y in p la c e an d y o u ’re c o nf id e n t an d c oura g e o us in i m p le m e n t in g it . T o w it , t w o lists: T h e W rig h t B ro th ers B o e in g W an g L a b ora t ories H P A lt a v ist a G o o g le R io MP3 p la y er A p p le iP o d T h e f irst lists th e p io n e ers, t h e v isio naries w h o g o t th ere f irst . T h ose w h o e it h er are n o lo n g er aro un d or are so irre le v an t p erha ps th e y sh o u ld n ’t b e . T h e se c o n d lists th e w inn ers, t h ose w h o tru ly d e liv ere d , e v e n if n o t in f irst p la c e . Suc c ess is unsuc c essfu l if w ha t e v er a ch ie v e d suc c ess w as so gre a t , so h e a v y , so b ig tha t o n e c ann o t se e b e y o n d it an d w ha t ’s n e x t . H e ’s a p o lit ic ian , so th e au d ie nc e p ro b a b ly e x p e c ts th e a p pro a ch in g se g u e . A f t er a ll, K asp aro v has so far t hro u g h o u t h is a d dress q u o t e d thre e o f t h e m ost fa m o us an d e n d urin g o f A m eric an p resid e n ts—G e org e W ash in g t o n , T h e o d ore R o ose v e lt , an d Jo hn F . K e nn e d y—an d e v e n b e g an h is a d dress w i t h a funn y d ig a b o u t h o w ju d g in g fro m th e nu m b er o f p resid e n t ia l c an d id a t es for n e x t y e ar’s e le c t io n , it t a k es m ore c o ura g e n o t t o run for th e A m eric an p resid e nc y . E v ery o n e lau g h e d , as a g a in th e w e ig h t o f w ha t h e is risk in g w as un d ersc ore d . K asp aro v sh if ts h is fo cus t o th e w ar in Ira q . H e q u o t es F ore ig n P o lic y Ma g a z in e : 91 p erc e n t o f e x p erts b e lie v e th e w orld is b e c o m in g less sa fe

for t h e U n it e d St a t es. O n ly 2 p erc e n t t h ink th e w orld is less d an g ero us n o w for A m eric ans. H e ’s sa y in g , c le arly so m e dra m a t ic chan g e , so m e ra d ic a l re-v isio n in g is re q u ire d . It use d t o b e tha t t h e U n it e d N a t io ns w as a b le t o m e d ia t e c o nf lic ts an d c arv e a p a th t o a v o id fu ture c o nf lic ts. H o w e v er, t h e w orld is m uch chan g e d fro m th e t i m es in w h ich th e U n it e d N a t io ns w as a p la y er. N e w t i m es re q u ire n e w so lu t io ns, id e as, v isio n . T h ere ’s a st an d in g o v a t io n . K asp aro v c o nn e c ts th e d o ts b e t w e e n th e Russian Presid e n t V la d i m ir Pu t in ’s incre ase d v isib ilit y o n th e in t erna t io na l st a g e , h ig h o il p ric es, t h e sh ort a g e o f o il, an d t error g ro u ps in th e M id e ast . “T h is is n o t a c ast stu d y stra t e g y ,” K asp aro v sa ys. “It has re a l w orld c o nse q u e nc es.” K asp aro v isn ’t urg in g for a m assiv e o v erthro w , or m assiv e a c t io n o f an y k in d . “In ch ess w e kn o w tha t a su b t le chan g e o n o n e sid e o f t h e b o ard c an ha v e a d ra m a t ic e ff e c t o n th e o th er sid e ,” h e sa ys. H e tra ils o ff; h is p o in t p e n e tra t es. H e re m in ds us tha t J F K o nc e sa id tha t t h e U n it e d St a t es w as in tro u b le if its c it iz e ns c are m ore a b o u t an a th le t ic e v e n t than th e y d o sc ie nc e an d e d u c a t io n . T ha t ’s th e lo n g-t erm v isio n , K asp aro v sa ys, t o th e curre n t c o n v ersa t io n o n inc e n t iv i z in g th e re d uc t io n o f e n erg y d e p e n d e nc e thro u g h i m p osin g a t a x . T ha t ’s w ha t K asp aro v has ch ose n—t h e lo n g-t erm v isio n , t h e stru g g le for e q ua lit y , t h e c o ura g e o us e x ist e nc e . H e insists th e last e x ists w it h in a ll—p e o p le an d b usin ess—in w a ys b ig an d sm a ll. “ C o ura g e is esse n t ia l in e v ery w a lk o f lif e , b e g inn in g w it h th e c o ura g e t o m ak e u p y o ur m in d .” H e urg es th e au d ie nc e t o ha v e th e c o ura g e t o th ink b ig , t a k e o n b ig id e as, an d se e k b ig cha lle n g es—an d w e ’ll re a li z e tha t t h e b ig st e p t a k es n o m ore e ffort t han th e sm a ll st e p . “Trust t h e m an o n th e $2 0 d o llar b ill, w h o sa id o n e m an w it h c o ura g e m ak es u p th e m a jorit y .” T h ere h e g o es q u o t in g p resid e n ts a g a in , as th e au d ie nc e rises t o th e ir f e e t t o a p p lau d h i m o nc e m ore .

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HERB KELLEHER Building a People- Focused Culture H is t i m e o n st a g e p unc tua t e d thro u g h o u t w it h b ursts o f lau g h t er—so m e t i m es surprisin g , so m e t i m es n o t , b u t a l w a ys re fresh in g—So u th w est A irlin es’ H erb K e lle h er st art e d t e llin g st ories. H e f irst ran thro u g h th e fa c ts tha t e v ery o n e in th e au d ie nc e sh o u ld ha v e kn o w n , an d p ro b a b ly d id kn o w , a lre a d y . W it h just thre e a irp lan es f ly in g 18 f lig h ts a d a y , So u th w est b e g an its serv ic e (o f t urn in g th e a irlin e in d ustry o n its h e a d ) in 1971. T o d a y th e c o m p an y o p era t es 51 0 737 p lan es, t a k in g o ff 3 ,3 0 0 f lig h ts p er d a y . A t t h e b e g inn in g , So u th w est w as th e sm a llest je t c arrier; t o d a y it is th e larg est in t erms o f p asse n g ers c arrie d . T h ere ’s m ore , an d e v ery o n e kn o ws it ’s c o m in g (e v ery o n e re a ds F orb es an d F ortun e ): So u th w est has b e e n p ro f it a b le for 35 c o nse cu t iv e y e ars. Pro f it a b le as e a ch y e ar th e y g re w larg er, c arry in g m ore p asse n g ers, p urchasin g m ore je ts, o p era t in g w it h in th e p u b lic e y e . T h ere ’s st ill m ore . F ro m 1972 t o 2 0 0 2 , So u th w est p ro d uc e d th e b est re turn t o in v est ors in th e S&P 5 0 0 , w it h an a v era g e re turn o f 76% p er y e ar c o m p o un d e d annua lly . H e p auses for slig h t d ra m a t ic e ff e c t ( b u t just for fun) an d th e n c o n t inu es: A $1 0 0 , 0 0 0 in v est m e n t in 1972 w as w orth in 2 0 0 2 $1 0 0 m illio n . T h ere are g asps. E v ery o n e has a l w a ys w o n d ere d h o w So u th w est d id , d o es, w ill c o n t inu e t o d o it . T h e answ er, t h e se cre t , is n o t p ro fo un d , b u t it d o es se e m ra d ic a l. So u th w est d e p art e d fro m tra d it io na l c orp ora t e d o c trin es an d a c c e p t e d b est p ra c t ic es b y p u t t in g p e o p le f irst . It se e ms so unc o m p lic a t e d it a c tua lly m ig h t w ork , an d d id an d d o es an d w ill. “ W e sa id th e b usin ess o f b usin ess is p e o p le , y est erd a y , t o d a y , an d fore v er. A m o n g e m p lo y e es, share h o ld ers, an d cust o m ers, w e d e c id e d o ur in t erna l cust o m ers—e m p lo y e es—c a m e f irst ,” K e lle h er e x p la in e d . T h e m o d us o p eran d i is so stra ig h t for w ard as t o n o t se e m b e lie v a b le . B u t re m e m b er: 3:51 0 , 18 :3 ,3 0 0 , 35-y e ar p ro f it a b ilit y , $1 0 0 K in 1972:$1 0 0 M in 2 0 0 2 . N o m a t t er h o w i m pressiv e th e nu m b ers are , t h e y so m e h o w d o n ’t o v ersha d o w th e si m p le “ p e o p le f irst” stra t e g y tha t la id th e g ro un d w ork for t h ose nu m b ers. K e lle h er’s re aso n in g g o es lik e th is: H o n or, resp e c t , an d tre a t y o ur cust o m ers w e ll, an d th e y w ill t re a t e x t erna l cust o m ers in th e sa m e w a y . C ust o m ers th e n m ak e share h o ld ers

