Insigniam Quarterly® Summer 2017 — Built to Last

TRANSFORMING THE PRACTICE OF MANAGEMENT AND LEADERSHIP
Volume 5 Issue 3 | Summer 2017 | quarterly.insigniam.com
VISIONARYCEOSDONOT
PREDICTTHEFUTURE—
THEYCREATEIT
PAGE40
LEILAJANAHHAS
MADEIMPACT
SOURCINGHERMISSION
PAGE58
J.C.PENNEY’S
DATA-DRIVEN
SURVIVALSTRATEGY
PAGE46
ATCARILLION,DAVIDPICTONISENSURINGA
PROFITABLESUSTAINABLELEGACYTAKESSHAPE
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BUILT
TOLAST
BUILTTOLASTVolume5Issue3Summer2017quarterly.insigniam.comINSIGNIAMQUARTERLY

“In a better business world, senior management would
be working on the present, while the CEO and her/
his team focus on designing and building the future.
In fact, we say that the executive function is designing
a proprietary future for the enterprise, enrolling
the people who are the enterprise in that future as
their future and then providing the environment and
resources for them to realize that future. However,
in keeping with the more-immediate threats-and-
opportunities framework and what they were taught in
business school or by watching their predecessors, most
leaders are bound by the limiting assumption that some
predetermined future exists to be ‘figured out.’ The truth
is that trying to read tea leaves is a waste of time.”
—NATHAN OWEN ROSENBERG SR., FOUNDING PARTNER, INSIGNIAM,
AND SCOTT BECKETT, PARTNER, INSIGNIAM
Over 30 years ago, Insigniam pioneered the field of organizational transformation. Today, executives
in large, complex organizations use Insigniam’s consulting services to generate breakthroughs in their
critical business results. Insigniam’s innovation consulting enables enterprises to identify and cross into
new strategic frontiers to rapidly generate new income streams. Insigniam provides executives of the
world’s largest companies with management consulting services and solutions that are unparalleled in
their potency to quickly deliver on strategic imperatives and boost dramatic growth. Insigniam solutions
include Enterprise Transformation, Strategy Innovation and Innovation Projects, Breakthrough Projects,
Transformational Leadership and Managing Change. Offices are located in Philadelphia, Laguna Beach,
London, Paris and Hong Kong. For more information, please visit www.insigniam.com.

quarterly.insigniam.com | INSIGNIAM QUARTERLY 1quarterly.insigniam.com | INSIGNIAM QUARTERLY 1
The best corporate legacies do not simply occur by chance.
They are created by the bold and driven by the visionary. Corporate
legacies shine the brightest when they transcend a single product,
service or industry.
Take Apple. When the corporate giant combined a phone, a
music player and the internet to make the iPhone, Steve Jobs and co.
not only created a new future for themselves; they also expanded
the idea of what a tech company could be and in what industries it
could play. They rewrote the boundaries of what is possible. That is
a true legacy.
“Without the iPhone revolution, it is hard to imagine a
technology company entering the transport industry or designing
a device that can steer cars around while receiving and transmitting
streams of data,” John Gapper at The Financial Times wrote earlier
this year.
But the sheen of a great legacy can disappear quickly if major
missteps are made, drama drives headlines or executive competency
is questioned. We have seen several recent examples of this,
including HSBC, Wells Fargo and United Airlines. And the risk
of a legacy being tarnished is higher in today’s world of constant
connection, where good news travels fast but bad news travels faster.
Samsung is another prime example. For years, the company’s legacy
has been built on quality and innovation, but that legacy is in jeopardy
following last year’s debacle with the Galaxy Note 7. According to the
Reputation Quotient Ratings report by The Harris Poll, in 2015 Samsung
was the third most-respected company among U.S. consumers. In the
2017 poll, its ranking fell more than 40 points. For better or worse,
corporate legacies are not stagnant—they shift over time with every
move leaders make. You will always have an impact.
This issue is full of stories from executives about how they plan
to build legacies at their companies. I hope they inspire you to create
your own.
LEGACIESTHATLAST
LETTER
FROM THE
EDITOR
Shideh Sedgh Bina
Founding Partner, Insigniam
EDITOR IN CHIEF
Shideh Sedgh Bina
sbina@insigniam.com
EXECUTIVE DIRECTOR
Nathan Owen Rosenberg Sr.
nrosenberg@insigniam.com
CHIEF FINANCIAL OFFICER
Jeff Mullican
jmullican@insigniam.com
MANAGING DIRECTOR OF
INSIGNIAM QUARTERLY
Natalie Rahn
nrahn@insigniam.com
PUBLISHER
James Meyers
jmeyers@imaginepub.com
EXECUTIVE VICE PRESIDENT & CHIEF
CONTENT OFFICER
Kim Caviness
EXECUTIVE VICE PRESIDENT, DESIGN
Douglas Kelly
VP, EDITORIAL DIRECTOR
Cyndee Miller
CONTENT DIRECTOR
Kelley Hunsberger
EXECUTIVE EDITOR
Jeremy Gantz
EDITORS
Becky Maughan
Julie Ortega
SENIOR ART DIRECTOR
Hugo Espinoza
CONTRIBUTING WRITERS
Sarah Fister Gale, Paul Gillin, Tegan Jones,
Novid Parsi, Kate Rockwood
Insigniam Quarterly is a thought leadership
publication committed to transforming the
world of business by offering content relevant
to the C-suite and their executive teams at
large, complex, global enterprises.
Insigniam Quarterly is published by Imagination, 600 W.
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Q&ANEWDIRECTIONS
Mark Vale knows how to keep
up with fast-changing emerging
markets. He is boldly expanding
UPS operations across the globe
and strengthening the company’s
legacy in the process.
By Tegan Jones
52
Contents
COVERSTORY
BUILDINGTHEFUTURE
It is David Picton’s job to execute a
central part of Carillion’s business
strategy: sustainability. He
describes how the organization’s
legacy will be not only green but
profitable and durable.
By Sarah Fister Gale
PATHFINDERS
You do not have to sit in the CEO
chair to have an impactful legacy.
Three executives from different
industries share their visions for
the future.
STOPTRYINGTOREADTEALEAVES
Do not fall into the trap of thinking
your company has a predetermined
future you must “figure out.”
Instead, enroll your organization
and build the future yourselves.
By Nathan Owen Rosenberg Sr.
and Scott Beckett
26 34
40
FEATURES
SUMMER 2017
PHOTOBYSTEWARTCOHEN

