Insigniam Quarterly Spring 2015 - Pathways to Growth

VO L U M E 3 , I S S U E 1 | S P R I N G 2 015
SPECIAL FORCES
Arcadis U.S. CEO and
turnaround expert John
Jastrem on transforming
disaster into success.
COFFEE WITH AN
ACCENT
The CEO of The Coffee
Bean & Tea Leaf
on expanding your
enterprise overseas.
AN INSIDE PERSPECTIVE ON DRIVING GROWTH AMID
THE DISRUPTION OF THE GLOBAL HEALTHCARE MARKET
™
FORWARD FACING
Cardinal Health
Medical Segment CEO
Donald Casey Jr. is
leading his company
into the future.
THE HEART
OF THE MATTER

The corporate culture acts like DNA, it holds the
instructions and protocols that can drive dramatic
growth. When organic growth is hard to achieve and
growth strategies wither and die, look to the corporate
culture. Transformational leadership sees to it that
the corporate culture contains the elements that
continually support a stream of dramatic growth.
— NATHAN O. ROSENBERG
FOUNDING PARTNER, INSIGNIAM

LETTER
INSIGNIAM QUARTERLY 1
N
FINDING THE FACTORS THAT
FUEL GROWTH
No one disputes the science behind Mother Nature’s growth process.
For plant life to flourish,the necessity of sunlight,water,and nutrients can’t be argued.
So why would we go about enterprise growth with any less certainty? After all,
we have conducted thorough research to unearth the factors that lead companies to
not just survive, but thrive.These prerequisites to growth can then be incorporated
at every level.
Take corporate culture,for instance.Some may think that culture is too intangible
to be molded.Yet our research,described in this issue,outlines nine specific facets of
corporate culture and how they must be oriented for abundant growth.This,in turn,
provides a clear road map for executives.
Thesamecanbesaidforleadership.Whenexecutivesfightinhibitoryfactorssuchas
corporatemyopia,andembraceriskandcreativeprocesses,growththroughinnovation
is around the corner.
AquickglanceatFortune500companiesrevealssometrulyexemplarycasestudies
in growth,such as that of Cardinal Health,which ranks No.22 on the esteemed list.
Our in-depth interview with our cover subject, Donald Casey Jr., the CEO of the
company’s medical segment, reveals how Cardinal Health has positioned itself for
expansion during a time of unprecedented change in the healthcare industry. In
many ways,Casey’s approach has taken into consideration the 10 disruptive forces in
healthcareweidentifyinthisissue,andCardinalHealthisnowexcellingintothefuture.
Evenwhenanorganizationisriddledwithapathy,sufferingfromdwindlingprofits,
and facing a seemingly inevitable demise — we’ve found a fertile breeding ground
for opportunity.We visit with turnaround expert andArcadis U.S.CEO John Jastrem,
who outlines what to do when it seems like the enterprise is out of options.
The truth is that, given the right tools and information, any company can take
decisive action that will lead to expansion.And in that vein,I present our spring 2015
issue,which considers the many sides of corporate growth from multiple perspectives.
Dramaticgrowthonlyappearstobejustoutofreach,andhereatInsigniam,weeagerly
look forward to partnering with you in the journey to achieve new corporate goals.
SPRING 2015
Shideh Sedgh Bina
Founding Partner, Insigniam

SPRING 20152 INSIGNIAM QUARTERLY
46
10 DISRUPTIVE FORCES IN HEALTHCARE
Insigniam
Extensive research has unearthed the factors
most affecting healthcare and the related steps
companies can take to succeed.
48
GROWTH THROUGH ADVERSITY
Stacey Closser
Turnaround expert and Arcadis U.S. CEO John
Jastrem explains how you can transform disaster
into untold success.
52
GROWTH WITH AN ACCENT
Joe Guinto
From cheeseburgers to lattes, The Coffee Bean &
Tea Leaf CEO John Dawson understands how to
transform domestic brands into global enterprises.
58
ORGANIC GROWTH
Rob Calderin
An in-depth look at the pathways to achieving
organic growth, a top priority of C-suite executives
in 2015.
FEATURES
THE HEART OF
THE MATTER
Chris Warren
As the CEO of Cardinal
Health’s Medical Segment,
Donald Casey Jr. has
positioned the company
for dramatic growth
through an innovative
approach to the changing
healthcare market.
COVER
STORY
38
TABLEOFCONTENTS

SPRING 2015 INSIGNIAM QUARTERLY 3
EDITOR-IN-CHIEF Shideh Sedgh Bina
shidehbinaIQ@insigniam.com
EXECUTIVE EDITOR Nathan O. Rosenberg
nrosenberg@insigniam.com
CHIEF FINANCIAL OFFICER Ralph Gotto
DIRECTOR OF WORLDWIDE Karen Turner
CLIENT SERVICES kturner@insigniam.com
DIRECTOR OF SPECIAL PROJECTS Alexes Fath
GENERAL MANAGER Jas Robertson
PRESIDENT Paul Buckley
EDITORIAL DIRECTOR Amy Robinson
amy.robinson@dcustom.com
MANAGING EDITOR Brian Keagy
CREATIVE DIRECTOR Kyle Phelps
kyle.phelps@dcustom.com
ASSISTANT ART DIRECTOR Emily Slack
PRODUCTION MANAGER Pedro Armstrong
IMAGING SPECIALIST John Gay
ACCOUNT DIRECTOR Cory Davies
EDITORIAL QUERIES
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214.523.0300
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Insigniam Quarterly is published by D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201.
Copyright 2015 by Insigniam. All rights reserved. Letters to the editors may be sent to Insigniam
Quarterly c/o D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. No part of this
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www.insigniamquarterly.com.
Q U A R T E R LY
VOLUME 3, ISSUE 1 | SPRING 2015
“We talk about it a ton. What are we doing to help our
customers with their biggest challenges every day?”
— DONALD CASEY JR., CEO, CARDINAL HEALTH MEDICAL SEGMENT
THE TICKER
Innovating your way to growth.
TOP LINE
Industries and markets experiencing explosive growth.
BLOOD, SWEAT & TEARS
Implementing a global shared services department to
produce international growth at The Hershey Company.
THE BOARDROOM
Is your company using an outdated model for board of
director involvement?
IQ BOOST
Building a passion for growth.
04
08
10
14
64
18
24
28
32
DEPARTMENTS
On the cover:
Cardinal Health Medical
Segment CEO Donald Casey Jr.
VO L U M E 3 , I S S U E 1 | S P R I N G 2 015
SPECIAL FORCES
Arcadis U.S. CEO and
turnaround expert John
Jastrem on transforming
disaster into success.
COFFEE WITH AN
ACCENT
The CEO of The Coffee
Bean & Tea Leaf
on expanding your
enterprise overseas.
AN INSIDE PERSPECTIVE ON DRIVING GROWTH ADMID
THE DISRUPTION OF THE GLOBAL HEALTHCARE MARKET
™
FORWARD FACING
Cardinal Health
Medical Segment CEO
Donald Casey Jr. is
leading his company
into the future.
THE HEART
OF THE MATTER
Insigniam and its publisher, D Custom, distribute
this editorial magazine to share the opinions
and insights of companies and their leaders on
impactful global business issues. Insigniam
Quarterly’s inclusion of a company or individual
does not indicate that they are a client of Insigniam.
Remuneration is not provided for editorial
coverage. Individuals appearing in Insigniam
Quarterly have done so with direct consent, or
provided consent by a designated authorized agent
in addition to being disclosed on the magazine’s
audience and purpose.
MINI-FEATURES
™
LEADERSHIP FOR EXPLOSIVE GROWTH
How executives can build on enterprise strengths to
create a process that leads to innovative growth.
UNLEASH CULTURE TO FUEL GROWTH
Aligning the nine facets of corporate culture to prime any
organization for success.
GROWTH FACTORS: TOP 10 EMERGING MARKETS
An analysis of the major factors fueling the growth rates in
these top emerging markets.
INVENTING GROWTH
Move past traditional means of acquiring growth by
developing an organization geared toward innovation.

THE TICKER
NO TOYING AROUND: LEGO’S
ALL-STAR COMEBACK
esearch shows that children are spending less and
time playing with LEGO bricks every year.Thankfully,LEGO
corporateleadersarewellawareofthistrend—andthat’sexactly
why creativity is flourishing at the company,sales are booming,
and the business surpassed rival Mattel to become the largest
toy manufacturer in the world by revenue and profit in 2014.A
firmbelieverinexperimentation,LEGOhasgivenitsexecutives
a simple mission: to routinely reinvent the business from the
bottom up.Through the introduction of films, video games,
apps, and augmented-reality experiences, senior leaders have
quickly embraced that mandate.
It bears remembering that disruption didn’t always come
naturally to the company.Thirteen years ago, LEGO was on
thevergeofstagnation,culminatinginadisastrous2002holiday
season when 40 percent of its retail stock went unsold. So the company decided to slash costs
and get back to basics.It doubled down on its core competency:mastering the mechanics of play.
Conducting groundbreaking research on how children play,LEGO quickly gained insights few
companies possessed. It parlayed these insights, along with its flair for design and cutting-edge
R&D,into a rapid-fire barrage of new ventures and quickly staged an all-star comeback.
Recently hailed by Fast Company as“theApple of toys,”the organization no longer sees itself as
being in the business of playthings.Rather,recognizing that children no longer make meaningful
distinctions between physical and digital interactions, it has repositioned itself as being in the
business of“play experiences.”Poised to unleash an onslaught of groundbreaking new ventures
from free motion-tracking games you can play with a wave of your hand to massive internet-
ready apps,it just goes to show… even when the basic building blocks of a business seem to be
crumbling,clever recombination is all it often takes to piece them back together.
11,755
$80 MILLION
$4.6
BILLION
LEGO’s 2013 revenue,
which has more than
doubled since 2009,
when it was $2.1 billion
Amount of money spent each year on
R&D in 2013, up from $52 million in 2009.
Number of LEGO
employees in
2013, an increase
from 7,286 just
four years prior.