ha p p y . K e lle h er is o f t-q u o t e d , “ E v ery b usin ess is in th e cust o m er serv ic e b usin ess.” B e lie v e it . T h is K e lle h er le arn e d fro m h is Mo th er. W h e n h e inform e d h er tha t sh e p a id $2 0 0 t o o m uch b y p urchasin g h er c ar fro m a p art icu lar d e a ler, sh e re p lie d sa y in g tha t w h e n th e c ar has a p ro b le m th e d e a ler c o m es p erso na lly t o m ak e it rig h t . “T h e $2 0 0 w as n o t for th e c ar, it w as for th e c are!” It isn ’t just a b o u t a f e e l-g o o d , hu m an ist ic a p pro a ch t o th e w orld a t larg e . T h ere is a stra t e g ic , b usin ess c o un t erp o in t t o th is q u est for “ psy ch ic sa t isfa c t io n .” In t erna l an d e x t erna l cust o m er serv ic e d e m an ds tha t a le a d er kn o w an d c are a b o u t th e a ffa irs in a ll d e p art m e n ts, d iv isio ns, se c t ors, an d w ork p la c es in e v ery org an i z a t io n . It ’s as b asic , an d b rillian t , as tha t . A s K e lle h er th e n launch es o ff a st a c c a t o o f ch o ic e m orse ls, p e ns are t o p a p er. T o ha v e an e n erg e t ic an d fun-lo v in g b usin ess e n v iro n m e n t , v isib ly d isp la y y o ur p h iloso p h y e v ery w a y . (H e m e ans e v ery w h ere .) If y o u d o n ’t m ak e it m e an in g fu l an d c o nsist e n t , y o u ’ll b e v ie w e d as a h y p o cri t e . F o cus o n y o ur p e o p le . D escrib e th e cu lt ure t o p o t e n t ia l n e w h ires, an d b e e x p lic it a b o u t w ha t y o u ’re lo o k in g for t h e m t o c o n trib u t e—“a w arrior sp irit an d a fun-lo v in g a t t it u d e .” A n e g a t iv e a t t it u d e c an c o m e fro m e v e n th e m ost q ua lif ie d can d id a t e for a p osit io n an d h ija ck e v ery o n e e lse ’s p osit iv e a t t it u d e . T o a v o id th is, in v o lv e y o ur m o d e l e m p lo y e es in th e h irin g pro c ess an d ask th e m for th e ir f e e d b a ck an d insig h ts o n th e p e o p le b e in g in t erv ie w e d . A n d—K e lle h er se e ms t o e n d orse th is o n e p art icu larly—h o ld th e f irst in t erv ie w as a g ro u p in t erv ie w an d ask q u est io ns tha t w ill t e ase o u t h o w th e y use d hu m or t o g e t o u t o f a d if f icu lt sit ua t io n . “ Y o u ’ll h e ar so m e o f t h e d a m n e d est st ories,” K e lle h er g uffa w s. A g ro u p in t erv ie w a lso a llo w s y o u t o o bserv e h o w th e c an d id a t es in t era c t w it h o th ers an d , in p art icu lar, t h e o n e t e llin g th e st ory . In t e nsiv e ly re v ie w n e w h ires for t h e ir a t t it u d e an d p erform anc e . E m p o w er y o ur e m p lo y e es b y g iv in g th e m th e au th orit y t o m ak e d e c isio ns o n th e sp o t o n th ose func t io ns or p ra c t ic es th e y are th e c o m p an y e x p ert .

W orld B usin ess F oru m 2 0 0 7 Pa g e | 2 0

C o m m un ic a t e , c o m m un ic a t e , c o m m un ic a t e . C e le bra t e . A s b usin esses g e t larg er an d m ore g e o gra p h ic a lly w id espre a d , it b e c o m es a ll t h e m ore i m p ort an t t o c e le bra t e e v ery suc c ess an d e v ery ro le m o d e l. D o in g so w ill re m in d y o ur e m p lo y e es h o w m uch y o u v a lu e th e m as in d iv id ua ls—“T h e y ’re n o t just w ork ers,” h e sa ys—an d it w ill re inforc e th e cu lt ure y o u ha v e w ork e d so hard t o cre a t e . O n e last t h in g , K e lle h er sa ys. “If y o u a in ’t g o t cu lt ure , y o u a in ’t g o t sh it .” C u lt ure is d if f icu l t t o id e n t if y a m o n g org an i z a t io ns as e a ch is p art icu lar, b u t e a ch c o m p an y n e e ds o n e . A s an e x a m p le , h e shares w it h th e au d ie nc e tha t D ian e v o n F urst e n b erg , t h e fa m o us fash io n

d esig n er, w ro t e h i m a le t t er sa y in g tha t sh e d id n ’t lik e ( th e a irp lan e ’s) a m b ie nc e . W it h h is tra d e m ark jo c osit y , K e lle h er re p lie d tha t “I d o n ’t kn o w w ha t tha t m e ans, b u t I’m g la d w e ha v e o n e!” In c losin g , K e lle h er re la ys w ha t h e c o nsid ers t o b e th e g re a t est t rib u t e e v er m a d e t o So u th w est A irlin es. A frie n d o f h is, w h o ha d a ha b it o f b e in g q u it e e arly for m e e t in gs, arriv e d as So u th w est e m p lo y e es w ere arriv in g t o st ar t t h e w ork d a y . H e n o t ic e d tha t e m p lo y e e a f t er e m p lo y e e arriv e d n o t o n ly e arly , b u t w it h sm iles o n th e ir fa c es. W ha t ’s m ore , se v era l ask e d h i m if t h e y c o u ld h e lp h i m . T ha t ’s th e se cre t t o So u th w est ’s suc c ess—its p e o p le .

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MIC HAEL EISNER C reativity & Growth Id e as d o n ’t just ha p p e n , T h e y n e e d t o b e insp ire d . A ll t o o o f t e n b usin ess w ill p u t incre d ib le a m o un t o f e n erg y t o insp irin g b a d id e as. T rib a l w isd o m o f D ak o t a In d ians, w h e n y o u d isc o v er y o u are rid in g a d e a d h orse , b est stra t e g y is t o d ism o un t an d g e t o n a n e w o n e . So m e c o m p an y m a k e an o th er ch o ic e , b u y a stro n g er w h ip , se e h o w o th ers rid e a d e a d h orse , lo w er th e st an d ards so tha t d e a d h orses c an b e inc lu d e d , re c lassif y h orse as liv in g i m p a ire d , rid e or h ire o u tsid e c o n tra c t ors t o rid e tha t d e a d h orse , h arn ess se v era l d e a d h orses t o g e th er t o g e t incre ase d sp e e d , a d d a d d it io na l sp e n d in g t o incre ase p erform anc e , lo w er o v erh e a d so it p erforms b e t t er, p ro m o t e d e a d h orse t o su p erv isory p osit io n . D urin g m y c are er I’v e trie d t o insp ire g re a t id e as, e x a m p le 19 8 9 id e a t o b u ild E uro D isn e y , list in g o n F re nch st o ck e x chan g e , w e ch e ere d an d w ere e x c it e d . Inst e a d th is is w ha t g re e t e d us, v id e o o f p ro t est ors sh o w n . N o t e x a c t ly e n thusiast ic re c e p t io n w e ha d an t ic ip a t e d . W e ll w e g o t o ur su i ts c le an e d an d g o t b a ck t o w ork , E uro D isn e y w e n t o n t o b e an a t t ra c t iv e resort , m ost v isit e d t o urist d est ina t io n in E uro p e . T h in gs d o n ’t a l w a ys g o sm o o th , q u est io n is h o w c an w e incre ase th e o d ds tha t a t t h e e n d o f t h e d a y o ur insp ire d id e as w ill y ie ld d esire d resu lts ( in th e b usin ess w orld ) . I h a v e fo un d it c o m es d o w n t o so m e th in g pre t t y si m p le . T h e b o x . W orks lik e th is: e arly in th e p ro c ess for n e w in it ia t iv e , d e t erm in e si z e o f its f inanc ia l b o x , so m e re q u ire larg e b o x , o f t e n o th ers d o f in e w it h sm a ll o n e , si z e sh o u ld b e b ase d o n stra ig h t for w ard ana lysis o f t h e e x p e c t e d re turn o n in v est m e n t . T h e n c o m es a less stra ig h t for w ard p ro c ess: w ha t g o es in th e b o x . O n e cruc ia l e le m e n t t o o b t a in o p t i m u m resu lts: t ha t e le m e n t is cre a t iv it y . C re a t iv it y is c lose ly asso c ia t e d w it h e n t ert a in m e nt in d ustry for o b v io us re aso ns, b u t is esse n t ia l t o e n d e a v or. H as t o ha v e sy m b io t ic re la t io nsh ip w it h f isc a l, t ha t is m icro m ana g e m e nt . L e t m e t e ll y o u a b o u t a f il m , Ra id ers o f th e L ost A rc , it ’s n o w a c lassic , b u t w e d id n ’t kn o w tha t w h e n w e g re e n li t i t d urin g m y t e nure a t Para m o un t , b e lie v e i t or n o t , e v ery stu d io re je c t e d th e id e a . S t e v e n Sp ie lb erg an d G e org e Luc as assure d us th e y c o u ld d e liv er it w it h a surprisin g ly m o d est f inanc ia l b o x . T h e y k e p t th e ir e n d o f th e b arg a in .