“Using analytics to mine information
and provide insights to the organization
makes it crystal clear what our
opportunities are.”
—Mike Amend, executive vice president, omnichannel, J.C. Penney
On the Cover
David Picton, chief
safety and sustain-
ability officer at
Carillion, London,
England
Photo by Jon Enoch
GAMECHANGERSPAGE46
04 THETICKER
News and trends affecting the C-suite
08 NUMBERS
Legacy-building by the numbers
12 BROWSERHISTORY
Book reviews, unusual company origin stories and a
Q&A with author Joseph J. Minarik
68 IQBOOST
Transformational leaders view interrupted
commitments as breakdowns rather than problems.
This mindset can catalyze powerful breakthroughs.
18 BLOOD,SWEAT&TEARS
Pete Valenti orchestrated successful
transformations at Johnson & Johnson and Bausch
+ Lomb. Now he is doing the same at Hologic.
22 FROMTHEBOARDROOM
Activist investors do not have to be a bad thing—if
your company and board respond the right way.
58 AGENTSOFCHANGE
Samasource CEO Leila Janah knows the corporate
world can be a powerful force for change. Her goal
is to get every Fortune 500 company to agree.
64 PERSPECTIVES
In today’s world of quarterly earnings and activist
investors, can CEOs truly build lasting legacies?
The answer is yes.
DEPARTMENTS
INSIGHT

4 INSIGNIAM QUARTERLY | Summer 2017
THENEXTWAVEOFWEARABLES
nce hyped as the next big thing,
smartwatch technology is at a
crossroads.
While Apple clearly dominates the
market—Canalys estimates the Apple
Watch captured nearly 80 percent of
global smartwatch revenue at the end
of 2016—other manufacturers are
struggling. Early fitness-tracker pioneer
Fitbit announced employee layoffs after
disappointing holiday sales, and Motorola says it
has put off smartwatch development
indefinitely.
But the trouble does not end with
slumping sales.
Even when consumers purchase
these wearables, they are abandoning
them at a high rate, according to
a Gartner survey of nearly 10,000
people in Australia, the United
States and the United Kingdom.
Roughly 30 percent of people who
try smartwatches and fitness trackers
stop using them because they do
not see a real use for the data they
provide.
“Dropout from device usage is a
serious problem for the industry,”
Angela McIntyre, Gartner’s research
director, said in a statement. “The
greatest hurdle for fitness-tracker and
smartwatch providers to overcome
is the consumer perception that the devices do not
offer a compelling enough value proposition.”
The market needs a heavy dose of innovation
to improve product prospects. And the health care
sector may be best suited to lead the charge.
O
THE
TICKER
According to Wearable Medical Devices: Technologies
and Global Markets from BCC Research, the wearable
medical device market is expected to increase from
$5.5 billion in 2016 to nearly $19.5 billion in 2021.
Jawbone, an early fitness-tracker entrant, is
already pulling out of the consumer wearable
market altogether to focus on clinical-grade health
wearables. And Nokia Technologies got into the
game last year when it purchased French startup
Withings, which makes smartwatches and medical
monitoring devices.
This strategic shift seems to align
with market demands.
A recent survey of British
consumers by software service
company Trustmarque and YouGov
found that 81 percent of respondents
would like to see more connected and
wearable devices used in health care,
with half of respondents saying they
think wearables could be most useful
in monitoring vulnerable people.
“It is a matter of time before
medical devices collect continuously
vital data from millions of patients
around the world in real time and
simultaneously compare them,”
Roman Chernyshev, a senior vice
president at global technology
consulting firm DataArt, told
Raconteur. “These developments
will change how diseases are
diagnosed. Medical conditions will be predicted as
a result of data and constant monitoring of health
information. Technological advancements will
result in health care being everywhere, although it
will be almost invisible.”
“It is a matter
of time before
medical
devices collect
continuously
vital data from
millions of
patients around
the world in
real time and
simultaneously
compare them.”
—Roman Chernyshev,
senior vice president, Data-
Art, to Raconteur