Studies of the world’s most successful firms
show that the fastest way to unlock your organization’s
creativity and growth potential is through simply
providing employees with flexible platforms for
brainstorming, sharing, and executing new ideas. An
increasing number of business leaders, from Wells
Fargo to Unilever, are embracing these collaborative
brainstormingprinciples.Nearlyafifthofallenterprises
now use cloud computing and websites to innovate —
just one of many tools for capturing worker suggestions.
But what’s even more eye-opening is how market leaders
are using these tools to drive continuing growth and success.
For example: At big data leader EMC, business units
pose pressing strategic problems to employees to solve via
innovation contests. Workers can suggest solutions, source
feedback, and vote for winning ideas online, which are
transformed into real-world prototypes. Strikingly, though,
many of the firm’s best new innovations are happening when
employeesindependentlyteamuptobringfailingideastolife.
Atpersonalfinance-softwaredeveloperIntuit,leadersgoone
stepfurther.Employeescanproposeideas,securestaffingand
resources,andactuallygotomarketwithpilotprograms,sans
management approval — and dozens of revenue-generating
features and products have resulted. Even government
THE POWER OF
THE PLATFORM
agencies such as NASA and the Federal Trade Commission
are now using crowdsourcing portals like Challenge.gov and
offering cash prizes to the public for creating new, business-
ready solutions. So the next time you want to spark ongoing
growth and success? It frequently pays to get a second — or
even 200th — opinion, just as the world’s most celebrated
business leaders do.
INNOVATE FASTER
When it comes to innovation,
less is often more. According to a
recent book Make Change Work for
You: 10 Ways to Future-ProofYourself,
Fearlessly Innovate,and Succeed Despite
Uncertainty,evolutionsandslightshifts
inthinkingcanbeeverybitaspowerful
as revolutions and game-changing
breakthroughs.Herearefivewaysyou
can rapidly drive innovation in your
enterprisewithouthugeinvestments:
Constantlyexperimentwithnewproductsandstrategies,iteratingandimproving,
based on the results you get from the market.
Always look for ways to reposition your products toward new customers.Ask
yourself:Who else might want our solutions?What new problems can we solve?
Build an environment that encourages colleagues to bring new ideas to light,
and look for insight from unusual places — customers can be your best source.
Share information freely through departments.When teams are aligned,you can
more easily bring about innovations.
Play a portfolio of strategic bets and innovative new ventures:These efforts can
help you continually learn,grow,and stay ahead of the pack.

THE TICKER
INNOVATION FOR BREAKFAST
Whynotstartthedaywithafresh,
piping hot cup of oatmeal — served
straight from your Keurig coffeemaker?
Thanks to food manufacturer General
Millsandthemagicofopeninnovation,
the choice is yours. With sales of cold
cereals (representing about 22 percent
of the firm’s U.S.-based business) down
as much as 10.7 percent from 2003 to
2013, the company recently faced a
difficult choice: Adapt or decline. With
an increase in customers’ demand for
grab-and-go convenience, the rising
popularity of fast-food retailers’ $3
drive-through oatmeal cups, and
the decrease in the amount of time
most have to sit around the breakfast
table, the company realized it had an
opportunity: It could use booming
sales of single-serve coffeemakers as
a way to reach today’s time-strapped
customer. After internal brainstorming
sessions, innovation teams created an
early sketch of potential solutions. They
then presented prospective ideas to
their network of suppliers, and external
vendors quickly came up with flavoring
recipes, packaging, and prototypes.
Following successful concept testing —
General Mills setup a lemonade stand-
style display in Minneapolis malls —
its Nature Valley Bistro Cups quickly
served up rapid success. As soon as the
cups were launched on Amazon, they
soldout;andthey’renowcarriedinover
6,000 retail stores.
The next time you feel like the boss is looking over your shoulder at work,
consider this: She could be sharing your desk instead. In fact, at industry-leading software
developerMenloInnovations,whichhasarosterofall-starclientssuchasAAAandDomino’s,
teamworkisthemostimportantdriverofbusinessgrowth.Twoworkersshareeverycomputer
in the office, and partners and projects shift weekly, which makes for an unusual fit as senior
executivesandjuniorinternsmustoftenlearntocowork.Butthisswitchingsystem(borrowed
from the airline industry) is no laughing matter. It not only helps facilitate creativity and
innovation, it also helps open employees’ eyes to new perspectives. Through direct, hands-
on mentorship and learning, workers are exposed to new influences, ingrain vital leadership
skills,andfacilitateongoingknowledgetransfer.JusthowsuccessfulisMenlo’sbuddysystem?
Ask the thousands of executives from firms ranging from Thomson Reuters to Toyota who
now visit the business to learn from its strategies.
AT MENLO, EVERYONE STANDS TOGETHER
Menlo’s“switching
system”is borrowed
from the airline industry.
6,000NUMBER OF RETAIL
STORES CARRYING THE
NATURE VALLEY BISTRO
CUPS
22%OF GENERAL MILL’S
BUSINESS IS IN COLD
CEREALS

Here’s how three leading organizations used the power of changing perspective and
iterative growth strategies to quickly solve problems and create powerful results.
SIMPLE SHIFTS; HUGE WINDFALLS
AD
TARGET
When retailer Target wanted to
increase revenues, it didn’t open
more giant strip-mall outlets. It
introduced pint-size CityTarget
storesinhighlytraffickedurbanareas
selling locally branded merchandise
and household goods (e.g. paper
towels) in smaller packages. The
concept’s been so successful that the
chain has doubled the number of
these stores in one year.
UNITED AIRLINES
Withanaverageof5,200flightsto369
destinationsaday,UnitedAirlinesisoften
faced with unforeseen weather delays
and cancellations. During events such as
these,itoncetookthreetofiveminutesto
rebook each inconvenienced passenger,
even with a team of hundreds of agents.
At a customer’s suggestion, United
introduced an automated rebooking
system that tracks flight progress — and
inthewakeofdelays,thesystemcannow
reroute customers in just three seconds
with no human interaction required.
MASTER LOCK
Threatened by a flood of low-priced
foreigncompetitors,thepadlockmaker
sought out niche markets for new
products where it could exercise its
brand-name advantage — continually
repositioning these products until they
reachedmaxperformance.Forinstance,
asteering-wheellockthatinitiallyfailed
when targeted at mainstream auto
owners proved hugely successful when
rebrandedasasecuritydevicefortrailers
and towing vehicles.
PDMA2015PDMA2015ANNUAL CONFERENCE
November 7-11, 2015
Disneyland Hotel
Anaheim, California

8 INSIGNIAM QUARTERLY SPRING 2015
TOP LINE
BY THE NUMBERS
COMPILED BY GEOFF WILLIAMS
$18 BILLION
The amount of profits Apple earned in the first fiscal
quarter of 2015, one of the highest in corporate history.
6,000%
Uber’s growth in the
last five years. By mid-
2014, the company was
valued at $18 billion.
750%
Airbnb’s growth in the last
five years. It’s now worth
$10 billion. Much of the reason for Apple’s growth in that quarter was
due to this country. Revenue in China grew 70 percent.
ROBOTICS
$15 billion in 2010
and expected to be
$67 billion by 2025.
FITNESS
$24 billion in 2015 and
expected to grow 23 percent
in the next 10 years.
3-D PRINTING
$3.8 billion in 2014
and projected to be
$16.2 billion by 2018.
ONLINE RETAIL SALES
$263 billion in 2013
and expected to be
$414 billion by 2018.
CHINA
INDUSTRIES EXPERIENCING EXPLOSIVE GROWTH

INSIGNIAM QUARTERLY 9SPRING 2015
36.1%Indian budget airline IndiGo’s
current market share. Since its
ﬁrst ﬂight took off in 2006, the
innovative carrier has become
the fastest-growing and largest
airline company in India.
Ulta Beauty, based in
Bolingbrook, Illinois, has tripled
its store count to 765 since 2007.
In the third quarter of 2014, the
cosmetics company saw:
7.2 PERCENT AND 7.5 PERCENT
Projections for India’s growth, this year and next. Next
year, it’s expected that India will be the world’s fastest-
growing large economy.
THE GROWTH AND DEVELOPMENT OF PEOPLE
IS THE HIGHEST CALLING OF LEADERSHIP.
— HARVEY S. FIRESTONE, FOUNDER OF FIRESTONE TIRE AND RUBBER COMPANY
JETGROUP
INDIGO
SPICEJET
AIRINDIA
GOAIR
A 30 PERCENT INCREASE IN PROFIT.
A 21 PERCENT INCREASE IN REVENUE.
A 59 PERCENT INCREASE IN STOCK PRICES.
(OVER 2014)
COMPANY GROWTH PROFILE
*ACCORDING TOTHE WASHINGTON POST.

FoundedbyMiltonS.Hersheyin1894,TheHershey
Company has one of those enviable brands that peopleflock
to—literally.Touristsfromaroundtheworlddescendonthe
smallPennsylvaniatownthecompanyhascalledhomesince
1905 (the company started in Lancaster,
Pennsylvania, in 1894) to visit Hershey’s
Chocolate World to learn how chocolate is
madeandenjoythe(non-chocolate-fueled)
rush to be had on the roller coasters and
other rides at Hersheypark.
While few companies can brag that
their consumers travel great distances to
interact with their brand, six years ago
Hershey executives were pondering how
more of the company’s candy could return
thefavor,especiallyoverseas.Indeed,while
Hersheyproducts—whichincludeover80
brands, such as Hershey’s Milk Chocolate Bars, Hershey’s
Kisses, Reese’s Peanut Butter Cups, Jolly Rancher, Ice
Breakers mints, and Brookside dark chocolates — were
already sold in 50 countries around the globe, the majority
THE INSIDE
OUT GAME
SPRING 2015
BLOOD,SWEAT&TEARS
To help the Hershey Company seize its global
potential, Jeff Kemmerer first had to address
unease and tap the talents of employees at the
121-year-old brand.
BY GEOFF WILLIAMS
10 INSIGNIAM QUARTERLY

SPRING 2015
of its customers were in North America.
The company’s executives understood that sustainable
growth required an aggressive push into dozens of new
global markets. While a big component
of success in reaching large numbers of
consumersinplaceslikeChinaandIndia
required understanding and adapting
their products and marketing messages
to suit local tastes, Hershey’s C-suite
also understood that in order to flourish
they would have to recalibrate some
of their own internal infrastructure
and operations.
Case in point: In order to serve
its existing international customers,
Hershey already had an international
division with multiple offices and
manufacturing plants located around
the globe, in places like Canada, Brazil,
China, and Mexico. But that meant
there was also a lot of redundancy
and wasted resources involved with
each country handling its own payroll, IT, shipping, and
transportation. That sort of inefficiency could easily take
an oversized bite out of the growth and profits it hoped to
secure by attracting new customers around the world. The
answer to this dilemma: the creation of a global shared
services (GSS) department to uniformly handle these
importantresponsibilitieseverywhereHersheyoperated.In
other words, GSS was a way for global Hershey operations
to speak the same language internally so that the company
could be more effective at pursuing the polyglot, often-
complex international markets essential for growth.
UP FOR A CHALLENGE
Almost by definition, the establishment and smooth
functioning of GSS at Hershey would be simultaneously
a complex task and, if done right, one that relatively few
people at the company would even notice. That is, taking
disparate and essential functions and processes occurring in
far-flung corners of the world and making them uniform is
a job that would only get someone noticed if it didn’t work.
Totakeonthatformidableresponsibility,Hershey’sthen-
CEODavidJ.West,whohassincelefttoheadupDelMonte,
turned to 23-year company veteran Jeff Kemmerer. It was a
logicalchoice.DuringhistenureatHershey,Kemmererhad
established a reputation and a track record as someone who
was eager to take on tough projects. “Every time they’ve
EVERYTHING’S
BEEN OUT OF MY
COMFORT ZONE,
AND SO EVERY
TIME I BECOME
COMFORTABLE,
THEY’VE SAID,
‘OK, NOW WE’D
LIKE YOU TO DO
THIS.’
—Jeff Kemmerer, vice president
of global shared services at The
Hershey Company
come to me and asked me to take on a new challenge, I’ve
always said, ‘yes,’ and each experience has been better than
the previous one,” says Kemmerer. “Everything’s been out
of my comfort zone, and so every time I
become comfortable, they’ve said, ‘OK,
now we’d like you to do this.’”
Kemmerer had already shown an
ability to lead and manage major change
thatinvolvedunifyingmyriadprocesses.
As director of Hershey’s Enterprise
Solutions Center, a group charged with
continuous improvement of integrated
business processes, Kemmerer saved
the company $20 million by instituting
best practices and improving business
and accounting processes. Additionally,
Kemmerer spent two years as the
director of Hershey’s sales finance
organization and then three-plus years
as vice president of finance for Hershey
Canada, Inc.
NOT JUST ABOUT THE NUMBERS
Withhisaccountingandfinancebackground,Kemmerer
clearly had a knack for understanding the numbers and
metrics he needed to focus on to make GSS a success. But
what was harder to predict — and every bit as important —
was the human part of the equation. Would the employees
Kemmerer needed to create a shared services organization
be willing to embrace a fundamentally new course? “Jeff
had the foresight to understand that while processes,
systems, and structures are obviously important in most
significant organizational changes, it is unquestionably
$7.4 billion
in 2014
$5.3 billion
in 2009
HERSHEY’S TOTAL REVENUE