C re a t iv it y c an a c tua lly f lo urish w it h f inanc ia l li m it a t io ns. O p p osit e c an b e th e c ase , b e c ause th e y ha v e a t t e m p t e d t o su bst it u t e m ore c a p it a l t han cre a t iv it y , e x a m p le : m o v ie Ra ise th e T i t an ic . A t Para m o un t w e k e p t m o v ie b u d g e ts un d er $1 0 M , lo w er than o th ers a t t h e t i m e , w e ha d m an y f il ms tha t w ere suc c esses, a ll p ro d uc e d o n a t ig h t f inanc ia l b u d g e t , t h ese p ro v id e v iv id e v id e nc e o f an o th er i m p ort an t d e c isio n m a k in g t o o l: sa y in g th e w ord n o . In H o lly w o o d , t h ere ’s n o th in g m ore se d uc t iv e than sa y in g Y es. E v ery o n e c e le bra t es e x c e p t for o n e in d iv id ua l, t h e share h o ld er, w h o is p a y in g th e fa c t o f c o n tra c ts tha t resu lt in un pro f it a b le p ro je c ts. W h e n y o u sa y N o e n o u g h t i m es p e o p le a c tua lly st art t o b e lie v e y o u . B u t th e e n t ert a in m e nt tha t resu lt e d w as c ause for c e le bra t io n for m o v ie g o ers an d share h o ld ers a lik e . D isn e y : in v o lv e d in m an y m ore b usin esses than m o v ies, an d trie d t o m a in t a in o b je c t iv it y in o ur a p pro a ch . T h e n w e ha d t w o fan t ast ic b ran ds: D isn e y an d E SP N . A na lysts c a lcu la t e E SP N is w orth t w ic e a lo n e than th e e n t ire A B C a c q u isit io n m a d e . W ha t a b o u t it is so c o m p e llin g? I m a in t a in it is its cre a t iv e sp irit , an infe c t io us a t t it u d e , d arin g a b ilit y t o o b t a in n e w w a ys t o c a p ture sp orts. O ur suc c ess w it h E SP N un d ersc ores o n e th in g , o ur c o nst an t p ro c ess o f fort if y in g th e b ran ds, stre n g th e n in g th e ir b o n d w it h c o nsu m ers. G au g h in p a in t in g e x a m p le . H o w w e a p pro a ch m ana g in g o ur b ran ds – e v ery t o y , D isn e y T V sh o w , t h e m e p ark a t t ra c t io n , p erform anc e , h o t e l ro o m , D isn e y m o v ie , ash tra y , o n lin e c o m m un it y , B ro a d w a y sh o w is an o th er d o t in th e p a in t in g o f a b ran d . It t a k es y e ars, d e c a d es t o cre a t e a m e an in g fu l b ran d , b u t n o sin g le d o t c a p tures th e w h o le esse nc e . If y o u t a k e it o n e d o t a t a t i m e , p a y in g c lose a t t e n t io n t o e v ery d e t a il – m icro m ana g e m e n t – k e e p in g e y e o n th e b ig p ic ture . Se p ara t es itse lf fro m th e m ark e t p la c e an d th e c lu t t er. T ornan t e C o m p an y , It a lian for H a ir P in T urn , w e are a b o u t t o f ina li z e T o p ps c o m p an y a c q u isit io n , b est kn o w n for sp ort in g c ards, B a z o o ka b u b b le g u m . T o p ps is c lose ly asso c ia t e d w it h th e esse nc e o f sp orts. M illio ns o f fans c o n t inu e t o th ink fo n d ly o f t h e susp e nse fu l t hrill o f o p e n in g a p a ck o f b ase b a ll c ards an d th e f irst sm e ll o f b u b b le g u m . T h e

W orld B usin ess F oru m 2 0 0 7 Pa g e | 22

p ossib ilit ies are t re m e n d o us, b u t I d o n ’t t h ink w e c an transm it t h e sm e ll t hro u g h th e In t ern e t . I ha d a g re a t run w it h M ick e y b u t n o w a m a b o u t t o st ar t u p w it h B a z o o ka Jo e . W e th ink w e c an turn th e T o p ps b ran d aro un d t o d a y . T hro u g h o u t D isn e y : T w o q u est io ns: w ha t d o es th is b ran d st an d for an d w ha t d o es it n o t st an d for. O p e ns u p d o ors t o n e w cre a t iv e o p p ortun it ies, so m e t i m es ha v e t o shu t d o ors t o o p p ortun it ies lucra t iv e in th e sh ort run b u t w o u ld hurt t h e b ran d . Past 2 0 y e ars D isn e y has b u ilt h o t e ls, w it h th o usan ds o f h o t e l ro o ms, o nc e a g a in f in d in g an insp irin g id e a , f illin g th e b o x , an d d e c id in g h o w m uch cre a t iv it y w e ch o ose t o p u t in t o it . B y est a b lish in g th ese st an d ard m o t e l b u ild in g w it h g ian t w h i msic a l ic o ns, t o uch es lik e th is p ian o sha p e p o o l, w e w ere a b le t o e le v a t e e n t ire th e e x p erie nc e t o so m e th in g y o u just c an ’t d o an y w h ere e lse . Pro c ess d e m o nstra t es li m it e d u t ilit y , sh if ts a t t e n t io n fro m m erits o f a fresh n e w id e a , an d su bst i t u t es a lo o k b a ck w ard a t w ha t p e o p le are a lre a d y d o in g . Q u o t e : W rig h t , “T o st e e l id e as fro m o n e p erso n is p la g iarism , t o st e e l fro m m an y is rese arch .” T h e k e y is t o a c t o n an id e a , w h e th er a b ig n e w v e n ture or a t in y sha m p o o b o t t le . T h e m o v ie g o t m a d e b e c ause so m e b o d y ha d an id e a , an d m a d e it ha p p e n – e x e cu t e d it an d w e n t for w ard o n a g o o d id e a . K e e p e y es o p e n , an d e ars. Suc c ess re q u ires m ore than m icro m ana g e m e nt , it re q u ires fa ilure . W a y t o a c c e lera t e y o ur suc c ess is t o d o u b le y o ur fa ilure ra t e .” F a ilure is n o t a c orp ora t e d e a th se n t e nc e , m ak in g th e sa m e m ist ak e t w ic e o n th e sa m e issu e is a t errib le th in g . T o p un ish fa ilure is an o th er w a y t o e nc o ura g e m e d io crit y . T h ink o f t h e p a in t in g , a b a d d o t c ann o t ru in th e p a in t in g , y o u c an f ix i t an d m o v e o n . P e o p le are a fra id t o use b rig h t an d b o ld c o lors, if y o u w an t t o insp ire id e a , y o u ha v e t o a c c e p t t ha t y o u w ill e nc o un t er m ore than a f e w tha t w o n ’t m ak e th e g ra d e . W orld is F la t , T o m F re e m an , jo urna list , d escrib es h o w n e w c o m m un ic a t io n t e ch is h e lp in g t o cre a t e le v e l p la y in g f ie ld for in t erna t io na l c o m m erc e . W orld is d i m e nsio na lly shrink in g . O nc e w as fu ll 3 d i m e nsio na l sp h ere , n o w h e sa ys i t ’s 2 D f la t . I p ro p ose th e y are shriv e le d d o w n t o o n e d i m e nsio n , t h e w orld has b e c o m e a sin g le d o t , w it h th e In t ern e t , e v ery o n e c an o c cu p y th e sa m e sp a c e…t i m e m o n e y an d lan g ua g e . N o w c o m m un ic a t io n is