49Apple
17Fitbit
15Samsung
19Others
2016 GLOBAL SMARTWATCH MARKET SHARE
Source:
Canalys,
2017
ISTOCKPHOTO

What makes a CEO?
For all of their differences,
there are common ties that
bind, according to a recent
study of 200 global executives
by Russell Reynolds
Associates. The study picked
apart the unique aspects
of the CEO personality,
outlining the traits that
set them apart from other
executives. It also identified
traits that distinguished the
most successful CEOs from
their peers.
Compared with other
executives, those who take
the top spot tend to be:
n Less cautious—they
embrace appropriate risks
n More likely to take
action and capitalize on
opportunities
n Driven and resilient
n Original thinkers
n Able to visualize the future
n Team builders
n Active communicators
n Effective at catalyzing
others into action
Among those who have
risen to CEO, high perform-
ers* are more likely to:
n Show a greater sense of
purpose and mission, and
demonstrate passion and
urgency
n Value substance and getting
to the core of the issue
n Focus more on the
organization, results and
others than on themselves
THECEOFORMULA
Kraft Heinz’s reputation for cost cutting
precedes it. That may be why when the
U.S. food giant approached Unilever with
a $143 billion takeover bid earlier this
year, the U.K. and Dutch consumer goods
company declined the offer.
Managed by Brazilian private equity
firm 3G Capital with considerable financial
backing from Warren Buffett, Kraft Heinz
is itself the product of a merger between
Heinz and Kraft Foods Group. 3G’s strategy
generally follows a formula of acquire, cut
costs and repeat. Case in point: Immedi-
ately after its creation in 2015, Kraft Heinz
announced the closure of seven factories
and elimination of about 2,600 jobs.
But such cost-cutting measures only
boost profits for so long—and now the
company is back on the hunt for more
takeover targets. “While [Kraft Heinz’s]
cost-cut-driven business model wowed
industry observers, it appears to be
reaching its limits, with Kraft’s sales stag-
nating and margins flattening,” Reuters
wrote after the Unilever bid failed. The
big question is where Kraft Heinz might
turn next—and whether the company will
pursue a hostile takeover if necessary.
Analysts postulate everyone from
Colgate-Palmolive and Clorox to General
Mills and Mondele-z could be on the
company’s shopping list.
THE
TICKER
*In this study, high performers’ companies
had a compound annual growth rate of at
least 5 percent during their tenure.
Note: To conduct this study, Russell
Reynolds Associates, in partnership with
Hogan Assessment Systems, created
detailed psychometric profiles of 200
global CEOs using the results of three
psychometric instruments: the Sixteen
Personality Factor Questionnaire, the
Occupational Personality Questionnaire
and the Hogan Development Survey. The
results were then validated via another
global sample of 700 CEOs produced and
then compared to non-CEO executives in
Russell Reynolds’ proprietary database of
9,000 senior leaders.
KRAFT HEINZ’S HUNGER PANGS
ISTOCKPHOTO(2)