BUILDING THE FUTURE
Kemmererdidn’tneedtoworry.Asaresultofhisopenness,
he didn’t have to contend with negative fallout from the
announcement. But he also believes that transparency
allowed him to build both trust and genuine enthusiasm
for what GSS meant for Hershey.
“Jeff’s commitment to building trust, being authentic
and transparent, and taking risks demonstrates the kind of
leadership required to be successful in an enterprise-wide
change initiative,” comments Bonnie Wingate, partner at
Insigniam. “The rewards can be significant, as they were
with Hershey’s growth outside North America.”
Kemmerer knew that GSS was moving beyond its
challenging transition period into one where a new culture
could be built when he started
fielding employee questions
that had nothing to do with the
safety of their jobs. “They were
asking, ‘Can I play music?’ ‘Can
I eat lunch at my desk?’ Every
SPRING 2015
BLOOD,SWEAT&TEARS
the people involved in and effected by the change that
ultimately determine whether it will succeed or fail,” says
Jon Kleinman, Insigniam partner.
Kemmerer began working on GSS as the vice president
of the division in August of 2009. And although he took
his time learning all about the existing processes and
strategizing what changes would be necessary, he also knew
from the beginning it would entail a substantial culture
shift and a restructuring that would inevitably include job
cuts. So, too, did the staffers he managed. “Whenever I’d
introduce the shared service concept, many employees
would say, ‘Just tell us who has a job and who doesn’t,’”
he recalls. Kemmerer’s initial response to those questions
was an indication of the sort of transparency and openness
he now sees was essential to the successful establishment of
GSS. “I don’t know. I need your help to figure that out,”
he told anyone who asked about job security.
Which is not to say that a commitment to transparency
didn’t mean that there weren’t bumps and lessons to
learn along the way. During an initial two-day working
session with the 140 employees who first populated GSS,
Kemmerer learned that his employees fell into one of three
categories: those who understood and cheered the wisdom
of GSS, those who were ambivalent, and those who were
steadfastly against the change GSS represented. “They were
never going to buy in. You can’t worry much about them,”
Kemmerer says now, though he admits that he wasn’t as
forcefulasheshouldhavebeenwiththedissidents.“Ishould
have been more aggressive at identifying the blockers faster,
the ones who don’t have the potential to grow.”
What he did do, though, was focus his attention on
those who were uncertain about GSS and what it meant to
them individually. Kemmerer regularly had lunch with 15
to 20 of those employees as a way to demonstrate that he
genuinely wanted to hear their concerns and ideas. It didn’t
start well. “I got a lot of blank stares,” he says about the
first lunch meeting. But by being consistent about soliciting
their input, a rapport, trust, and enthusiasm began to build.
“They were asking me, ‘What about this?’ ‘Have you
considered that?’” he recalls.
The cohesion Kemmerer was steadfastly building paid
dividends when he let his lunchmates know that he would
need to eliminate 30 to 40 positions. After hearing his
explanation, his employees asked if they could share the
news with their coworkers. Committed to transparency,
Kemmerer said, “yes,” though he quickly had second
thoughts. “I was sick to my stomach,” he says. “I thought,
‘What have I done?’”
Tourists from
around the world
flock to Hershey,
Pennsylvania, to
visit Hershey’s
Chocolate World and
Hersheypark.
12 INSIGNIAM QUARTERLY

SPRING 2015
conversation was about the work environment instead of
whether a position would be eliminated,” he says.
What Kemmerer told employees not only answered their
specific questions, but also helped lay the groundwork for
the sort of culture he knew would be essential for GSS
to flourish. As long as what they did at their desks didn’t
negatively impact others, he had no problem with it. It was a
way of reinforcing the idea that employees feel independent
and empowered. “Every employee of shared service is a
leader,” he says. “You don’t want employees waiting to be
told what to do. We wanted an empowered environment.”
Six years after the launch of GSS, not all questions about
the division’s role have been sorted out. There’s an ongoing
and healthy debate about what work GSS should handle and
what individual departments at Hershey should take on.
And Kemmerer has been careful to tie the growth of GSS
to that of the departments they serve.
Yet what is not in question is how GSS has helped fuel
Hershey’s international growth. Hershey has seen its sales
grow from $5.3 billion in 2009 to $7.4 billion last year,
and the company has
now set $10 billion as
its target. The most
rapid growth has
come from outside
the United States,
with Hershey now
selling its products in
70 countries.
Nor is there any
question in Kemmerer’s mind about what makes this kind
of growth possible: people. “Employees are your most
important asset, and you have to act that way even when
you make difficult decisions, like letting a person go,” he
says. “You first care about the person and focus on them
being successful.”
In his own way, Kemmerer has helped expand Hershey’s
reach around the world. And who knows, it might even
mean a few new languages will soon be heard at Hershey’s
Chocolate World and Hersheypark.

With implementation of the Sarbanes-Oxley
controls now in place at most publicly held companies,
many boards of directors are shifting attention to issues that
are more likely to grow revenues and profits. A McKinsey
survey (“The View From the Boardroom”) supports this
shift in concluding that one-third of the company directors
surveyed want to spend significantly less time on audit and
compensation issues.
Many directors have expressed a desire
to become more involved with their
company’s strategic growth planning.
The McKinsey study found that 75
percent of the directors surveyed want
to spend at least a quarter of their board
time dealing with the company’s business
strategy, its risks, and maximizing
growth opportunities.
Though just one survey, these conclusions support what
many of us see in the boardroom every day: The pendulum
of topics commanding directors’ attention is swinging
from oversight and compliance back to where it should be
focused on the company’s growth plans. Boards do their
jobs best when challenging the CEO to grow revenue,
asking questions, and vetting the strategic plan. That’s how
directors increase shareholder value.
The attention of boards of directors is swinging
away from oversight back to where it should be,
focusing on company growth.
BY JOHN REHFELD
THE COMPANY
DIRECTOR’S ROLE IN
COMPANY GROWTH
THEBOARDROOM

CHANGING THE BOARD’S TRADITIONAL ROLE
The following chart illustrates what traditional boards
viewed as their role. Notice that the board stayed at
approving and monitoring the company’s business strategy
rather than helping to formulate and implement.
THE BOARD OF DIRECTORS’ TRADITIONAL
ROLE IN STRATEGY
However, if directors truly wish to become more
involved in their company’s growth strategies, as shown
in the McKinsey survey cited above, the simplest way to
engage the board is to put the growth plan first on the
agenda. This keeps oversight, regulatory compliance,
and general governance activities from monopolizing the
entire schedule, thereby giving priority to the discussion
of strategy formulation and implementation.
Since the board chair cannot allow a single topic, no
matter how important, to occupy the entire agenda, the
smartest way to accomplish the goal of a full and complete
discussion of the company’s growth plan is to talk about
it in bite-size segments throughout the planning cycle.
Such quick, intense exchanges between the board and
management strengthen overall strategy and ensure that
the resulting growth plan is grounded in reality.
GETTING BOARDS OF DIRECTORS INVOLVED:
CASE STUDY ADVANCED MEDICAL OPTICS
Most directors of Advanced Medical Optics (AMO) of
Santa Ana, California, are intensely involved with specific
senior executives through AMO’s director/executive
mentoring program. This program matches each of
several senior executives with particular directors in that
executive’s area of concentration and provides a forum for
their regular interaction. The purpose is to mentor the
executives and to get the company’s board of directors
more closely involved. As a result, key board members of
AMO are involved with strategy formulation.
CEO Jim Mazzo keeps AMO’s entire board informed
throughout the planning process. Each discussion of the
growthplanisshort,concise,andinformative.Thedirectors
learn what the growth strategies team is considering.
Directors get to offer opinions and ask questions, thereby
taking co-ownership of the process with management. The
primary benefit is that by the time AMO’s strategic plan is
completed, it drills into the smallest, most critical details
needed to make the plan successful. It answers the critical
question, “How will this strategy make more money than
the plan costs to implement?”
RECRUITING BOARD TALENT
The days of the CEO’s buddies populating boards are
past. Today’s directors are often experts in their own right.
They are chosen for their experience and capabilities.
With this background, board members who insist on
being treated as talented, expert resources improve
the formulation, approval, and monitoring of business
strategies while leaving implementation of strategy to the
management team. Today’s skilled directors now drive the
strategic growth plan by drilling down on the link between
employees’ skills and competent management.
GROWTH THE KEY STRATEGY
Most companies have as a strategic objective to grow
faster than the overall market. To do this, they must unseat
market share from competitors or identify niche areas of
faster growth within the overall market. Not only must the
strategic plan clearly identify how this growth will occur,
but regular board discussions should also track progress
toward achieving this objective.
MID-COURSE CORRECTIONS
But what if things go south? Directors don’t want a
growth plan that assumes the company is like a truck
driving through a town where every traffic light is green.
They want a plan that shows what happens when specific
contingencies occur. Often scenarios planning “if this
happens, then we do X, and here’s the impact,“ provide all
BOARDAPPROVE MONITOR
MANAGEMENTFORMULATE IMPLEMENT
DIRECTORS’ TRADITIONAL STRATEGY ROLE