inst an t an e o us, fre e , c an lo g o n t o transla t io n .c o m an d y o u c an b e c o n v ersan t in an y th in g . Mass c o m m un ic a t io n isn ’t a b o u t m asses. R e c e n t ly it t o o k a m ass o f m o n e y tha t ha d t o a t t ra c t a m ass au d ie nc e , n o w th is is n o lo n g er t ru e . Sure th ere w ill a l w a ys b e d e m an d for c ost ly sp e c t a c les, b u t n o w w it h v id e o c a m era an d c o m p ut er an y o n e c an sh o o t a m o v ie an d Trib u t e t o p o t e n t ia l au d ie nc e o v er th e In t ern e t . C o m p ut er is b o th d istrib u t io n an d h o m e th e a t er. C o nse q u e n t ly a lo w b u d g e t m o v ie is i m a g ina b ly t in y , le a v in g cre a t iv it y t h e o n ly v aria b le . T h is p h e n o m ena is incre d ib le , w e are h e lp in g fun d in g a w e bsit e c a lle d V e o h , m ak in g it p ossib le for an y o n e t o d istrib u t e D V D q ua lit y m o v ies o v er th e In t ern e t . W e bsit e lik e V e o h so a w e bsit e in K e n y a c an b e se e n b y a p ro d uc er in San t a Mo n ic a , b u t o f c o urse , syst e ms aren ’t in p la c e t o d o th is y e t . It is risk in g th e fa t e o f b e c o m in g t o p ure anarch y , c an le a d t o frustra t io n w h e n ch o ic es are o v er w h e l m in g , w ha t is n e e d e d are hu m an f ilt e rs, a lso kn o w n as hu m an m icro m ana g ers, t o f il t e r it d o w n an d h e lp insp ire t o b rin g i t d o w n th e m ass au d ie nc e , so p e o p le c an g o t o c ert a in sit es th e y c an c o un t o n . P erso na l c ore c o m p e t e nc y , o f b e in g a hu m an f ilt e r for a g re a t e n t ert a in m e nt id e a t o th e In t ern e t . I st ar t e d o u t as an e x e cu t iv e t o A B C T V n e t w ork , w h ere I ha d a w id e ran g e o f o ld sch o o l T V sh o w s, m o v e d u p c orp ora t e la d d er, h a d a han d in m o v ies an d o th er k in ds o f cra f t e d e n t ert a in m e nt , an d n o w I’m b a ck w h ere I b e g an , w ork in g w it h a n e w e x c it in g m e d ia , w h ere a sin g le b ran d c an b e th e t i m e o f a sin g le b re ak . O nc e hu m an f ilt e rs are in p la c e , n o t o n ly w ill t h e K e n y an f ilt e r n o t ha v e t o g o t o H o lly w o o d , a b rillian t in v est m e n t b ank er w o n ’t ha v e t o b e in N Y , an d a n e x t g e n era t io n sh ip m e nt v e n d or w ill n o t ha v e t o b e in silic o n v a lle y , t h e y c an a ll m ak e it w h ere th e y are , in th e ir h o m e p la c e . T h is w it h a hu m an f ilt e r is w h ere th e In t ern e t is h e a d in g , w ill b e a fan t ast ic th in g . T h e b re ak thro u g h w ill c o m e fro m p e o p le w h o use th e d e c isio n m ak in g t o o ls w e use t o d a y . I use th e m for e v ery th in g fro m g un sh o t , t o b ic y c list , h o t e l, cru ise sh ip , sha m p o o b o t t le , lio n k in g t o a ro ck b an d . My m essa g e is th is: w ha t e v er o n e ’s b usin ess, t h e w a y t o o p t i m i z e th e suc c ess is th ink in g insid e th e b o x , m ak e sure f irst t h e b o x is rig h t si z e , use m icro m ana g e m e nt , an d b e w illin g t o d anc e w it h fa ilure . Y o u ’ll b e d e lig h t e d b y insp irin g id e as y o u d isc o v er o nc e y o u are a ll b o x e d in .

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CARL IC HAN Unlocking Shareholder Value W ha t w e d o in o ur in v est m e n ts is t o lo o k for v a lu e , w h ere it st ares a t y o u in th e fa c e an d is o b v io us. W ha t w e d o is w e t a k e a d v an t a g e o f so m e k in d o f t rust sit ua t io n , t h ere ’s a g re a t d isc o nn e c t b e t w e e n v a lu es o f asse ts an d w ha t th e st o cks st an d for. T h e st o ck is ch e a p , y o u b u y th e st o ck . I use d t o w o n d er w h y th e st o ck is ch e a p , b u t n o w I un d erst an d it , w it h m an y c o m p an ies w it h m an y e x c e p t io ns, m ana g e m e nts are re a lly b a d , y o u ha v e n o id e a l un t il y o u g e t in t o th ese c o m p an ies. Y o u lo o k for th ese d isc o nn e c ts an d y o u w an t m ana g e m e n t t o d o so m e th in g t o m a k e th e st o ck w orth w ha t th e asse ts are w orth . O v er th e y e ars, w e ’v e b e e n m ak in g 4 0% annua li z e d o n in v est m e n t c a p it a l d o in g tha t k in d o f t h in g . T h e re aso n tha t y o u ha v e th ese d isc o nn e c ts an d g larin g o p p ortun it ies is th ere is g re a t d if f icu lt ies in d o in g w ha t th e a c t iv ist d o es. G o in g a g a inst th e est a b lish m e nt in m an y w a ys, t h e y thro w ro a d b lo cks a t y o u . Y o u ha v e a b unch o f la w y ers w it h la w s an d ru les an d th e y try t o st o p y o u . L a t e ly b e c ause w e ha v e a b ran d na m e , t h e y g e n era lly d o n ’t t hro w th is stuff a t y o u . T h e n e w a c t iv ists th e y d o . T h e y sa y n o w th e o ld g u y isn ’t g o in g a w a y . N o w th e y sa y if h e d o esn ’t g o a w a y , g iv e h i m w ha t h e w an ts. A lo t o f t h e m sort o f t a k e o ur a d v ic e an d d o so m e o f th e th in gs w e sa y . W ha t I’m sa y in g t o y o u is th e m ana g e m e n t in th is c o un try has n o a c c o un t a b ilit y . Y o u ha v e tre m e n d o us w ast e . I t o ld th is st ory last n ig h t : t re m e n d o us w ast e in m ana g e m e nt t o d a y , a b a d c o m m e nt ary , b e c ause th e m ark e t is ro arin g a t a h e a d rig h t n o w . W e ha v e c o m p e t it iv e p ro b le ms w it h A sia , w e ha v e so m uch w ast e tha t a g u y lik e m e , w h e n I t a k e o v er a c o m p an y an d g o in , t h ere are v ery f e w tha t I w o u ld g o in t o an d p u t a n e w C E O in t o c an ’t sa v e 3 0% o n c ost . If y o u c o u ld sa v e 3 0% o n c ost y o u c o u ld g a in c o m p e t i t iv e a d v an t a g e o v er A sia . O n e e x a m p le , it ’s n o t th e C E O fau lt , it ’s th e fau lt o f t h e B o ards, t h e b est t h in g th e y c o u ld d o is k e e p q u ie t , m ak e th e m a c c o un t a b le an d n o t t ry t o m icro m ana g e . I t o o k o v er a c ar c o m p an y in th e 19 8 0 ’s, I kn e w it w as ch e a p , d id a ll t h e w ork o n it , t h e y ha d 12 f lo ors in N Y C , I w e n t in an d sa id I w an t t o un d erst an d th is le asin g b usin ess. I kn e w th is c o m p an y w as gre a t , t h e y w ere runn in g aro un d lo o k in g b usy . I g o h o m e w it h p a ds f ille d w it h nu m b ers an d I c an ’t f ig ure o u t w ha t t h e y d o . Se e ms lik e a b ig ro un d ro b in . G o n e x t d a y , sa m e th in g . I t e ll t h e C E O , I’m g o in g t o g o t o St . L o u is t o t a lk t o th e