Dubai, United Arab Emirates has a
reputation for going big. The emirate is
home to a number of “world’s largests”—in-
cluding the tallest building, the biggest mall
and the largest indoor theme park.
In recent years, however, this City of Gold
has been making a name for itself in the dig-
ital world. Here is a look at five recent public
initiatives that aim to transform Dubai into a
21st-century tech leader:
1. Blockchain: In February 2016, Dubai officials
announced the emirate’s plan to make the city
a blockchain hub. Later that year, they pushed
that plan even further by declaring their intent
to execute all of its transactions on a blockchain
by 2020. And finally, this February, the govern-
ment announced its partnership with IBM to
test blockchain technology for trade finance.
“IBM believes that blockchain will do for trans-
actions what the internet did for information,”
Amr Refaat, general manager of IBM Middle
East and Pakistan, said in a statement.
2. Passenger drones: Dubai announced it
would begin offering single-passenger drone
service in July, making the emirate an early
adopter of pilotless flight.
3. FinTech Hive at DIFC: In January, the
Dubai International Financial Centre (DIFC)
launched its FinTech accelerator, which aims
to mentor startups and spur innovation in the
financial services industry. “The accelerator
will invite applications from global firms plan-
ning to access the Middle East, Africa and
South Asia (MEASA) markets, and will
DUBAI’STECHLEGACY
take entrants through a series of mentorship
and co-working sessions for a period of 12
weeks,” Pinaki Aich, vice president of group
strategy at DIFC, told Entrepreneur. “This will
culminate with a demo day where startups
will display their work and engage with tech
firms as potential customers and investors.”
4. Autonomous vehicles: In February,
Dubai’s transportation authority announced
a deal to purchase 200 Tesla Model S sedans
and Model X SUVs fitted with the company’s
autonomous driving technology for the city’s
10,000-vehicle taxi and limousine fleet. This
drives the city one step closer to its goal of
making 25 percent of all local car trips auton-
omous by 2030. The city plans to have this
self-driving fleet on the streets by 2020.
5. Dubai Future Accelerators
(DFA): Instead of teaching ap-
plicants how to write a business
plan or attract investments, DFA
gives tech companies instant
access to government offi-
cials. The goal is to streamline
Dubai’s future by finding ways
to improve key community ser-
vices—such as policing, patient
safety, water distribution, and
passport security and control—
with technology.
China’s
Ehang 184
passenger
drone aims
to begin
regular
operations
in Dubai in
July 2017.
quarterly.insigniam.com | INSIGNIAM QUARTERLY 7
PHOTOSCOURTESYOFEHANG

MAKE A MARKThere is more than one way to build a legacy.
NO TIME TO LOSE
LEGACY OF INCLUSION
If CEOs want to boost gender or racial diversity, there is plenty of work left to do.
67%of the public thinks CEOs focus too much
on short-term financial results.
57%think CEOs are not in their role long enough
to make a positive long-term impact.
Average tenure of current CEOs:
Still, 50% of outgoing CEOs maintain influence by remaining on their company’s board.
S&P 500 FTSE 100 ASX 200
Women only make up …
And while nurturing a culture of diversity is a worthy cause, not all workplace initiatives
have the same level of success.
Percent change in representation of white, black, Hispanic and Asian managers over five years when
organizations participated in the following programs1
:
1
This data is based on a study of 829 midsize and large U.S. firms.
0
2
4
6
8
10
12
10.8
years
5.3
years 4.4
years
of CEOs in
Australia
15.4%of S&P
500 CEOs
5.8%of Fortune
500 CEOs
4.2%of Bombay
Stock Exchange
100 executive
directors
2.5%of TSX 60
CEOs
1.7%
Type of Program White Black Hispanic Asian
Men Women Men Women Men Women Men Women
Voluntary diversity training +13.3 +9.1 +9.3 +12.6
Self-managed teams -2.8 +5.6 +3.4 +3.9 +3.6
Cross-training -1.4 +3.0 +2.7 +3.0 -3.9 +6.5 +4.1
College recruitment: women -2.0 +10.2 +7.9 +8.7 +10.0 +18.3 +8.6
College recruitment: minorities +7.7 +8.9
Mentoring +18.0 +9.1 +23.7 +18.0 +24.0
Diversity task forces -3.3 +11.6 +8.7 +22.7 +12.0 +16.2 +30.2 +24.2
Diversity managers +7.5 +17.0 +11.1 +18.2 +10.9 +13.6
NUMBERS

PLANNING FOR CHANGE
Many boards say they do not have a CEO succession plan.
And that may explain why the answers to this question vary so much: “If we have to replace the CEO in the
next year, we will most likely hire an outsider.”
Do you have an emergency succession plan? Do you have a long-term succession plan?
No: 58%
Yes: 35%
Other: 7%
No: 54%
Yes: 42%
Other: 4%
BREAKING DOWN TENURES
The average U.S. C-suite tenure is 5.3 years, according to a recent study. While CEOs tend to stick around the
longest, it is the chief marketing officers who often turn over the fastest.
0
10
20
30
40
Agree
39%
Neither agree
nor disagree
13%
Disagree
28%
Strongly
disagree
7%
Strongly agree
13%
CEO
8 years
CFO CIO
4.3 years
Chief Marketing
Officer
4.1 years
Chief Human
Resources Officer
58
5.1 years
53 51 52
5 years
55
Average
Tenure
Average
Age

FAMILY LEGACIES
The largest family firms2
in the world.
2
A privately held firm is defined as a family business if a family controls more than half of the voting rights. A publicly listed firm is defined as a family
business if a family holds at least 32 percent of the voting rights.
3
In the Global Family Business Index, which comprises the 500 largest family firms in the world
$100
$200
$300
$400
$500
REVENUE(BIL)
Family:
Established:
Headquarters:
Public/Private:
Employees:
#
2
VOLKSWAGEN
261.6
Porsche
1937
Germany
Public
572,800
#
1
WAL-MART
STORES INC.
476.3
Walton
1962
United States
Public
2.2 million
#
3
BERKSHIRE
HATHAWAY INC.
182.2
Buffett
1955
United States
Public
330,745
#
4
EXOR N.V.
151.1
Agnelli
1927
Italy
Public
301,441
#
5
FORD MOTOR
COMPANY
146.9
Ford
1903
United States
Public
181,000
Countries with the most
family businesses3
100United States
NUMBERS