the insight necessary. Certainly, directors need the business
and industry background to know what critical questions
to ask and how to accurately interpret the responses. Such
questions frequently facilitate healthy board discussion.
They often take the following forms:
6 What are the potential upside and downside of specific
contingencies?
6 What is the probability of each?
6 What events must happen for the upside or downside
contingency to occur?
6 Can the board of directors control any of the
contingencies?
6 What are some alternatives and options for dealing
with contingencies, assuming the best case and worst
case scenarios?
HARNESSING BOARD TALENTS: CASE STUDY
PRIMAL SOLUTIONS
Gettingtheboardinvolvedinformulating,approving,and
monitoring the company’s strategy engages directors’ often
ignored capabilities. A good example is the management
of VoIP software producer, Primal Solutions. Management
quicklyrealizedthattheboardnotonlywantedtoparticipate
in strategy formulation, but that its members also had more
experience in formulating business strategy than did many
management teams of companies considerably larger than
Primal Solutions with its $10 million in sales.
Primal Solutions’ CEO asked the lead director and one
advisory council member to work with the management
team to formulate the company’s business strategy.
Together, they filled specific experience gaps. As directors,
their intent was to guide, help avoid pitfalls, and empower
the CEO throughout the process. Their role was to stay
in the background and support the discussions rather than
to dominate them.
Five members of the management team, a member of the
board of directors and an outside facilitator shaped Primal’s
business strategies and the plan to achieve them over one
two-day meeting and three subsequent one-day meetings.
The board member’s presence added to the sense of urgency
and seriousness that the project demanded.
Theresultingstrategicplanreorganizedthecompanyinto
two different business units. The plan also recommended
some strategic personnel changes needed to implement
the plan. These changes would not likely have occurred as
quickly had the strategic plan not been treated as a blueprint
to be followed by management and monitored by the board.
Primal Solutions’ approach succeeded because they
followed these important rules:
6 Schedule significant time — several full days in this
case — to hold meaningful conversations.
6 Create an atmosphere that makes the strategic
planning team feel like it’s okay to challenge and
question assumptions, and it’s okay not to know the
answer, because we’re all working toward a common
goal: to increase shareholder value.
6 Review the broad competitive landscape and
alternative market scenarios.
6 Hold subsequent meetings to review and approve each
stage of the strategic growth plan.
6 Devise a scheme to measure specific metrics used to
track plan implementation and performance.
6 Reserve significant parts of each board meeting to
devote to the company’s growth strategy.
6 Benchmark and monitor the company’s market
position compared to that of its competitors.
6 Identify and track the two or three capabilities that
are critical to achieving success.
TAPPING THE BOARD OF
DIRECTORS’ SPECIAL TALENTS
Two simple questions that are very important to
formulating the company’s strategic plan can help identify
possible shortfalls in the board’s capabilities:
1 What essential areas of expertise, technical know-
how, and experience does the growth plan require?
2 What inventory of this expertise, technical know-
how, and experience does each board member bring
to the table?
Getting the answers to these questions may require a
competency assessment either by the board itself or by
the strategic planning team. Along with board members
who have technical qualifications, directors recruited to
help formulate the strategic growth plan must be evaluated
regarding their attitudes, values, time constraints, abilities
to work cooperatively, and desire to contribute to the
team’s success.
USING AN ADVISORY BOARD: CASE STUDY
SONIC FOUNDRY
Whatiftheboarddoesn’thavethenecessaryqualifications
tohelpwiththestrategicgrowthplan?Itisdifficulttoquickly
change the composition of the statutory board. However,
a company can swiftly create and enable an advisory board
with relevant experience and industry contacts.
THEBOARDROOM

A good example of this is Sonic Foundry (SoFo), a
company that created a real-time multimedia presentation
recorder and web communications system. SoFo’s growth
strategy requires them to cross the chasm by moving sales
from customers who are strictly early adopters to customers
who are in the mainstream market. Since SoFo is a small
company, the business strategies team consisted solely of
the CEO and the head of sales and marketing. Owing
to the company’s prior business and rapid evolution,
the statutory board lacked the distance learning and
distribution experience needed to help management create
the strategic plan. Even worse, SoFo’s small window of
opportunity to stay competitive didn’t allow time to recruit
statutory board members who had the right backgrounds.
Instead, they quickly formed an advisory board. The full
10-person advisory board meets twice a year. However,
the smaller, specialized committees such as the growth
strategies committee meet considerably more often.
SoFo’s use of committee members from the advisory
board expanded the growth strategy team’s depth and
experience. SoFo’s strategic planning process resulted in a
number of key decisions being made, such as unbundling
the products to make them easier to use and moving the
purchase decision from their customers’ IT departments to
the end users. SoFo also raised prices and began charging
for features that they had once just given away. Profit
margins rose.
Today, SoFo has a formalized strategic planning process
that holds three one-day meetings annually and involves
the management team and the advisory board. The
management team reports back to the advisory board on
lessons learned and actions taken. Like Primal Solutions’
board, SoFo’s advisory board members participating in
formulating the company’s growth strategies are not
interested in dominating the discussions. Rather, their
mission is to add expertise to planning deliberations and
to empowering the CEO.
MANAGING THE BOARD’S AGENDA
Board meetings are busy affairs. Adding one more thing
to an already crowded agenda can be disruptive. If that
additional thing is something so critical to the company’s
future value as business growth strategies, then the board
must create a new paradigm to manage its agenda.
Boards that want more involvement in formulating
company growth strategies create a strategic review
committee. This committee draws out the board’s
expertise, but doesn’t take huge chunks of board time, since
the committee meets off-line, often with key members of
the management team. The strategic review committee
saves the board time by communicating and prompting
board discussion on strategic direction, identifying and
monitoring business drivers, keeping an eye on and
responding to major strategic issues, and understanding
the company’s competitive position all of which are among
the board’s responsibilities in providing strategic oversight.
PROVIDING DIRECTORS
THE INFORMATION THEY NEED
Engaged directors often first want to understand the
market. They need independent information showing
market size and market share for both the company and
for competitors. They want to see sales trends in the market
place and to identify where new customers are entering
the market while the old standbys may be exiting from
it. Savvy directors make the connection between those
market segments and niches that are expanding and those
that are contracting. They link that information with key
points in the strategic growth plan and then reach their
conclusions.
CONCLUSION
With some advance attention to likely concerns and
questions, members of boards of directors gain greater
confidence that the planning team has looked into all
the areas that hold potential opportunity or threat for
the company. Such oversight often requires individual
members of the board and outside advisors with specific
expertise to become involved in the strategic planning
process. The board of directors empowers the CEO to lead
the company’s planning process and provides a sometimes
necessary assist to create the final plan. With this higher
level of involvement, the board of directors has all the
information it needs to thoroughly discuss the growth plan
and to approve its implementation.
Look for boards of the future to become increasingly
involved, not only in approving and monitoring their
company’s business strategies, but also in offering concrete
advicetothemanagementteaminstrategicformulationand
implementation. Because directors are more qualified now
than ever before, expect them to use their vast experience
to help grow revenues and profits.
Reprinted with permission from the Graziadio Business Review.

proprietary process for creativity and
execution. To create a system that leads
to better innovation and more successful
marketing, executives must first know
how to overcome factors inherent in
organizations that all too often limit the
business’ ability to grow.
1
CORPORATE GRAVITY
Kodak knew film, and it did film very well. It
created the industry for personal cameras. But the
companydidnotanticipatewhenorhowquicklythemarket
— the very market it generated and led — would move to
digital. The reason: Kodak was caught in its own corporate
gravity; it was stuck in an orbit around a core product.
Toomanycompaniesfindthemselvesinsimilarsituations.
They develop a core product or service, one that produces a
growingincomestreamthatsupportsmuchofthecompany.
Understandably, then, companies organize themselves
around that core, setting up rules, structures, and systems
Peter Drucker boldly declared that “business has
only two functions — marketing and innovation.Marketing
and innovation produce results,”Drucker wrote in his seminal
1954 tome,The Practice of Management.“All the rest are costs.”
The world of business has changed a lot in the 61 years
since Drucker published those words. But he is still right.
Executives who boost innovation or improve effective
marketing — and especially those who succeed in doing
both — are the leaders who will help their companies
achieve explosive growth.
But that kind of growth also requires that leaders build
on the inherent strengths of the enterprise to create a
BY NATHAN O. ROSENBERG AND SHIDEH SEDGH BINA
LEADING FOR
EXPLOSIVE GROWTH

to protect it and keep the income stream flowing.
But once the business model is organized around that
core product or service, management may begin to perceive
change — specifically, change that could launch them into
new markets or create new business models that eat into the
corebusinessmodel—asthreats.Straytoofarfromthecore,
the thinking goes, and you might end up cannibalizing or
even destroying the source of the enterprise’s success.
In practical terms, corporate gravity might occur when a
chief financial officer sets hurdle rates for investments that
are too high for most innovations to clear. To be sure, high
hurdle rates will protect the core product. And while it is
easy to calculate the value of an improvement to the core
product or service, the CFO may get conservative when
calculating returns on a new way of doing business. That
oftenunrecognizedprejudicewillweighdowninnovations
sothattheynevergetoffthegroundandfindtheirtruevalue
in the marketplace.
Arbitrary decision-making has the same impact.
Insigniam recently worked with one company that wanted
to accelerate new product launches. It had been debuting
onenewproducteverytwoyearsandwantedtodramatically
change that by unveiling one new product per quarter. That
required a substantial amount of product testing. But after
a few months the testing ground to a halt. Why? Because
the company president ignored the test results and made the
call on which new products would make it to market. As a
result, the employees saw no reason to champion new ideas,
becausetherewerenoguidelinesforknowingwhethertheir
ideas had a chance of ever being produced.
Even when guidelines are in place, corporate gravity can
weighdownthecreativeprocess.Forexample,weconsulted
with a pharmaceutical company recently that experienced
a drop in market share for one of its major products to
No. 2 from the No. 1 position, and other products were
beginning to falter. We discovered that the CEO had
recently established a regulatory review panel. The team’s
primary task was to make sure the company never again ran
afoul of regulators. That task may have been a worthy one.
But to achieve it, the review panel swung to a “no risk is