C E O th ere , h e sa id d o n ’t g o t o th e m , t h e y are a fra id o f y o u . I g o an o th er d a y t o th e 9 th f lo or, an d c an ’t f ig ure o u t w ha t th ese g u ys d o . So I g o o u t t h e g u y in S t . L o u is w h o w as su p p ose d t o b e n erv o us, h e w as th e t o u g h est g u y I e v er m e t . I sa id t o h i m , I d o n ’t w an t t o hurt t h ose g u ys in N e w Y ork , b u t h o w m an y o f th e m d o y o u n e e d t o su p p ort y o u? H e sa id w ha t y o u sh o u ld d o is f ire th e m a ll an d c lose th e b u ild in g , I t h ink I n e e d m inus 3 0 o f t h e m . B e c ause I c o u ld g e t rid o f 3 0 o f m y p e o p le tha t f e e d th e m n o th in g . So I b rin g in a c o nsu lt an t , h e sa ys w e ’ll g o in an d w e ’ll t e ll y o u w ha t th e y d o . T h e y c o m e b a ck 4 w e e ks la t er, a b o o k w it h y e llo w an d re d lin es. I sa id I c an ’t re a d th is b o o k . H ere ’s a p ie c e o f p a p er, t e ll m e w ha t th e y d o . H e lo o ks a t m e an d sa ys y o u ’v e b e e n fa ir w it h m e , so I’ll b e fa ir w it h y o u , w e c an ’t f ig ure o u t w ha t th e y d o e it h er. T h is is a m e t a p h or for t h e A m eric an b usin ess. If y o u b o u g h t a g ro c ery st an d y o u w o u ld ha v e h e ard fro m so m e b o d y . T h e y w ere n e v er th ere . T h is is th e tro u b le w it h A m eric an b usin ess, t h is is w h y y o u c an m ak e so m uch m o n e y b y g o in g in an d m ak in g th e m d o so m e th in g . T ro u b le is tha t t h ere ’s n o a c c o un t a b ili t y w i t h p u b lic c o m p an ies. G o v ern m e n t m ust g o in (st a t e ) t o p ro t e c t t h e m . T h e y le t t h ese b ig p u b lic c o m p an ies c o n tro l p e nsio n p lans, b u t in a d e f in e d c o n trib u t io n p lan w h y sh o u ld th e C E O s use tha t as p ro t e c t io n , t h e y t a k e th ese p e nsio n p lans an d g iv e th e m t o m utua l fun ds, so th e m utua l fun ds are lo w . H e d g e fun ds, g re a t t h in g a b o u t th e m , is th e y are p erform anc e orie n t e d , un lik e m utua l fun ds. H e d g e fun ds w ill g e t o n th e sid e o f so m e o n e d o in g a p ro x y . T h e y c o m e t o use t o lo o k a t th is o n e or tha t o n e . T ha t ’s g o o d . W h e n w e d o t ak e o v er th ese c o m p an ies, w e d o h e lp th e m , b u t w e d o n ’t m icro m ana g e th e m . It ’s th e w orst t h in g y o u c an d o . W e h e lp th e m w it h th e f inanc e , t o g e t th e rig h t k in d o f insuranc e . I’v e h ire d an insuranc e m an t o w ork for m e t o t e ll m e w ha t ’s g o in g o n w it h th e insuranc e , lik e K in g C harles h ire d a p ira t e t o t e ll h i m w ha t t o d o w it h th e p ira t es. H u g e p ro b le m t o d a y , g e t t in g a c c o un t a b ilit y . T h ese b o ard m e m b ers th ink th e y kn o w so m e th in g , c o m e in an d st art t e llin g y o u h o w t o run th e c o m p an y . It ’s a sha m e tha t t h e y are su d d e n ly m uch m ore e m p o w ere d . N o w w it h a c o m p an y w h ere I c an c o n tro l it . T h e y are g o o d for o n e th in g , t o m ak e sure th e C E O ’s are a c c o un t a b le , if t h e nu m b ers are n ’t c o m in g in rig h t , t h e y g e t rid o f it . B u t it ’s m ost ly th e

W orld B usin ess F oru m 2 0 0 7 Pa g e | 2 4

o p p osit e , t h e y c o m e in an d try t o t e ll y o u h o w t o run th e c o m p an y . T h ere ’s a d esire for p e o p le t o d o th is, lik e w h e n w e t o o k o v er th e c asin os, for inst anc e . O n e g u y c a m e t o m e w it h an id e a , w e sh o u ld b u ild th is C o p a ca b ana in o n e o f t h ese b ig are as. I sa id le t m e lo o k a t t h e p lans. I sa id w e g o t rich o u t th ere . I sa id I d o n ’t m icro m ana g e . W e w e n t t o se e th e m , w e sh o w e d th e m th ese g re a t p lans, I e x p e c t e d h is m icro m ana g in g , b u t h e ’s n o t tha t e n thusiast ic , an d h e sa id it w as th e d u m b est id e a I’v e e v er se e n . So w e rip p e d u p th e stuff. T h e tro u b le is y o u ha v e t o o m an y o f t h ese g u ys o n b o ards w h o try t o m icro m ana g e . T w o pressures in th ese c o m p an ies, o n e th e C E O sh o u ld or sh o u ld n ’t b e th ere , t h e g u ys o n th e b o ard are w e ll m e an in g , an d d o n ’t ha v e an y id e a a b o u t w ha t ’s g o in g o n . T a lk a b o u t th e e c o n o m y . I t h ink tha t w e ha v e t o b e c au t io us t o d a y . W e ’v e ha d a fre e rid e th e last 25 y e ars in th is c o un try , A lan Gre e nsp an lo w ere d ra t es an d d id th e rig h t th in g . T h e y lo w ere d th e ra t es w it h o u t ha v in g inf la t io n , y o u ha d a p erfe c t st orm , stuff c o m in g in a bro a d , y o u ha d i m m igra t io n w ork in g an d t e chn o lo g y , an d w e g o t th e b e n e f it o f lo w c ost . A lo t o f t h ose th in gs are g o in g a w a y . Y o u ha v e th is cre d it crunch , a lo ck d o w n o n le n d in g w h ich is fu e lin g th is e c o n o m y , w orry tha t e arn in gs m a y d e cre ase . F or 3 y e ars y o u ’v e ha d e arn in gs tha t in 2 0 0 0 -2 0 0 2 , t h e y w e n t d o w n 1%. T h ere ’s n o la w tha t sa ys e arn in gs ha v e t o k e e p incre asin g . If the y re gress t o th e m e an , c o m p an ies are se llin g a t 28 t o 3 0 t i m es e arn in gs, w h ich is a bsurd . I c o u ld g o o n t a lk in g a b o u t th e e c o n o m y , b u t y o u ha v e a m assiv e h o usin g pro b le m , w h ere h o usin g is d o w n 4 0%. T h e ore t ic a lly y o u are liv in g in a b u b b le in A sia . Y o u ha v e t o I b e lie v e b e q u it e c au t io us. D o w ha t I d o w h ich is b u y c o m p an ies tha t if t h e st o cks g o d o w n , y o u c an t a k e th e m o v er an d m ak e th e asse ts m e an so m e th in g . I’m n o t t e llin g y o u n o t t o in v est , I f e e l I sh o u ld m e n t io n i t . U n e m p lo y m e nt is sort o f cre e p in g u p , y o u ha v e a ll t h ese th in gs ha p p e n in g . My a d v ic e , I m e t a y o un g la w y er an d ask e d h i m w ha t h e w as d o in g , h e sa id I’m in b ankru p t c y la w . I sa id y o u m ig h t b e in a g ro w th in d ustry . T h e a d v ic e I g iv e y o u , o n e fast st ory , t ha t b rin gs h o m e w h a t I a m sa y in g , y o u o u g h t t o ha v e c ash , k e e p it aro un d , y o u m ig h t f in d a g re a t use for it . O n e t i m e , S ir R o b ert w as th e rich est m an in A ustra lia , h e sa ys, y o u sh o u ld lo o k a t t h is