Sources: 2016 Edelman Trust Barometer; The Conference Board, CEO Succession Practices: 2016 Edition; Robert Half FTSE 100 CEO Tracker, 2016; Global Proxy
Solicitation, AICD Governance Summit 2016; RHR International, Successful CEO Transitions, 2017; Catalyst, Statistical Overview Of Women In The Workforce, 2016; Fortune,
“The Percentage of Female CEOs in the Fortune 500 Drops to 4%,” 2016; Catalyst, Women CEOs Of The S&P 500, 2017; Harvard Business Review, “Why Diversity
Programs Fail,” 2016; MIT Sloan Management Review, “How Boards Botch CEO Succession,” 2016; Korn Ferry Institute, Age and Tenure in the C-Suite, 2017; The Center
for Family Business at the University of St. Gallen and EY's Global Family Business Center of Excellence, Global Family Business Index, 2016.
#
7
KOCH
INDUSTRIES
INC.
115
Koch
1940
United States
Private
100,000
#
8
BMW
101
Quandt
1916
Germany
Public
110,351
#
9
SCHWARZ
GROUP
89.4
Schwarz
1930
Germany
Private
335,000
#
10
GROUPE
AUCHAN
85.5
Mulliez
1961
France
Private
302,500
#
6
CARGILL INC.
136.7
1865
United States
Private
143,000
Japan
is home to the oldest
surviving family business in the
index: Takenaka Corporation,
founded in
Germany
86 Italy
27 France
26 India
24
1610
Cargill/
MacMillan

A Man for All Markets: From Las
Vegas to Wall Street, How I Beat
the Dealer and the Market
by Edward O. Thorp. Random
House, 2017.
“The dealer always wins.” Edward
Thorp put the lie to that blackjack
players’ adage. The legendary
mathematician dared to challenge
the conventional wisdom and ended
up pioneering the concept of card
counting. A Man for All Markets reveals the process that
led him to the game-changing innovation—and then
on to the financial markets. After all, Mr. Thorp once
said, Wall Street is nothing but “the biggest casino in
the world.” Gamblers, mathematicians and finance
buffs alike will love how this book pulls back the
curtain on a brilliant mind.
Dreaming Big: My Journey to
Connect India by Sam Pitroda with
David Chanoff. Penguin Books
Limited, 2015.
Claiming to have connected an entire
country would normally smack of
hubris, but Sam Pitroda is a special
case. The entrepreneur, inventor and
philanthropist is widely recognized
as having laid the foundation for
India’s telecommunications and
technology revolution back in the 1980s.
Playing such a momentous and modernizing role
was not easy. After earning his education in the United
States, Mr. Pitroda returned to India to rise to the top
of the telecom industry, advise prime ministers and
earn patents. He also hit roadblock after roadblock: a
heart attack and false corruption charges, to name two.
Dreaming Big takes us through all the ups and downs,
offering a window into how India has transformed
itself so dramatically in barely more than a generation.
BROWSER
HISTORY
LASTINGIMPRESSIONSA roundup of books, websites and other resources from and for the C-suite.
Shoe Dog: A Memoir by the
Creator of Nike by Phil Knight.
Scribner, 2016.
Memoirs by corporate founders and
CEOs have become a dime a dozen,
with a new “formula for success”
seemingly released every day. Phil
Knight’s memoir is different. He is not
concerned with showing off; he holds
nothing back and hides no flaws.
Instead, as Bill Gates noted in his
review of the book, it is a refreshingly
honest account of what it is like to
start a business. Shoe Dog follows Mr.
Knight from a $50 loan that started
him off, through numerous setbacks
and failures—both personal and
professional—to the eventual rise of
the more than $30 billion powerhouse
Nike is today.