the best risk” policy and simply killed most new marketing
initiatives that came before it. While not intentional, it had
the effect of stopping any new creativity and the potential
innovation that could follow.
2
CORPORATE MYOPIA
When a company is unable to recognize future
value, it has developed corporate myopia. This
short-sightedness may spring from judging value in a time
periodthatistooimmediateorfromtheinabilitytoseevalue
through the customer’s eyes. It is a dangerous condition.
When companies can only see what’s in their immediate
future and that which only relates to their current mix of
products or services, they fail to envision revolutionary new
ideas on the marketing or innovation side. That leaves room
for competitors to step in.
A consumer goods company lost a rapidly growing
category that currently generates about $500 million in
annual sales due to corporate myopia. The company had
the technology for what would eventually be sold as the
Swiffer Sweeper. But they could not see the value in a
product because they were focused too narrowly on the
way that houses had been cleaned in the previous decade.
Once the company passed on the Swiffer concept, a
competitor bought it, redefined household cleaning, and
created a new product franchise.
3
CORPORATE IMMUNE SYSTEM
The human immune system works hard to kill
off foreign bodies, the things that might hurt us.
Organizations do that, too, working to kill off dangers
of all kinds. That is sometimes good. But occasionally
the corporate immune system simply attacks anything
unfamiliar, even ideas that could breath new life into
the organization.
Take the diversity issues now facing many Silicon
Valley firms for example. The workforces at the top tech
companies are mostly comprised of white or Asian men.
In 2014, Google, for instance, employed more than 46,000
people, but just 2 percent were African-American. Inside
Google’s tech division, more than 80 percent of workers
were male and 60 percent of them were white. Apple,
Yahoo, Facebook, and Twitter have all recently reported
similar numbers.
The problem, many think, is not outright racial or
gender bias on behalf of the top tech firms. In fact, the
point is not gender or race; it is diversity of experience that
will lead to new and better ideas. In this case, the thinking
is that Silicon Valley executives and managers simply tend
to recruit workers who come from the same backgrounds
as themselves and have the same perspectives and styles that
the executives and managers themselves exhibit. Leaders in
all kinds of companies suffer from that same kind of indirect
bias when they hire people who resemble themselves in
one way or another.
That is what a corporate immune system does: It simply
tries to replicate the sources of its prior success and all too
often views anything new as a potential threat to future
success. That’s a force that can greatly inhibit innovation
and growth.
INSPIRE CREATIVITY AND GROWTH
Leaderswhowanttoavoidtheinherentproblemswiththe
corporateimmunesystem,corporatemyopia,andcorporate
gravity will want to create a process that identifies factors
that inspire creativity and growth and identifies ones that
inhibit creativity and growth. That method can take any
number of forms, but whatever the shape, it must do three
things: embrace risk, create a process for creativity, and
measure the creation of value in ways other than traditional
profit and loss statements.
Embrace Risk
Wayne Delker, the just-retired chief innovation officer
at Clorox, has long managed a massive portfolio of R&D
projects, many of which are product redesigns. That could
involve anything from putting grooves in Kingsford
charcoal briquettes to reduce the weight of the bag and
make the charcoal to burn hotter to inventing a product
like the ToiletWand. “We have to simultaneously innovate
across those different product lines to keep the brands
healthy,” Delker said recently.
WHEN COMPANIES CAN ONLY SEE
WHAT’S IN THEIR IMMEDIATE FUTURE
AND THAT WHICH ONLY RELATES TO
THEIR CURRENT MIX OF PRODUCTS
OR SERVICES, THEY FAIL TO ENVISION
REVOLUTIONARY NEW IDEAS ON
THE MARKETING OR INNOVATION
SIDE. THAT LEAVES ROOM FOR
COMPETITORS TO STEP IN.

Clorox executives do not always know that a new
product will connect with consumers. After all, before
the ToiletWand, with its disposable sponges preloaded with
Clorox Toilet Bowl Cleaner, hit the market, consumers
had spent decades using wire-and-bristle-capped toilet
brushes. Who could say, then, that the wand would be
something millions would embrace?
That uncertainty and the risks associated with it did not
stop Clorox, because the company trusts what Buckminster
Fuller called the “profound knowledge” of its leaders, and it
hasaproprietaryprocesstobringnewtechnologiesandideas
to the market while managing Clorox’s exposure to risk.
The most common mistake in regard to profound
knowledge is that it presents itself as gut instinct about the
industry in which you work. And all business leaders have
been traditionally trained to ensure that facts triumph over
gut. Leaders who are in the marketplace stand in the stream
of their industry every day, with information and data
flowing by them constantly. Sometimes all the data, facts,
and projections one would like to be working with prove
too fluid to capture. But these leaders of growth know what
is out there when they have been standing in that stream
long enough. The judgments made based on knowledge
and wisdom gained from sustained engagement in the
marketplace (even if the leaders cannot fully articulate the
basis of the judgments) often turn out to be better grounds
for a business decision on a new product or marketing
approach than a BASES score.
Create a Process for Creativity
Cultivating creativity is bigger than a suggestion box.
Companies have to invest in an infrastructure that fosters
innovation and gives creative ideas an outlet. Employees
have to know how to take an idea and turn it into a
prototype and how to move that prototype to a new
product or marketing campaign.
One example that worked for one of Insigniam’s clients:
Create an office of project management and pair it with an
office of project acceleration. Combined, the two are able
to push a larger number of ideas through the corporate
pipeline. The new innovation office created and published
a proprietary innovation process that anyone and everyone
in the enterprise can use.
Howevertheinfrastructureissetup,executioniskey.And
executionrequiresaculturethatisfocusedonaccountability.
That does not mean “blame, shame, and credit.” Instead,
accountabilityisasystemofmeasuringoutcomes.Justlikein
accounting where your balance sheet must add up correctly,
there also has to be a balance in performance accountability.
Think of it like this: Producing the intended result is a
product of action; accountability is acknowledging the
actual result and the actions taken or not taken.
Create a New Scoreboard
Balance sheets and income statements are important. But
those agreed-on financial tools do not measure or show
valuable developments in innovation and marketing. And,
as anyone reading this article will know, the first rule of
management is that you tend to get what you measure.
Therefore, leaders of growth will have a metric and a
scoreboard that measures, captures and displays the value
generated by innovation and marketing. What is tracked
and displayed on this new scoreboard is critical.
Do you value lead times? Quality control? Brand
recognition? Then put those on the scoreboard. Wayne
Delker invented a metric to measure ROI for R&D and
reported the number at executive team meetings, just as
the CFO reported earnings.
Peter Drucker first told us 61 years ago, the two and
only two functions of a business that generate value are
innovation and marketing. Growth leaders provide an
environment that supports creativity through culture,
processes, and structure, and have ways to account for the
value generated by that creativity.

FACTORS PREVENTING CORPORATE
LEADERS FROM CREATING A SYSTEM
THAT LEADS TO BETTER INNOVATION,
MARKETING — AND GROWTH.3CORPORATE GRAVITY
CORPORATE MYOPIA
MILLION BILLION
1
2
1975
1996
2004
2012
The digital camera is invented by
Kodak, which it quickly placed back
in the closet.In fact, Kodak invented
much of the technology used in
digital imaging.
Kodak remakes itself as a digital
imaging company, a decade after
the first digital camera hit the
consumer market.
Kodak files for Chapter
11 bankruptcy, having
failed to capitalize on
digital imaging due to
corporate gravity.
Kodak’s revenues peak at $16 billion,
but the company was not adequately
prepared for the digital camera’s
imminent market penetration.
$500
Annual sales of Swiffer Sweeper,
a product that a consumer goods
company passed on because they
were focused too narrowly on the
way houses had been cleaned in
the previous decade.
U.S. household-care market size.
$4575%
Swiffer Sweeper owner Proctor &
Gamble’s hold on the quick-clean
market in 2005, just 6 years after
launching the cleaning aid.

CORPORATE IMMUNE SYSTEM3Percentages of jobs held on average by different groups in Silicon Valley companies Apple, Yahoo,
Facebook,Google,andTwitter,whichmaypreventadiversityofideasfrombubblingupthroughtheranks.
2% AFRICAN-AMERICAN
16% WOMEN
4% HISPANIC

Societies,like computers,have operating systems.
These systems consist of a set of rules for human behavior and
how people act. “The laws, social customs, and economic
arrangements that we encounter each day sit atop a layer
of instructions, protocols, and suppositions about how the
world works,” says business guru Daniel H. Pink in Drive:
The Surprising Truth About What Motivates Us.
Organizations have operating systems, too. Beneath the
surface of the hardware (tools and structures) and software
(employees and processes) is a complex set of values,
arrangements, rules, and suppositions governing how the
organizationworks.Wegenerallyrefertothis
as corporate culture.
Organizationaloperatingsystemsorcultures
are the invisible forces driving performance.
They can either propel or inhibit growth. If
the culture aligns and reinforces vision and
strategy,yougetboominggrowthlikeatApple
or Netflix. If it’s myopic and sclerotic, you get
an enterprise like RadioShack with a decline
that can be traced through a long thread of
self-defeating tactics born from a cultural background that
didn’t create the evolution needed to survive.
These cultural systems can be broken down into
nine distinct elements:
• Language and the network of conversations
• Customer orientation
• What is actually valued
• Accountability and responsibility
• Traditions, rituals, heroes, legends, and artifacts
• Leadership dynamics
• Unwritten rules for success
UNLEASH CULTURE
TO FUEL GROWTH
How to align the nine facets of corporate
culture to drive performance.
BY SHIDEH SEDGH BINA AND NATHAN O. ROSENBERG

• Decision rights and processes
• Legacy
Together these elements form the set of instructions,
protocols, and suppositions — the DNA — of the corporate
organism. This DNA either primes the organization for
growth, or sets it on a course of stagnation, dysfunction,
and decline.
LANGUAGE AND THE NETWORK
OF CONVERSATIONS
What people say aligns with how they perceive what
they’re experiencing. For human beings, perception is not
only physical, it’s linguistic — shaped by language. What
you listen for when assessing the network of organizational
conversations are the elements shaping these interactions.
Listening to what’s being said is often not enough to
generate a sense of corporate cultures. You also have to be
aware of what’s not being said.
For example, we once interviewed employees at all levels
of a high-flying U.S. supercomputer maker in the Midwest.
Throughouttheseinterviews,weneveronceheardanadmission
thatsomeonemadeamistakeorwastedthecompany’smoney.
Thistoldusthatwhatwaslackinginthecorporateculturewas
asenseofpersonalresponsibilityandindividualaccountability.
When we relayed this to the CEO, he said, “Wow. I
never would have gotten that. But the second you say it,
you’re absolutely right. This is Midwest nice, and we don’t
hold people to account.”
Todrivegrowth,thepatternsofconversationmustshiftfrom
passiveexpressionssuchas:“Itwouldbegoodif...,”“Somebody
should…,” and “We need to…,” to active declarations such as
“I will…,” “I promise…,” and “Would you…?”
CUSTOMER ORIENTATION
How important is the customer? Years ago we had the
opportunitytoparticipateinoneofthefirstknowncorporate-
culture transformations at the Ford Motor Company. We
foundthatsomeassemblylineworkerswouldoftenstrikeback
at management by sabotaging cars. For example, they’d put
a tin can inside a fender so it rattled when the car was driven.
They were using customers to animate their hostility toward
management. This episode illustrates the consequences of a
culture so dysfunctional that both employees and customers
becamecompletelyalienatedfromthecompanyanditssuccess.