c o m p an y T e x a c o , t h is w as in ’85 , I’m frie n ds w it h th e m ana g e m e nt , b u t I t h ink th e st o ck is v ery ch e a p . T h e n w e t a lk e d m ore an d h e sa id I lo v e t o b u y sto cks, an d I’m b u llish o n th e m ark e t rig h t n o w , h e sa ys I h a v e lin es o f cre d it fro m a ll m y frie n ds fro m d if f e re n t b anks, an d I ha v e $12 B in cre d it . L in es o f cre d it? W h e n y o u n e e d th e m o n e y th e y w o n ’t g iv e it t o y o u . H e sa id y o u are t o o c y n ic a l, t h ese b ank ers are a ll m y g o o d frie n ds. I sa id tha t ’s n o p ro b le m . I lo o k e d a t T e x a c o , I d id n ’t b u y m uch , t h e st o ck w as in th e 5 0 ’s, b u t as y o u kn o w T e x a c o w e n t b ankru p t . I w as w a t ch in g it , an d I w as o n a p lan e g o in g t o Martha ’s V in e y ard , an d n e x t t o m e w as a D a ily N e w s h a d S ir R o b ert in tro u b le . N o w T e x a c o ha d n ’t chan g e d , t h e asse ts w ere st ill t h ere , b u t t h e y w ere in b ankru p t c y an d in tro u b le . So I p u t in a c a ll t o h i m , it ’s a b o u t m id n ig h t th e p h o n e rin gs, h e ’s f ly in g aro un d th e w orld , I sa id it ’s n o t m y b usin ess b u t I re a d so m e w h ere y o u m ig h t b e ha v in g so m e crisis, it ’s 19 87 . I ha v e a lo t o f c ash , I’d lik e t o b id y o u , if y o u w an t t o b id , for y o ur T e x a c o st o ck , I’ll b id y o u 29 , w ha t it ’s se llin g . I h e ard Ja m es G o ldsm it h is try in g t o b u y it . Y o u c an t a k e m y b id for 4 8 h o urs, an d y o u c an t e ll G o ldsm i t h , if h e b ids h ig h er…. H e sa ys I’ll d o it rig h t n o w , le t ’s g e t t h e la w y ers t o w ork , w e w ork e d a ll n ig h t an d I b o u g h t th e st o ck . B u t b e fore I hun g u p , h e sa id b y th e w a y , y o u w ere q u it e c orre c t a b o u t t h ose b anks. T o b rin g it h o m e a b o u t t h e n e e d for c a p i t a l in b a d t i m es, t h ere ’s a b o o k , lit t le kn o w n b y Dre iser, t h e F inn ian Se ar, t ru e st ory a b o u t a b rillian t f inanc ier in 19 0 0 . H e w as m ak in g a ll t h is m o n e y , h e w as le v era g e d t o th e h ilt , an d th ere w as a Ph ila d e lp h ia f ire , h e lost h is m o n e y , m o v e d t o C h ic a g o , an d a g a in h e w as kn o w n a f t er 3-5 y e ars as b e in g a b rillian t sp e cu la t or an d m a d e a for tun e . T h e n h e g o t in t o th is w ar w it h th e m a jor fa m ilies o f C h ic a g o , an d e v ery o n e e x p e c t e d h i m t o lose th is f ig h t . D re iser m e t in C h ic a g o , a ll t h e n e w sp a p ers w ere o u tsid e w a it in g t o f in d o u t th e resu lt . A n d th e m an w a lk e d o u t sm ilin g , h e sa ys y o u kn o w I lost a ll m y m o n e y , I le arn e d a lesso n fro m tha t , if y o u fo llo w th is o n e ru le I ha v e , y o u sh o u ld a l w a ys w in , h e sa ys, for e m erg e nc ies a l w a ys ha v e $1 0 0 m illio n in g o ld b urie d in S w it z erlan d . T ha t ’s m y a d v ic e , n o t t o ha v e $1 0 0 M illio n in g o ld , b u t ha v e c a p it a l aro un d un less y o u c an g e t an e d g e or arb it ra g e lik e w ha t w e d o . B u t tha t ’s m y a d v ic e , for w ha t it ’s w orth . Q u est io ns & A ns w ers fro m th e au d ie nc e

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Q : Y o u w ere c a lle d th e c orp ora t e ra id er in th e 19 8 0 ’s, n o w y o u are a w h it e ha t g u y . W ha t ’s th e d if f e re nc e? A : t h ere is n o d if f e re nc e , w ha t I d id w as sa lu t a t ory . I’m n o t Ro b in H o o d , b u t w ha t w e d o h e lps share h o ld ers a g re a t d e a l. In th e last 2 y e ars, w e g o t a c t iv ists, t h e y fo llo w e d so m e o f th e stuff. In a y e ar la t er w e a d d e d $5 0 MM t o th e c o m p an ies. Q : W h e n y o u d id th is in th e 8 0 ’s y o u t o o k gre e n m a il. Y o u w ere n o t th e share h o ld er’s frie n d? A : I d id n ’t kn o w I w as w ork in g for an y o th er share h o ld ers. If t h e c o m p an y w an ts t o p a y m e , w e g o in t o a c o m p an y an d lit e ra lly , I w as re la t iv e ly p o or th en . A m eric an C an for inst anc e , t ru e st ory . I a m b u y in g st o ck , I b e lie v e th e m ana g e m e n t w as p re t t y p o or, i t w as an insuranc e c o m p an y , I b e lie v e d w e c o u ld c o n v inc e th e p e o p le a t A m eric an C an t o d o so m e th in g . B u t as I sa y , t h ese c o m p an ies w o u ld h ire arm ies o f la w y ers, I d id n ’t ha v e th e p o w er. I w as m ore b luff in g th e n , I’m n o t an y m ore . I h a v e m o n e y an d fo llo w in g . I g o t o A m eric an C an an d a frie n d o f m in e , su p p ose d frie n d , c a lls m e an d sa ys c o m e u p , I kn o w y o u ’re b u y in g th e st o ck , m e e t th ese g u ys. I sa id gre a t , I’v e g o t g re a t id e as an d I g o m e e t th e m , an d I h a v e b o o ks an d p a p ers an d g ra p hs an d th is is w ha t I c an d o . T h e t w o g u ys w ere n o d d in g , an d I f ig ure d I’m m ak in g h e a d w a y . So I g o o u t , an d fe e l t h is is g re a t , t h e y c an p u t m e o n th e b o ard an d I c an run so m e o f th e m o n e y . A n d h e sa ys y o u kn o w , t h e y d o n ’t lik e y o u . I sa id w ha t d o y o u m e an , t h e y w ere sm ilin g . H e sa id tha t ’s th e ir w a y , h e sa id h ere ’s y o ur ch o ic e , I kn o w y o u ’v e g o t m ost o f y o ur m o n e y in A m eric an C an , an d t o m orro w w e ’ll su e y o u in e v ery st a t e , an d y o u kn o w tha t ’s e x p e nsiv e , I d o u b t y o u ’ll b e a b le t o w e a th er th e st orm , an d w e ’re g o in g t o h ire PR f irms an d b last it . I sa id th ere ’s n o th in g I e v er d id . H e sa id tha t ’s o ka y , w e ’re g o in g t o b last it . Y o ur w if e m ig h t n o t lik e it . T h e n th e y sa id if y o u g e t thro u g h a ll t ha t , t o d a y I w o u ld f ig h t th e m , b u t e v e n if y o u g e t a ll t hro u g h tha t th e y sa id w e ’ll se ll t h e insuranc e c o m p an y an d w e ’ll n e v er le t y o u

c o m e in . H ere ’s an a l t e rna t iv e y o u c an se ll t h e st o ck an d w e ’ll g iv e y o u $2 4 M illio n , an d I t o o k th e 2 4 . T h e g re e n m a il is o v er n o w . Y o u c an ’t d o it t o d a y , t h ere are t a x la w s. B u t I w o u ld n ’t d o it . I d o th ink tha t w ha t I d o is e x tre m e ly sa lu t a t ory for t h e e c o n o m y an d it has t o b e d o n e . W e ’re losin g o ur h y g ie n it y . Q : Y o u ha v e an in t erest in g th e ory o f c orp ora t e m ana g e m e nt . A : A th e ory m ore than a th e ory , it ’s a b e lie f. So m e o f y o u m a y n o t m in d th is, y o u ’re n o t a ll C E O s o u t th ere . W it h m an y e x c e p t io ns, w h e n y o u w e n t t o c o lle g e y o u w ere in a fra t ern it y , or c lu b , an d I w e n t t o Princ e t o n , I w ork e d hard . W h e n I w asn ’t w ork in g if I f e lt d o w n a b o u t so m e th in g , y o u w e n t t o y o ur c lu b . In th e c lu b w as th e p resid e n t , t h e fra t ern it y p resid e n t , g re a t est g u y , n ic e g u y . S la p p e d y o u o n th e b a ck , t e ll m e y o ur st ory . H o w c o m e th e g u y n e v er d id an y w ork , h e w as a l w a ys th ere . Y o u v o t e d for h i m , h e g o es in t o b usin ess, n o t t h e b rig h t est g u y , b u t has t w o g o o d inst inc ts, lik e a b le an d a surv iv or. H e kn o ws w h e n h e ’s thre a t e n e d . H e w o u ld kn o ck th e o th er g u y o u t , h e kn e w h o w t o d o it . T h is g u y m o v es u p th e la d d er, n e v er ha v in g re a l id e as, n e v er g o in g t o b e a thre a t t o th e g u y a b o v e h i m , in fa c t , h e ’s a lit t le d u m b er than h i m . T h e g u y a b o v e h i m is n o d u m m y an d m o v es h i m o u t . B u t t h is g u y m o v es u p t o C E O , t h e B o ard m e m b ers lik e h i m , h e ’s a l w a ys a v a ila b le , n e v er m ak es w a v es or has an id e a . H e e v e n tua lly , w h e n th e C E O le a v es g e ts t o b e C E O . N o w tha t g u y g o es thro u g h th e sa m e th in g . H e ’s a surv iv or. H e n e v er w an ts so m e o n e un d ern e a th h i m brig h t er than h i m . So th e g u y w h o ’s # 2 g e ts t o b e C E O . E v e n tua lly y o u ’ll h a v e m oro ns runn in g th e c o m p an y . W e m a y n o t b e tha t far fro m tha t p o in t rig h t n o w , t ha t ’s w ha t w orries m e . O n e p o in t , t h ere are m an y e x c e p t io ns t o th is ru le , I’v e m e t so m e re a lly b rig h t g u ys an d d e d ic a t e d g u ys w h o run c o m p an ies. T h is d o es n o t f it e v ery th in g , I’m a lit t le fa c e t io us. T h ere are g u ys in-b e t w e e n .