THISISYOURLIFE:
BROADERHORIZONS
CEOs, just like every other worker, need time to
unplug. Taking a break from the work can not only
boost your motivation, but also expose you to
moments of inspiration and new perspectives that
will make you a better leader.
If you are traveling to Africa, Europe or the
eastern United States for business anytime soon
and need a quick escape, consider making a stop
at one of the world’s most talked-about new
museums.
Zeitz MOCAA
Cape Town, South Africa
The Zeitz Museum
of Contemporary Art
Africa, opening in
September, will be the
first major museum on
the continent dedicated
to contemporary art—and the biggest museum to open in Africa
for more than a century. It was co-founded by former Puma CEO
Jochen Zeitz, whose personal collection of art from Africa and its
diaspora will populate the museum’s initial exhibitions.
Construction of the Zeitz MOCAA began back in 2013 on a plum
site: the Victoria & Alfred Waterfront in the heart of Cape Town.
Surrounded by shops and restaurants (and ocean views), the new
museum will be housed in the historic Grain Silo building, an icon
of the Cape Town skyline.
Museo Atlántico
Off the coast of Lanzarote, Spain (in the Canary
Islands west of Morocco)
This underwater museum was inaugurated
in January, roughly 45 feet below the surface
of the Atlantic Ocean. Designed by Jason
deCaires Taylor, it comprises more than
300 eerie, humanlike sculptures and their
surroundings, including a seesaw designed to
look like an oil pump.
But what makes the museum truly unusual
is how it aims to interact with the environment.
The sculptures are made of pH-neutral cement
and are void of any corrosive materials. As such,
they are designed to attract marine life and
transform over time as algae and other sea life
make them their homes. In other words, this
museum could end up being an artificial reef.
To visit Museo Atlántico, you will need a
diving certification.
The Smithsonian
National Museum
of African American
History and Culture
Washington, D.C., USA
The popularity of this
museum since it opened
last fall has made obtaining
tickets difficult, but it is worth trying. Almost 37,000 historical and
cultural artifacts reside within this Smithsonian museum’s walls.
Together they tell an expansive, detailed and moving history of the
African-American experience since the 17th century.
Artifacts on display cover the full range of that experience, from
gymnast Gabby Douglas’ grips from the uneven bars she competed on
during the 2012 Olympic games, to Emmett Till’s casket, to a preserved
slave cabin. And the museum is alive: Some exhibits will be updated as
current events unfold.
A sculpture in
Museo Atlántico
PHOTOSCOURTESYOFMUSEOATLANTICO(TOP),HEATHERWICK
STUDIO(BOTTOMLEFT),SMITHSONIAN(BOTTOMRIGHT).