When you put employees first, it translates to the
customer. After all, in the end, the customer determines
your success. Ultimately, only satisfied customers can fuel
enterprise growth. And customers are not abstractions.
That’s why some companies actually give the customer a
name.Forexample,duringhigh-levelmeetingsatAmazon.
com, CEO Jeff Bezos has an empty chair representing
the customer placed at the table. And those at the table
had better include the customer in the conversation when
decisions are made.
WHAT IS ACTUALLY VALUED
Corporate values are not plaques on walls. They are not
posters. They’re not handbooks passed out to employees.
Corporate values are what leadership consistently displays
and reinforces through action. What behavior can get you
fired? What actions are people rewarded for?
Rewards don’t necessarily mean bonus money.
One of the misconceptions we often find among executives
is the belief that without bonuses, people won’t pursue
high performance. This is incorrect. In Drive, Pink relates
what a team of researchers reported to the Bank of Boston
in 2005 after completing a study gauging the effects of
incentives on performance: “In eight of the nine tasks we
examined across the three experiments, higher incentives
led to worse performance.”
Clearly, something other than money drives people to
achieve. Oftentimes performance of the task — the sense of
striving and accomplishment — is its own reward. But this
drive is fragile. It needs a hospitable environment to thrive.
A CEO we once worked with regularly composed
handwritten notes to employees on his personal stationary
to recognize a job well done. People framed these notes and
put them up on their walls like they were plaques, because
they were so proud to receive a simple handwritten note
from their CEO.
But remember: Stated values and beliefs are
counterproductive if leadership doesn’t walk the walk. In
one organization we worked with, several of the most
senior executives regularly violated values and rules
explicitly outlined in the employee handbook. That
destroys corporate culture. It creates cynicism. It kills
growth. You’d be better off having no beliefs than stating
a set of beliefs and values that executives habitually violate.
ACCOUNTABILITY AND RESPONSIBILITY
To successfully establish a growth trajectory, enterprise
leadersmuststrivetocreateaculturewherepeoplearen’tafraid
to bring bad news to leadership. If an employee has a problem
deliveringsomethingthatwaspromised,thatemployeeshould
feel comfortable picking up the phone or walking down the
hall to alert their superiors in a timely manner.
Agile leaders often respond by offering assistance: “Okay,
how can I help you?” or “What resources do you need?”
or “Let’s think about how we can solve this problem.” If
an employee believes leaders are prepared to support them
in a pinch, they’re much more likely to bring up problems
before they escalate into crises. Such an environment
fosters collaborative problem solving and allows leaders to
effectively tap the human resources at their disposal.
TRADITIONS, RITUALS, HEROES, LEGENDS, AND
ARTIFACTS
Traditions, rituals, and heroes animate corporate culture.
These powerful elements are instilled intentionally. Who
do we want to make a hero? What are the stories we want
to tell? By introducing potent narratives, we reinforce and
give life to corporate values.
At Home Depot, there’s a common-told story involving a
customerwhoneededhelpinstallinganatticfaninhishome.
Theassociateprovidedhimwiththeparts,instructions,and
tools to do the job. But at the end of the day, the associate
realized he forgot to give the customer a critical part for the
installation. So he pursued the cashier who transacted the
purchase, obtained the customer’s record, and contacted the
customer. He then made arrangements to deliver the part to
the customer’s house on his way home from work.
What does this story tell new employees? It tells them
three things:
• We’re in the do-it-yourself business. Our job is to
make do-it-yourselfers successful.
• Customer service is really important.
• You take care of the customer.
That’s all encapsulated in one story. And you make a
hero of that employee. Skip all of the buzzwords. Stories
are more important. At AutoZone, the DIY vehicle-parts
retailerrenownedforitscustomerservice,meetingsstartwith
reading a customer letter about an employee that went the
extra mile for the customer. If you’re an organization with a
high-performanceculture,youinstillandsustainthesestories.
LEADERSHIP DYNAMICS
Successful cultures — those primed for growth — make
clear that anyone in the organization can lead. If only senior
executives can lead, you’re in big trouble. If the only person
whocanleadistheCEO,you’reinreallybigtrouble.Highly

effective organizations have leaders at each and every level.
Whenpeoplestepforwardtolead,executivesfromtheCEO
on down must encourage and incentivize that behavior.
Greatleadersencourageotherpeopletolead,evenifthose
peoplearenoteffectivethefirsttimeout.Theyreinforceand
support that behavior. True leaders are not threatened when
otherstakethelead.Organizationssaturatedwithleadership
culturepropelgrowth.Thehigh-performingcultureswe’ve
seen have well-defined leadership governance structures
with different leadership bodies across management levels,
each with its own charter, accountability, and meeting
cadence to instill leadership throughout the enterprise.
UNWRITTEN RULES FOR SUCCESS
This element is a tough one. The only way to tease out
unwritten rules for success is by violating them. Therefore,
you’re going to get a bruised forehead and a bloody nose
walking into walls you simply can’t see. If you examine
outcomes, these shadowy rules begin to take shape. What
kinds of people succeed in the organization? How do they
behave? What are they rewarded for?
Butkeepinmind:Unwrittenrulesarerulesforsucceeding
in the company, not for succeeding in the marketplace. And
these rules are oftentimes at odds. We witnessed this at a
manufacturing company that was fighting market-share
erosion due to new, innovative activity from one of their
key competitors. They needed to come up with potent,
creative marketplace moves quickly. Yet when they called
meetingswiththeirtopleaders,theunwrittenrulessaidthat
only those executives that ranked senior vice president and
above could sit at the conference table and participate in the
conversation. VPs were expected to sit in the chairs around
the wall and not participate unless called upon. So much for
creativity and agility in the marketplace — the thinking is
constrained by one’s title or the location of one’s chair in
the meeting room.
DECISION RIGHTS AND PROCESS
Who gets to make decisions? Who has the authority to
make changes in a process or shift direction? In many large
organizations,nobodyknowstheanswertothesequestions.
Andtothedegreethatnobodycanintelligentlyanswerthese
questions,you’vegotaproblem.Ifemployeeswanttochange
something in the company to make a process better, how do
they know if they have the right to do so? And if not, who
does? Too frequently the answer is, “I don’t know.”
Sometimesleadersrefusetograntpeopleondifferentlevels
oftheorganizationwithdecision-makingrights,becausethey
are afraid people are going to screw up. Sometimes the drive
for immediate results leads to decision rights rising to the
top—thus reducing risk for the senior levels while shrinking
the range of motion of those closest to the market. In an
extreme case, we witnessed a $14 billion global company
whereeverycontractover$25,000hadtobepersonallysigned
by the CEO and any travel expense over $500 had to be
approvedbyanexecutivecommitteemember.Thiscultureof
thriftdroveattentionandactiontowardchasingliterallyevery
dollar and away from serving customers and executing on
critical tactics. Too much management and control indicates
bad management. Without the ability to execute on new
ideasandinnovativechanges,employeeswillgivethemselves
overtoacultureofcomplacency,ratherthanworkinghardto
continuously improve the way they do business.
LEGACY
Havingamissionstatementorcredoisimportant.Soisthe
informalandformalstorytellingthatpopulateanenterprise.
This means more than a poster on the wall; it helps everyone
throughout the organization align and make decisions.
Johnson & Johnson maintains an impressive decades-long
commitment to its credo. This four-paragraph statement
written in 1943 by then-Chairman Robert Wood Johnson
clearly states what is important and the responsibilities of
the enterprise, and it outlines the focus of this $65 billion
mega-corporation. “We believe our first responsibility is
to the doctors, nurses, and patients, to mothers and fathers
and all others who use our products and services” and then
movingontoemployeesandcommunities,andendingwith
stockholders. By stating and codifying a clear ethos, J&J
provides all of its employees with a consistent set of criteria
to use as a benchmark for decision-making — the same
criteria executives use to guide their decisions — which
only serves to empower employees to deliver on stated
objectives.Thecompanyinvestssignificantmoneyandtime
intomonitoringitsadherencetoitscredoandboastspremier
performance among its competitors.
THE CULTURAL MOLECULE
We call each of these facets “elements” because they
come together to create a molecule—the DNA that drives
corporate culture. When combined, these elements contain
theinstructionsandprotocolsthatcandrivedramaticgrowth.
When these elements lose their power, the organization
begins to whither and degenerate. The culture becomes
countertowhatyouwanttoaccomplishandorganicgrowth
become harder and harder to achieve.

SOURCE: INSTITUTIONAL INVESTOR
GROWTH FACTORS:
The Drivers Behind 2015’s Top 10 Emerging Markets
The growth rates of emerging markets were forecasted to slow to an average of 4.4 percent in 2014, down from 7.5 percent
in 2010 according to the International Monetary Fund. But not every country is suffering. Some markets have been
insulated against outside forces, such as dropping commodity prices, through strong internal policies, among other factors.
Here, we take an in-depth look at the environments fostering the strong growth of the top 10 emerging markets.
QATAR
$16 billion, cost of Hamad International
Airport, opened in 2014, which promises not
only global travel, but also 70 retail shops
2022, the year Qatar will host the FIFA World
Cup, driving infrastructure improvement
projects including road systems, a metro
system in Doha, stadiums, and arenas
85 percent of export earnings come from
oil and natural gas, making the country
vulnerable to unstable prices
1
6.5 PERCENT,
2014 GROWTH RATE
7.7 PERCENT,
PROJECTED 2015
GROWTH RATE
7.4 PERCENT,
2014 GROWTH RATE
7.1 PERCENT,
PROJECTED 2015 GROWTH RATE
10.4 percent, the growth rate of China in 2010, which has
since slowed to 7.4 percent in 2014
4 million yuan, the amount paid on the 89.8 million
yuan due when Chinese company Chaori Solar
defaulted on its bond note in March 2014, raising
concerns about how China would balance market
liberalization with ﬁnancial stability
November 2014, the month Shanghai-Hong Kong Stock
Connect launched, which opened up the Shanghai Stock
Exchange to international trade for the ﬁrst time and
allows mainland investors to buy Hong Kong stocks
CHINA
2
GROSS DOMESTIC PRODUCT GROWTH (IN %) PER THE IMF
Country 2014 2015
Qatar 6.5 7.7
China 7.4 7.1
India 5.6 6.4
Philippines 6.2 6.3
Indonesia 5.2 5.5
Malaysia 5.9 5.2
Peru 3.6 5.1
Thailand 1.0 4.6
Colombia 4.8 4.5
United Arab Emirates 4.3 4.5

1947, the year India last implemented
large-scale tax reform. The new goods
and services tax, which is scheduled to
take effect in 2016, will replace indirect
taxes placed on goods and services by
the central and state governments and is
expected to increase growth
30 percent, the amount the Bombay Stock
Exchange S&P BSE SENSEX has risen
since the beginning of March 2014, when
it looked certain that the business-minded
Narendra Modi would be elected prime
minister (he won two months later)
5.2 PERCENT,
2014 GROWTH RATE
5.5 PERCENT,
PROJECTED 2015
GROWTH RATE
6.2 PERCENT,
2014 GROWTH RATE
6.3 PERCENT,
PROJECTED 2015
GROWTH RATE
5.6 PERCENT,
2014 GROWTH RATE
6.4 PERCENT,
No. 3 largest democracy in the world
No. 1 largest economy in Southeast Asia
Poor roads, a factor many analysts blame
for hurting the country’s growth rate, which
reform-minded President Joko Widodo,
elected in July 2014, promised to invest in
$8 billion, amount of money in projected
government savings by the end of 2015
due to cut fuel subsidies promised by
Widodo
3
INDIA
PHILIPPINES
1.1 million, the number of homes
destroyed by Typhoon Haiyan (Yolanda)
in November 2013, from which the
country continues to recover
5.4 percent, Philippines’ growth rate in
the third quarter of 2014, reﬂecting lower
state spending
No. 4, Philippines’ ranking among
the fastest-growing emerging-market
economies in the world
Trade and commerce, areas currently
constrained by the Philippines’ lack of
modernization in customs regulations and
infrastructure
4
5
INDONESIA