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DENNIS NALLY Corporate Accountability I h a v e a t o p ic I w an t t o in tro d uc e w it h y o u , b u t b e fore I b e g in m y re m arks, le t m e se e a sh o w o f han ds, h o w m an y o f y o u re m e m b er w ha t it w as lik e in th e w ork p la c e 3 0 y e ars, a g o . T ha t ’s w ha t I t h o u g h t n o t t o o m an y . H ere ’s w ha t I re m e m b er, in 197 4 , w h e n I b e g an m y c are er, a d v anc e d t e chn o lo g y w as an a d d in g m a ch in e . A n d th e d ress c o d e w as a su it , w it h w id e la p e ls an d 3 p ie c e . H u m an R eso urc es w as P erso nn e l w as d o w n th e ha ll. I w an t t o t a lk a b o u t th e ro le o f hu m an reso urc es, ar t o f f in d in g , d e v e lo p in g an d re t a in in g t a le n t . A t P W C w e re a li z e n o issu e has a g re a t er or d ire c t b e arin g o n o ur b o t t o m lin e as t a le n t , n e v er b e fore has it b e e n as cha lle n g in g as it is t o d a y . In 197 4 , o ur t o p c o m p e t it ors w ere th e o th er b ig a c c o un t in g f irms. T h e sh if t t o kn o w le d g e b ase d e c o n o m y has chan g e d a ll o f t ha t . F irms b e fore re lie d o n an un li m it e d su p p ly , t o d a y w e ’re fa c e d w it h un li m it e d d e m an d . F in d in g t a le n t is n o lo n g er as si m p le as c o n d uc t in g a c a m p us c a m p a ig n . T h ese cha lle n g es are c o m p o un d e d b y t h e fa c t t ha t a siz e a b le p ort io n o f U .S. w orkforc e w ill b e re a d y t o p a ck it u p an d m o v e t o F lorid a in 2 y e ars or so . 25% o f th e w ork in g a g e p o p u la t io n w ill re a ch re t ire m e n t a g e . W e a ll kn o w a b o u t it , t h e re a l q u est io n is w ha t are w e g o in g t o d o w it h it . W it h chan g in g d e m o gra p h ics, t e chn o lo g y an d g lo b a li z a t io n , t a le n t is n o lo n g er just a resu m e a w a y . A m eric an c orp ora t io ns are lo o k in g t o a fu ture w h ere w it h o u t t a le n t , p erform anc e an d p ro f it a b ilit y w ill b e a t a sig n if ic an t risk . H o w m an y t i m es ha v e y o u h e ard c o m p an ies sa y o ur p e o p le are o ur g re a t est asse t . T o d a y c o m p an ies n e e d t o d o a lo t m ore than just sa y it . W e n e e d t o a c t o n it . T a le n t w ill b e th e d e f in in g c o m p e t i t iv e a d v an t a g e . C o m p an ies tha t w an t t o suc c e e d w ill n e e d t o d ra m a t ic a lly d e f in e , d e v e lo p an d m ore i m p ort an t ly h o ld o n t o th e t a le n t tha t t h e y ha v e . N o lo n g er c an w e lo o k a t H R as a ro le o f a sin g le d e p art m e n t , b u t e m bra c e it as a c e n tra l stra t e g y fo r o ur suc c ess. O r re a lly b u ild H R in t o o ur D N A , fro m b o ardro o m a ll t h e w a y d o w n . H o w I t h ink it c an b e d o n e . F irst f in d in g th e rig h t p e o p le . Use d t o b e th e re q u ire m e n ts w ere stra ig h t for w ard , b a ck gro un d in a c c o un t in g or b usin ess, d e gre e fro m an A m eric an un iv ersit y , an d w illin g n ess t o w ork hard . A t P W C w e

b e lie v e w e p la y a crit ic a l ro le in th e sm o o th func t io n in g o f c a p it a l m ark e ts, w e n e e d in d iv id ua ls w h o un d erst an d b a lanc e sh e e t as w e ll as P&L st a t e m e n t , b u t a lso p e o p le w h o c an b a lanc e p riorit ies o f p ro f it an d p rinc ip le . W e n e e d e m p lo y e es w it h in t e grit y . W e ’v e a ll se e n w ha t c an ha p p e n w h e n th is is n o t th e c ase . W e a lso n e e d p e o p le o f d iv erse b a ck gro un ds, d iv erse cu lt ures, b rin g in g bro a d er un d erst an d in g o f t h e w ork aro un d th e m . T h is p ro v id es re a l o p p ortun it ies, b u t a re a l resp o nsib ilit y as w e ll, t o o ur p e o p le an d so c ie t y a t larg e . W e c an ’t un d erst an d th ese o p p ortun it ies – le t a lo n e a d dress th e m – if o ur w orkforc e d o es n o t a d dress th e n e e ds o f t h e m ark e t p la c e . A sse m b lin g w orkforc e tha t th inks a lik e w o n ’t w ork . W e n e e d t o e x p an d p ara m e t ers o f o ur re cru it in g . W e c an re ly o n th e stre n g th o f o ur n e t w ork a t P W C t o b rin g o ur o p era t io ns aro un d th e g lo b e . B u t it ’s si m p ly n o t e n o u g h . T h e g o o d n e ws, o n c o lle g e c a m p us t o d a y , d iv ersit y is g ro w in g , 14% o f stu d e n ts are fro m In d ia . A n d a p p lic a t io ns t o Y a le fro m C h in ese stu d e n ts has g ro w n 7 0%. T h e b a d n e w s: t a p p in g in t o th is t a le n t is n o t e asily d o n e . T h e y are g ra d ua t in g an d g o in g h o m e . T h e v isa c a p for t h ose w an t in g t o w ork in th e U .S. w as re a ch e d o n th e f irst d a y o f f ilin g , an d a f t er d a y o n e y o u c o u ld n ’t e v e n a p p ly . B usin esses n e e d t o b an d t o g e th er t o incre ase th e v isa ca p . B u t un t il t h is chan g es, c an ’t sit o n sid e lin es, n e e d t o w ork hard er t o f in d an d cu lt iv a t e th e t a le n t in o ur b a ck y ards. T h is m e ans re cru it in g stu d e n ts a t e arlier a g e . Jun ior an d Se n ior y e ars is n o t e n o u g h . N e e d t o a t t ra c t t h e m b e fore th e y d e c lare m a jors, n o w re a ch in g o u t t o F resh m an an d So p h o m ore y e ars, as th e y are ch o osin g a m a jor. C o m p an ies re a li z in g tha t t e chn o lo g y c an p la y an i m p ort an t ro le in re cru it in g , a lso re v o lu t io n i z in g h o w c o m p an ies re cru it . D id y o u e v er i m a g in e y o u c o u ld re cru it o n lin e , or b y se n d in g t e x t m essa g es? C o m p an ies tha t d o n o t e v o lv e , m o v e for w ard , w ill b e le f t b e h in d . T h e c o m p e t it io n is re a l, re c e n t W SJ p o ll sh o ws tha t ha lf t h e resp o n d e n ts w ere less suc c essfu l t han p re v io us y e ar in h irin g M B A c an d id a t es. F in d in g th e rig h t p e o p le is a b o u t kn o w in g h o w , w h e n , w h ere t o lo o k . More i m p ort an t ly , f in d in g th e p e o p le y o u w an t is e nsurin g th e p e o p le w an t y o u . T o a t t ra c t t h e t a le n t n e c essary , is a b urd e n o n b usin ess t o m ak e th e w ork p la c e m ore