BROWSER
HISTORY
BEFORE
THEYWERE
FAMOUS
Avon: Beauty With
Literary Roots
In an effort to boost
interest in the books he
was peddling, door-to-
door salesman David
Hall McCon-
nell started
pairing
them with
homemade
perfumes.
When the
fragrances
proved more
popular than
his literary
offerings, Mr.
McConnell
opened a perfume lab-
oratory in Suffern, New
York, which would later
evolve into the $6 billion
door-to-door beauty
empire.
DuPont: Before It
Invented Nylon
The U.S.-based conglomerate
started with a bang in 1802:
as a gunpowder mill founded
by Eleuthère Irénée du Pont, a
chemist who fled France during
the Revolution. It dominated
the gunpowder business for a
century but was then bought
by three young du Pont cousins who set out
to transform the brand into a more diversified
chemical company. In the late 1910s, they
made the leap into textile fibers, which
seemed like a good prospect since
they were already in the business of
cellulose-based explosives.
Cadbury: A Sweet for
Sobriety
A Quaker who wanted
to offer alternatives to
alcohol, John Cadbury
originally opened a
grocer’s store in Birming-
ham, England that sold
specialty tea, coffee and
drinking chocolate (which
he made by hand with
a mortar and pestle). But when consumers’ appetite for the chocolate
grew, he opened a factory and ditched the mortar for a commercial-scale
production that grew into one of England’s most recognizable brands.
Rarely is the path to success a straight line.
To build a company with a long legacy of
great products or services, leaders must be
willing to take risks, innovate, evolve and,
in some cases, completely change direction.
Here is a look at the surprising and often
humble beginnings of 10 of the world’s
most well-known brands.
Nintendo:
Card Games Set the Stage
Gaming is in the Japanese com-
pany’s DNA, but in 1889 when
Fusajiro Yamauchi founded the
company (as Nintendo Koppai),
it produced handmade playing
cards. The company then landed
in the hands of Yamauchi’s
grandson, who branched out
into a number of failed endeav-
ors, including a taxi company
and a hotel chain. Eventually,
the company returned to
playful roots and set
its sights on
video games,
making its
very own
consoles
by 1983.
David Hall
McConnell,
founder,
Avon
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ALAMYSTOCKPHOTO
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S.O.S. Pads:
From Selling Out to
Cleaning Up
Irwin Cox, a Wear-Ever
Aluminum cooking
utensil salesman, was
looking for a way his
customers could keep
their pans clean and
bright. So in 1917, he
dipped steel wool pads
into liquid soap in his
basement and let them
air dry. His wife dubbed
his scouring pads S.O.S.,
or “Save Our Sauce-
pans.” He eventually
left the sales job to
focus on the invention.
Procter & Gamble:
Founded on Fatherly Advice
When William Procter, an English
candlemaker, and James Gamble, an
Irish soapmaker, married sisters Olivia and
Elizabeth Norris, the two were in fierce com-
petition for raw goods. Their new father-in-law,
however, suggested
they would find more
success if they joined forces.
More than 175 years later,
the brothers-in-law’s business
has grown into a $65 billion
consumer goods global giant.
Samsung Electronics: A Subsidiary With Staying Power
With only $25 in capital, Byung-Chull Lee launched Samsung
Sanghoe, a Korea-based exporter of local vegetables, fruits and
fish to China. Soon, Mr. Lee was
able to expand into flour mills and
confectionery machines. From
that place of prosperity, Samsung
started a subsidiary boom, including
Samsung Fire & Marine Insurance
and Samsung Everland. But it
was Samsung-Sanyo Electronics,
launched in 1969, that broke through
on a global scale.
Wrigley: From Freebies to Fortune
William Wrigley Jr. began his career selling
baking powder. But when the gum sticks he
gave away with each sale garnered more
buzz than the baking powder, he decided
to make the product his full-time focus.
By combating a stereotype that only
women should chew gum and
launching the United States’
first national direct-market-
ing campaign, Mr. Wrigley
built a company that
now has an annual
revenue of more
than $5 billion.
Nokia:
A Smartphone’s Analog Origin
When Finnish engineer Fredrik Idestam opened a second paper
mill near the town of Nokia, Finland in 1868, a mini empire was
born. A rubber and cable company then became part of the
conglomerate. The cable company was the phone manufacturer’s
first foray into telecommunications. In the 1960s it pivoted to
electronics, creating radiotelephones for the army. It later helped
create the Nordic Mobile Telephone service, the world’s first
international cellular network, and eventually car and mobile
phones for the network.
Toyota: Born Out of
Textiles
Sakichi Toyoda was an inven-
tor who opened the Toyoda
Automatic Loom Works in
1926. Looking to grow beyond
textiles—and with the urging
of the Japanese government—
Mr. Toyoda sent his son to
investigate the emerging
automobile industry in Europe
and the United States. Upon
his return, the pair opened an
auto department that eventu-
ally became Toyota Motor Co.
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Q&A:ACRISISOFTRUSTCapitalism is in danger, says author Joseph J. Minarik, and it is up to all business leaders to help turn the tide.
rony capitalism has gotten out
of hand. Business leaders are
addicted to short-term value.
Corporate incumbents use
connections to keep disruptors
out of their markets—including
industry-changing innovations
that could boost the economy.
That is, if you believe public
opinion.
But public opinion is exactly what worries
Joseph J. Minarik and Steve Odland, co-
authors of Sustaining Capitalism: Bipartisan
Solutions to Restore Trust & Prosperity. There
has been a significant erosion of public trust
in corporations and politicians, and it is
putting capitalism at risk, they argue. While
Mr. Minarik and Mr. Odland focus their
assessment on the United States, they argue
the same issues can be found across the globe.
The authors call on business leaders to band
together to fight short-termism and crony
capitalism, and ultimately help to restore public
trust in the system. It is a weighty request, but
Mr. Minarik says the status quo is likely to only
lead down a darker path. He spoke with IQ
about why executives must care about fixing
capitalism and what they can do to help.
IQ: Can you start by discussing the current
threats to capitalism and the necessity of
sustaining it?
Joseph J. Minarik: We perceive the most
important problem to be an erosion of trust.
There’s a lack of trust between individuals
and the nation’s institutions—that includes
government and business.
We need to create a new environment in
which people have sufficient trust so they are
willing to speak to one another and express their
opinions to their leaders. They need to have
enough confidence in the future so that they are
willing to take risks to establish businesses to
make investments and help our economy grow.
At this point, public attitudes have been
sufficiently deteriorated—particularly over
the last 10 years, but really over a longer
period of time—such that we have great
concern about the prospect for the ability of
the system to sustain itself. If we allow the
capitalist approach to deteriorate and lose
out in public trust and in people’s willingness
to adhere to it, we would first of all see an
erosion of living standards. Then secondly,
we could possibly see a revolt against the
entire economic system, the consequences of
which could be really catastrophic.
We need to keep the American people
involved in the workings of the economic
system. To do that, we need to make sure the
capitalist system works for them.
IQ: Many of the solutions proposed in
Sustaining Capitalism require business
leaders to relinquish self-serving pursuits
in favor of benefiting society. What will it
take for this shift to happen?
JM: We believe business has to take the lead.
Business leaders must step forward, be clear
that they understand that our economic
system is under stress and that it needs greater
support, and make clear that they understand
they need to be part of the solution.
In particular, they must recognize that there
is strength in numbers. They need to step
forward together and explain to the population,
“Here is what we have to do in order to make
our economic system more successful and
more sustainable, to make it work for all
Americans, and we are prepared to play our
part.” We believe that doing this will, at the end
of the day, be in the interest of all Americans
including those business leaders. Because
business cannot be successful if the society on
which it is based is not successful as well.
IQ: Can you discuss some of your
proposed solutions to corporate short-
“Business
cannot be
successful if
the society
on which it is
based is not
successful
as well.”
—Joseph J. Minarik,
co-author, Sustaining
Capitalism: Bipartisan
Solutions to Restore
Trust & Prosperity
BROWSER
HISTORY
C
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To escape short-termism, businesses will
need to adopt a multi-stakeholder approach
to value creation. Adopting a long-term
perspective leads naturally to a multi-
stakeholder approach, since a business cannot
prosper over the longer term without taking
care of its customers, employees, suppliers
and community.
A challenge of the multi-stakeholder
approach is that it involves setting priorities
and executing tradeoffs. The board and
the CEO must find ways to express which
stakeholders stand at what place in line of
priority, and over what time horizon, while
maintaining a cooperative and cohesive
relationship among those stakeholders.
IQ: Lately a lot of prominent Silicon Valley
executives seem to be a good example of
what you encourage in the book, as far as
speaking out in the public sphere.
JM: As much as I admire business leaders
who are willing to climb out of the foxhole
as individuals, I find myself often wishing
that before they do so, they reach out to
some fellow business leaders and urge them
to step out together. Some very prominent
business leaders might figure, “I am big
enough to stand on my own. I don’t want to
water down my own principles. I don’t want
to compromise.”
I think business leaders, even those who are
in very powerful positions, need to understand
that they are just one member of the business
community. If everybody in the business
community has their own plan, that’s too
many. We need one plan.
They need to recognize that the ultimate
solution to the problem is going to be one they
share with many, many other people—possibly
with people who don’t share every detail of
their vision. So executives need to be prepared
to work with other people and find common
ground. IQ
termism, including how and why CEOs
should transition to a multi-stakeholder
approach?
JM: There is tremendous pressure for
executives to find ways to increase earnings,
which very often means the one thing
they can do over a very short period of
time is cut down on longer-term projects,
including investments in physical capital and
knowledge capital and so forth.
Those kinds of investments, in physical
capital and knowledge capital, always take
some time to pay off. So first of all, the
corporate manager has to stand up and
explain to investors, “This is why I am taking
the path that I have chosen. I believe it will
be good for our shareholders in the long run
and that is why we believe that we, our firm,
are a good investment for the future.”
ABOUT THE AUTHORS
Joseph J. Minarik is
senior vice president and
director of research of
the U.S. Committee for
Economic Development
(CED). He was the chief
economist of the U.S.
Office of Management
and Budget for President
Bill Clinton.
Steve Odland is president
and CEO of the CED and
former chairman & CEO
of Office Depot Inc. and
AutoZone Inc.