MALAYSIA
6
7
PERU
3.6 PERCENT,
2014 GROWTH RATE
5.1 PERCENT,
PROJECTED 2015
GROWTH RATE
5.9 PERCENT,
2014 GROWTH RATE
5.2 PERCENT,
PROJECTED 2015
GROWTH RATE
4.8 PERCENT,
2014 GROWTH RATE
4.5 PERCENT,
COLOMBIA
40 percent of the world’s supply of palm
oil is produced in Malaysia
10 percent of Malaysia’s GDP is account-
ed for by palm oil
4.5 percent export tax on crude palm oil
was temporarily removed from September
2014 through February 2015 in the hopes
of increasing growth
Oil prices are less likely to affect
Malaysia due to diversified economy
60 percent of country’s export earnings
come from mining
No. 1, the ranking it will achieve as
fastest-growing emerging-market
economy in Latin America if IMF growth
projections come true
3.5 percent was Peru’s lowest interest
rate in three years when the central
bank cut rates in September 2014
A3, the rating Moody’s Investors Service
raised Peru’s credit to in July 2014,
matching that of Mexico and trailing
only Chile in Latin America
Alonso Segura, the well-regarded
economist appointed finance minister
in September, who is pushing for major
economic reforms
$1 billion, size of bond being pushed
by Segura along with tax cuts to finance
public sector investments and short-
term spending

2X, oil production rate increase in the last 8 years
10 percent of the country’s roads are paved, and the
country’s infrastructure badly needs investment
50 years, how long it’s been since the conﬂict
between the Colombian government and the
Revolutionary Armed Forces of Colombia began
December 2014, when negotiations began promis-
ing a potential end to the conﬂict, which could lead
to increased growth
Emerging market status, the country was
upgraded from frontier market by U.S.-based
index provider MSCI
Less than 1/3, the fraction of the GDP now
accounted for by oil thanks to efforts by the
government to diversify the economy
Tourism, the area government has worked to
develop through luxury hotels and international
airlines Etihad Airways and Emirates
9
10
UNITED ARAB EMIRATES
4.3 PERCENT,
2014 GROWTH RATE
4.5 PERCENT,
PROJECTED 2015
GROWTH RATE
Political instability, the cause of the dismal growth rate in 2014
2011, the year that former Prime Minister Yingluck Shinawatra began
rule, which ended in May 2014 during a military coup
Military rule, believed to have stabilized the business environment,
which should revive foreign direct investment and growth after a
year of disruptive political unrest
THAILAND
8
1 PERCENT,
2014 GROWTH RATE
4.6 PERCENT,
PROJECTED 2015
GROWTH RATE

For the past decade or so, companies seeking to
boost growth have had two primary options: mergers and
acquisitions or innovation. Many executives and boards
have opted to pursue mergers and acquisitions (M&A),
convincedthatincreasingeverythingfromtheirgeographic
reach to their amount of intellectual property will translate
seamlessly into brisk and sustained growth. Indeed, last
year alone saw over 40,000 M&A deals made worth $3.5
trillion worldwide, an increase of nearly
50 percent from 2013 and the most since
the pre–Great Recession days of 2007.
But don’t let the sheer popularity of
M&Aconvinceyouthatthey’reafoolproof
blueprint for vigorous and sustainable
growth. In fact, a vast body of research has
shown that M&A are anything but a slam
dunk. For a wide range of reasons — such as an inability to
mesh disparate corporate cultures into one that is cohesive
andeffective—atleast50percentofallM&Asfailtoachieve
theirobjectives,whichalmostalwaysincludegrowth.Given
that questionable track record, it’s wise to carefully consider
the primary non-M&A pathway to growth: innovation.
Thoughitmaysoundimprobable,wearguethatinnovation
approached properly — which is to say thoughtfully and
INVENTING GROWTH
Move past traditional means of aquiring growth
for a company by developing an organization
primed for innovation
BY JON KLEINMAN AND ROBERT E. JOHNSTON JR.

boldly—hasasuccessrateborderingon100percent.Problem
is,pursuinggrowththroughinnovationtherightwayisneither
simple nor especially intuitive. By definition, establishing
a culture with the capacity for the sort of innovation that
continuouslydrivesgrowthrequiresfundamentallyreshaping
howthingsaredoneandhowpeoplethinkinanorganization.
Though it will challenge the status-quo culture, which is
often centered on maintaining and perpetuating a company’s
current products and processes, an innovation-oriented
culture can yield dramatic results. This kind of company
mind-set values new, original ideas and possibilities.
Growth through innovation is a journey that will vary
from company to company and industry to industry. Yet it’s
important for leaders to understand some of the similarities,
questions, and requirements involved with any successful
quest for innovation-fueled growth. Here are a few:
DON’T DEFINE INNOVATION TOO NARROWLY
It’s understandable why so many people both in and out
of the business world immediately think of Apple when
they hear the word innovation. The technology company’s
ability to consistently develop breakthrough products like
the iPad and iPhone has allowed it to both capture the
public’simaginationandachieveenviablyconsistentgrowth.
But while product innovation is undeniably one important
aspect of innovation, it is hardly the only one. We define
innovation as anything new or novel that creates or adds
value. There are myriad examples of companies that have
achievedtrulybreakthroughgrowthbyinnovatingavariety
of aspects of their business, including their business models,
supply chains, or even their routes to market. Language
matters in business, and having too limited a definition of
innovation can unwittingly erect a formidable barrier to it.

A MANDATE FROM LEADERS
No matter whether it’s product- or business-model
innovation, the one essential ingredient for success is
leadership. C-suite executives, in particular, need to
establish a strong enough mandate for innovation, so that
everyone — from the CEO to middle managers and factory
workers — understands the basic concept: The company’s
future success depends on innovation. Obviously, this
requires senior management to be aligned and consistently
vocal about the central role innovation plays in the entire
enterprise’s fortunes. Innovation must be one of the stated
top three priorities of the company. A couple of memos and
a town-hall meeting isn’t enough; this has to be an ongoing
company-wide conversation that constantly reiterates the
commitment to innovation.
Nevertheless, it’s important to remember that words
alone aren’t enough. Leaders also need to be sure that their
actions align with their message.Which means that the goal
of innovation — the creation of new value — must be
supported by the incentives, rewards and internal structures
of a company.For example,we have worked with a large real
estate investment trust (REIT) company that owns over 150
hotel properties all around the world.Not only has everyone
fromthechairmanoftheboardtotheCEOandexecutivevice
presidentregularlytrumpetedtheimportanceofinnovationat
all of the company’s properties,they have also created metrics,
incentives,and training programs that actually recognize and
incentivize everyday actions.
ENLIST EVERYONE IN THE EFFORT
Any effective executive team knows this:Good ideas come
from everywhere.After all, it’s logical that salespeople closest
to your customers will have a good sense of their evolving
needs and the opportunities that could arise by meeting them.
Simply put, growth through innovation requires help and
input from everyone. Fortunately, fostering a culture where
people are encouraged and expected to contribute ideas that
drivegrowthalsosignificantlyelevatesemployees’engagement
andcommitment.Thisisimportant.Althoughvital,incentives,
training,and other programs designed to drive innovation are
not sufficient by themselves.Decades of research — much of
which is summarized in Daniel H. Pink’s best-selling book
Drive — demonstrates that what truly motivates people to
perform is not money or fear but the very human desire to
create and ultimately master new things, control and direct
their own lives,and make a positive difference in the world.
The most successful efforts to hardwire innovation into a
company both understand that idea and grasp the notion that
employees are most likely to support and perpetuate a culture
thattheyhelpedcreate.Wehaveseenthatdynamicinourwork
withapackaged-goodscompany.Aftercommittingtoputting
innovation at the core of the company,senior leaders decided
to form 20 innovation teams to explore business growth
ideas and challenges that had been identified by executives.
Participation was open to everyone at the company,and it was
all volunteer work, meaning that employees had all of their
regular duties in addition to the time commitment involved
with the innovation teams. Not only did a lot of employees
opt to work on the innovation teams, many volunteered to
work with more than one team.At the end of one year, the
company CEO gathered the 20 teams together to thank them
for all of their work. During the gathering, though, one of
the team leaders took the microphone from the CEO and
thanked him for providing the opportunity for employees to
express their creativity.
KNOW WHERE YOU’RE GOING, AND LET
INNOVATION HELP YOU GET THERE
Successful growth through innovation requires the input
of everyone at a company, but it is incumbent on leaders to
establish where all of this effort should be headed.This is
less obvious than it may seem. Companies have a tendency
to imagine their future based on their past. Instead, what is
more conducive to growth is to chart a future course based
on developing or recognizing unrealized opportunities and
letting innovation lead you to that envisioned future.A classic
lessonabouttheperilsoflookingbackwardratherthanhaving
foresight comes from history.Railroad executives at the turn
of the last century undoubtedly believed they had bright
prospects.And it’s easy to see why:Trains had established a
virtual monopoly on long-distance travel.

THOUGH IT MAY SOUND
IMPROBABLE, WE ARGUE
THAT INNOVATION
APPROACHED PROPERLY
HAS A SUCCESS RATE
BORDERING ON
100 PERCENT.