W orld B usin ess F oru m 2 0 0 7 Pa g e | 27

a t t ra c t iv e than in th e p ast . W asn ’t so m e th in g m ost c o m p an ies th o u g h t a b o u t . T o d a y ’s e n v iro n m e nt , c o m p an ies c ann o t rest o n th e ir laure ls, b ig na m e is n o t e n o u g h . T h e re c e n t c orp ora t e sc an d a ls m ak e c an d id a t es th ink t w ic e , t h e y ask q u est io ns lik e is th ere c orp ora t e in t e grit y . Jo b se e k ers d e m an d in g m ore in a b ran d , w an t t o kn o w it ’s au th e n t ic , it ’s re a l. W an t t o b e sure th e i m a g e prese n t e d m a t ch es re a lit y o f w ha t ’s t a k in g p la c e in w ork p la c e , if it d o esn ’t , t h e y ’ll f in d so m e th in g b e t t er. 7 0% o f stu d e n ts w o u ld n ’t a p p ly for a jo b tha t d id n ’t c o nsid er so c ia l resp o nsib ilit y o f t o p p riorit y . A n o th er stu d y a t St anford , stu d e n ts w o u ld sa crif ic e $13 , 0 0 0 t o w ork for a c o m p an y w it h so c ia l resp o nsib ilit y . F le x ib ilit y is an o th er c o nc ern , t o p re q u ire m e n ts o f jo b se e k ers t o d a y . T e le c o m m ut in g m ore th e n orm , so is p ro v id in g c ash t o p ro v id e e m p lo y e e t o se t u p h o m e o ff ic e , p e o p le e x p e c t f le x ib ilit y t o b e i m p ort an t p art o f t h e p a cka g e . Im p ort an t t o re cru its an d e m p lo y e es, so th is y e ar w e t a ck e d o n 3 m ore w e e ks for m a t ern i t y le a v e , m ore t i m e o ff, F rid a y ’s o ff in th e su m m er. T h is resp o nse w as p h e n o m e na l. B o t t o m lin e , jo b se e k ers t o d a y w an t m ore . T h e y ’re in th e p osit io n t o d e m an d it , an d c o m p an ies tha t p ro v id e it w ill w in in th e m ark e t p la c e . So a t tra c t in g t a le n t has chan g e d , an d th e cha lle n g e o f re t a in in g it has e v o lv e d e v e n m ore . A stu d y e arlier th is y e ar sa id tha t k e e p in g w ork ers ha p p y , cha lle n g e d , m o t iv a t e d has b e c o m e m ore i m p ort an t t o b usin esses, m ore than c o n tro llin g c osts. W e m a d e re t e n t io n m ore i m p ort an t . C o m p a n ies tha t o b t a in g o o d re t e n t io n nu m b ers ha v e a b e t t er t i m e a t tra c t in g e m p lo y e es. W e sa w th is as a p ro b le m in o ur c o m p an y , w e st art e d fo cusin g o n d e v e lo p in g o ur p e o p le . W ha t d o I m e an? More e m p hasis o n tra in in g , e asier for e m p lo y e es t o a t t e n d , an d m a d e i t n o t o n e si z e f its a ll, an d m a d e it e asier for th e m t o d e v e lo p th e ir sk ill se ts. F ro m tra in in g o v erse as t o c lasses o n t e a m w ork an d v a lu es. A lso g a v e th e m a b ilit y t o t a k e e x t e n d e d t i m e o ff t o h e lp ra isin g ch ildre n an d a g in g p are n ts. W e insist e d tha t m ana g e m e n t an d m e n t ors g a v e q ua lit y f e e d b a ck , w e m a d e c o nst an t c o a ch in g p art o f o ur cu lt ure . C an ’t t a lk a b o u t re t e n t io n w it h o u t t a lk in g a b o u t e m p lo y e e d e v e lo p m e nt . W h e n y o u se e e m p lo y e es g ro w in g w it h th e c o m p an y , t h e y are m ore lik e ly t o st a y , t h e ir v a lu e w ill o n ly incre ase w it h a f irm tha t is d e v e lo p in g th e m . T h is p o in ts t o an o th er re a lit y ,

d e v e lo p m e nt is a crit ic a l c o m p o n e n t o f b u ild in g th e t a le n t e d w ork forc e w e a ll n e e d . A t P W C p e o p le are o ur b ran d , o ur b usin ess, an d w e b e lie v e in b u ild in g th e b est b usin ess. T h ink a b o u t it , for m an y c o m p an ies, it ’s th e ir sin g le larg est e x p e nse , b u t m an y d o n ’t sp e n d th e t i m e or reso urc e t o m ak e sure e m p lo y e es are re a lly p erform in g a t t h e ir b est . If y o u sp e n d m o n e y o n e q u ip m e nt , y o u ’d m ak e sure it g o t t h e m a in t e nanc e it n e e d e d . T h ere w as a t i m e w h e n o ur c o lle g e d e gre es a llo w e d us t o re m a in u p t o sp e e d for o ur c are ers. T o d a y , lif e lo n g le arn in g is n o t t h e n orm . W e n e e d t o cu lt iv a t e th e ha b it o f c o n t inu o us le arn in g , m ak e it so m e th in g w e d o w h e n n o o n e is lo o k in g . C o m m it m e n t t o cu lt ure o f le arn in g fro m t o p a ll t h e w a y d o w n . W ha t it w ill t a k e t o suc c e e d in th e q u est for t a le n t . Just as it m ust b e in t e gra t e d t o e v ery d e p art m e n t , m ust p ro je c t o u t w ard as w e ll t o c o m m un it ies, sch o o ls, c lassro o ms in A m eric a . H as t o b e h o list ic in its na ture . R esp o nsib ilit y o f a le a d er is t o m ak e sure b usin ess suc c e e ds t o d a y an d t o p osit io n it so it suc c e e ds in th e fu ture , b y lo o k in g t o w ard th e n e x t g e n era t io n w h o w ill b e le a d in g t o m orro w . T a lk in g a b o u t e d uc a t io n , fun d a m e n t a lly , a t its e arlier st a g es. W e ll b e y o n d re a ch in g o u t t o fresh m e n an d so p h o m ores in c o lle g e . Ma y b e y o u ’v e h e ard a b o u t 5 St ar, c a m p for b ask e t b a ll stu d e n ts. E v ery y e ar re cru it e rs d esc e n d o n th is c a m p . W h y are n ’t w e , just lik e b ask e t b a ll c o a ch es t a k in g th e g re a t er in t erest in o ur stu d e n ts a t a n e arly st a g e in th e g a m e .? O p p ortun it y t o b e g in sha p in g an d d e v e lo p in g p e o p le b e fore th e y g e t t o us. More than an o p p ortun it y , for t h e fu ture o f o ur c o un try an d a b ilit y t o c o m p e t e g lo b a lly , t o m e it ’s a na t io na l resp o nsib ili t y . W e ’re t ry in g t o m ak e a d if f e re nc e thro u g h th e jun ior d e v e lo p m e nt p ro gra m t o e nrich pro gra ms for h ig h sch o o l stu d e n ts. T h ere is m ore w e sh o u ld b e d o in g . W e are c o m m i t t e d t o a d dress w h y th e syst e m isn ’t w ork in g , an d w ha t c an b e d o n e t o f ix it . W e b e lie v e tha t b u ild in g a c o m p e t it iv e t a le n t p o o l is cruc ia l t o th e suc c ess o f o ur b usin ess, t h is is n o t just a P W C or b usin ess cha lle n g e . A t its c ore it ’s an A m eric an cha lle n g e . A m eric an b usin esses t o d a y are p la y in g o n a d if f e re n t p la y in g f ie ld w h e n i t c o m es t o re t a in in g an d sust a in in g t a le n t . T h e w orld has chan g e d , c o m p e t it io n for t a le n t , e a ch o f us m ust e n g a g e in w a ys n e v er d o n e b e fore , t h e cha lle n g e is re a l, a c t io n is re q u ire d an d t i m e is n o w .