But brain science now tells us that our current perceptions
areshapedbypastexperiences.Unfortunately,theresultofthat
isoftenaseverecaseofcorporatemyopiathatmakesitdifficult
to envision a different and better future.Instead of thinking of
themselves as being in the transportation business,the railroad
executives of yore doggedly hung on to the notion of being
exclusively in the train business, even
as other faster and more convenient
modesoftransportationemerged.That
lack of foresight spelled the end of the
big train companies. Being clear on
the future you want to build opens
the door to the kind of innovations
required to get there — preferably at
the speed of a jet plane,notAmtrak.
We’ve witnessed the power of foresight in our work with
the medical products division of a large conglomerate. One
key component of our collaboration with the company’s
executiveswasoutliningwhatitspreferredfuturewouldbeand
then devising an innovation-led roadmap to make it a reality.
In other words, we collectively charted where the company
wanted to be in 10 years and then worked backward to create
milestones that needed to be achieved to get there,including
the development of new products.The result: One year into
its plan, the company was approached by a global medical
products giant interested in an acquisition.We later learned
that the amount the acquirer paid was twice the original offer,
because the vision and strategy for the
future that the company laid out was
so compelling.
MEASUREMENT MATTERS
It’s often said that we measure
what we value. If innovation is the
tool to spur growth, then companies
need to commit to measuring its effectiveness, especially
in relation to achieving their envisioned futures. Part of
what distinguishes innovation from creativity is the fact
that the value created by innovation is measurable. In
the case of the REIT client we worked with, executives
established clear black-and-white metrics about revenue
increases at each property, based on its size and the new
INNOVATION DEFINED:
ANYTHING NEW OR
NOVEL THAT CREATES
OR ADDS VALUE.
6REQUIREMENTS
FOR INNOVATION-
FUELED GROWTH
DON’T DEFINE
INNOVATION TOO
NARROWLY
SCHOOL DAZE
ENLIST
EVERYONE IN
THE EFFORT
KNOW WHERE
YOU’RE GOING,
AND LET
INNOVATION HELP
YOU GET THERE
A MANDATE
FROM LEADERS
MEASUREMENT
MATTERS

ideas being implemented. While metrics are important,
it’s also paramount that they not be too limiting. This is
especiallysowhenitcomestoevaluatingnewideas.Weonce
worked with a company that was looking to generate more
breakthrough ideas to fuel its growth. While this company
had a legacy of innovation and leadership that consistently
espoused its importance, we discovered that they were too
quick to discard ideas. Early in development, potentially
game-changing, breakthrough ideas often won’t appear
that way, and it’s important to keep that in mind when
evaluating them.
SCHOOL DAZE
Business schools are good at a lot of things, but teaching
managers and executives about innovation is not one of them.
As a rule, business school students learn how to manage a
company’s existing products and business lines with a goal
of getting the most out of them.While that is a mandate that
C-suite executives have, they also are charged with creating
a company’s future.All too often, these responsibilities are in
direct conflict. Leaders must recognize how the corporate
immune system and corporate gravity work against
implementing even the most promising new ideas.Corporate
gravity — the real and perceived barriers to doing anything
counter to the current business model — must be countered
withdecision-makingstructuresthatensureideasareapproved
and funded quickly or put into an actively managed system for
consideration again later.The corporate immune system that
manifests itself in the bureaucracy,turf,and hierarchy that kill
off most ideas must be replaced by structures that turn ideas
into realities so that everyone feels emboldened to take risks
and propose innovations.
What happens when innovation becomes the engine for
growth? We’ve seen impressive results time and again. For
instance, a packaged-goods company asked us to work with
its executives and board four years ago to assist its effort to
instill a company-wide spirit of innovation. Fast-forward,
and this year, the company will launch 100 new products;
meanwhile its factory leadership has identified improvements
in its manufacturing process worth millions of dollars.
This is the norm when companies make innovation
the centerpiece of their plan for growth. But remember,
a haphazard approach to innovation won’t yield the many
benefits and sustainable growth that are possible. Put simply,
smart innovation requires a company-wide commitment,
diligent planning and measurement, and the imagination to
glimpse a better future.If that’s not a commitment executives
are willing to make, then the 50-50 crapshoot of M&As just
might be the better choice.
LAST YEAR ALONE SAW
BY THE NUMBERS
M&A DEALS MADE, WHICH
WERE WORTH
WORLDWIDE, AN
INCREASE OF NEARLY
FROM 2013, AND THE
MOST SINCE THE GREAT
RECESSION OF 2008
BUT AT LEAST
OF ALL M&AS FAIL TO
ACHIEVE THEIR OBJECTIVES
40,000
50%
HALF
$3.5
TRILLION

BY CHRI S WARREN
As the CEO of the Cardinal Health Medical
Segment, Donald Casey Jr. drills down to the core
of the constantly changing healthcare industry to
discover the innovative ways the company can
position itself for dramatic growth and success.
THE HEART OF THE MATTER

For the past three years, Casey has served as the chief
executive officer of the Medical Segment of Cardinal
Health, a company based in Dublin, Ohio, in the United
States that ranks No. 22 on the 2014 Fortune 500 list. In his
current role, Casey heads up the Cardinal Health segment
that manufactures and delivers a variety of essential medical
productsanddevices—suchasextravascularclosuredevices
and Negative Pressure Wound Therapy pumps — to
hospitals, surgery centers, clinical laboratories, and other
medical facilities throughout North America.
So when Casey says that healthcare has been whipsawed
by dramatic change over the past few years, it’s worth
listening. “I have been doing healthcare for 33 years at
this point. And there has been more change
in the last three than at any time, and it’s
by a long shot,” says Casey, who points
to the Affordable Care Act and an aging
population as the two main drivers behind
whatisafundamentalreshapingofAmerican
healthcare.“Thefastest-growing
population in all of the U.S.
today is 80 and above,” he says.
Many of these older Americans
are contending with more than
one chronic disease, meaning
their healthcare demands are
significant and growing.
Already,hesays,regulatoryand
demographic shifts are having a
dramatic impact. For instance,
individualhospitalsarebecoming
ararity,morphingoutofnecessity
intowhatareknownasintegrated
delivery networks that provide
everything from surgery centers
and physicians’ offices to skilled
nursing and long-term care
facilities. While these genuinely
seismic and fast-paced changes
cause plenty of hand-wringing
and sleepless nights among healthcare executives, Casey
sees real opportunity for Cardinal Health amid the tumult.
But when Casey outlines how Cardinal Health can
succeedinabusinessenvironmentthatisanythingbutstable
andpredictable,whatheisreallydescribingisaroleinwhich
his company helps its customers adapt and flourish in what is
very much a new world. Here’s why: Even though more and
more baby boomers and older patients are seeking care —
much of it expensive treatments for serious diseases — there
is little appetite for healthcare spending to catapult above its
current15to17percentofAmerica’sgrossdomesticproduct.
“I don’t think people are comfortable with the idea that we
arejustgoingtoincreasethatto30percent,”saysCasey.“It’s
going to be much more about how are we
goingtoprovidegreathealthcaretopeoplein
new paradigms. And that is where we think
Cardinal thrives.”
That’s not just Casey’s opinion, either. In
thecompany’ssecond-quarterearningsofthe
FEW PEOPLE CAN SPEAK WITH AS MUCH
authorityabouttherecentchangesthathaveconvulsed
the worldwide healthcare system as Donald Casey Jr.
Indeed, Casey has spent the past three-plus decades
working in a variety of healthcare jobs. For the
first 26 years of his career, Casey was at Johnson &
Johnson (J&J),where he held executive positions in
the company’s medical device and pharmaceutical
divisions. Later, Casey was worldwide chairman of
J&J’sComprehensiveCareGroupaswellasamember
of the company’s executive committee, where he
oversaw its global cardiovascular,diagnostic,diabetes,
and vision-care franchises.
Over the last 30-plus
years, Donald Casey
Jr. has been witness to
the changes that have
overtaken the global
healthcare market.

2015 fiscal year, Cardinal Health reported revenue of $25.5
billion, an uptick of 15 percent from the previous year’s
second quarter. And the Cardinal Health Medical Segment
also saw revenue rise 4 percent compared to 2014.
POSITIONED FOR GROWTH
To understand why Casey sees opportunity and growth
where others see crisis, it’s helpful to more closely examine
the challenges much of the industry faces and how Cardinal
Health helps solve these problems. Put simply, the future
of healthcare boils down to this: Do more with less. While
that is an ominous-sounding mandate for many, Casey has
been in healthcare long enough to know that there is a
wide spectrum of areas ripe for improvement. “Healthcare
for years was almost a cottage industry. It was individual
hospitals and individual doctors,” he says. The evolution
away from what amounts to a mom and pop business model
presents enormous possibilities. “With hospital chains
getting progressively larger, they are bringing modern
management and efficiency into the system,” says Casey.
“And then the technological advances that have been kind
of the mainstay in other industries are being brought to bear
in healthcare because there’s such an opportunity to create
more efficiency.”
The Cardinal Health Medical Segment has positioned
itselftodrivethatefficiencyandultimatelyhelpitscustomers
focus on delivering the best patient care possible. How
does it do that? In part, it’s by investing in and operating
a sophisticated supply chain of the sort that is more or less
standard in American retail. Think about it: When a case
of soda leaves the shelf at Wal-Mart, how much time does it
take to be replenished? Not long. But in healthcare, that sort
of quick replacement has not always been the norm. Take
the case of cardiology, where Cardinal Health is actively
building out its information-enabled
supply chain. “A doctor will get a delivery
from a cardiology device company three
or four times a day through UPS,” says
Casey. “But there’s no aggregation of how
you put all that demand together and use
a shared distribution network, which is
something Cardinal Health provides.”
The benefit of the sort of efficient
delivery model Cardinal brings is significant. Largely
eliminated are lost and dated products, and the economic
burden they represent that goes hand in hand with an
antiquated process for getting vital medical products to the
clinicians who need them. “Probably 10 to 15 percent more
inventoryisheldbecausethereisnotransparencyorvisibility
about how to manage that inventory,” says Casey. Nor is all
inventorycreatedequal.Somedevicesareneededtoperform
scheduled procedures, such as angioplasty to treat coronary
arterydisease,whileothersaregenuineemergencies.“How
many units do we really need to stock within a hospital
versus how many can we store centrally and get out on an
as-needed basis?” asks Casey. “If X percent are emergencies,
what do you need to serve those well while at the same
time understanding that how you manage inventory for
PROBABLY 10 TO 15 PERCENT MORE
INVENTORY IS HELD BECAUSE THERE IS
NO TRANSPARENCY OR VISIBILITY ABOUT
HOW TO MANAGE THAT INVENTORY.

scheduled procedures needs to be done differently?”
Differently — that’s how Cardinal Health is working.
For example, the company’s budding information-enabled
supply chain uses a low-cost WaveMark RFID (radio-
frequency identification) technology that will let the
company know when a product leaves the distribution
center, when it enters a hospital and even when it enters
an operating room. It also will provide notification when a
product is actually taken out of its packaging.
In other words, the information-enabled supply
chain provides the kind of transparency that previously
has been unimaginable in healthcare. Casey says tests
through the Veterans Health Administration have seen
inventory reductions of 15 to 20 percent
and the near elimination of dated
and lost products. “[Take a] look at
pharmaceuticals that have come up with
cures for hepatitis C and devices that
make a profound life-saving difference
to people,” says Casey. “We also think
there needs to be innovation in the supply chain, and that
is what we are going to do.”
MAKING CHANGES TO BENEFIT CUSTOMERS
Given that Cardinal Health sees its role — and its avenue
togrowth—ashelpingitscustomersadaptinwaysthatallow
them to provide improved patient care at a reduced cost, it’s
no surprise that Casey and his colleagues are always on the
lookout for ways to improve the value of Cardinal Health’s
own offerings. For a company that brings efficiency where
it was lacking, it’s almost inevitable that Cardinal Health
would pursue increased scale and even more innovation.
InMarch,CardinalHealthannounceditsplanstoacquire
As CEO of the Cardinal Health Medical
Segment, Casey has taken an inventive
approach including the development of
an information-enabled supply chain.

Insigniam Quarterly Spring 2015 - Pathways to Growth

Insigniam Quarterly Spring 2015 - Pathways to Growth

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