ALEGACYOF
BREAKTHROUGHS
At Johnson & Johnson, Bausch + Lomb and
now Hologic, Pete Valenti has discarded the
status quo to spark transformations.
By Novid Parsi
ete Valenti is a turnaround man.
For almost three decades, he has built a career out
of going into businesses with slow or negative growth
and creating transformations that drive innovation
and sustainable change. It is his legacy—and one that
he is proud of. “I love to see people and organizations
win,” says Mr. Valenti, who is division president of
breast and skeletal health solutions at Hologic.
His breakthroughs are not simply about bringing
better products to market faster, however. To Mr.
Valenti, it is also vital to alter the mindsets of the people who
make up an organization. “It’s about what excites people, what
gets them believing in the future and thinking differently about
what they can do personally to impact their situation,” he says.
“Launching a better new product is one thing. Creating a culture
that’s always looking to do things better, creating an organization
that will win for decades to come—that’s the ultimate goal.”
It is a goal he and his teams have achieved at various Johnson
& Johnson businesses, including K-Y brand and Vistakon, at
Bausch + Lomb, and now at his current organization, Hologic.
P
INSIGHT
BLOOD, SWEAT
& TEARS
ISTOCKPHOTO

“Creating a culture that’s always looking to do
things better, creating an organization that will win
for decades to come—that’s the ultimate goal.”
—Pete Valenti, division president, breast and skeletal health solutions, Hologic
The company develops and manufactures
diagnostic and surgical products and medical
imaging systems related to women’s health.
But in each case, the breakthroughs
he helped create almost did not happen.
The reason, he says, is simple: People and
organizations inherently resist change
and favor the status quo. “Organizations’
momentum, thinking and in some cases
management processes are all against driving
that kind of big change,” he says.
In addition, companies create what Mr.
Valenti calls “artificial criteria”—hurdles
designed to make decision-making simpler,
such as a minimum amount of revenue a
proposed new product must guarantee before
it can be produced, that in fact can stifle big
ideas. “So it takes bold thinking and bold
positioning to get those breakthroughs.”
SHIFTING MINDSETS
When it comes to innovation, barriers to
entry often start at the top. Such was the
case for Johnson & Johnson’s K-Y product
line. The 60-year-old brand had become tired
and growth had flatlined. And yet, company
leadership was hesitant to make a change.
The problem? K-Y had long been known
as a surgical lubricant, and that was the
niche Johnson & Johnson continued to push.
But the brand had taken on a life of its own
among consumers. Once the product became
available over the counter, they started
using it as a sexual lubricant. “At Johnson &
Johnson, a very conservative company, the
idea of products used for better sex was not
appealing,” Mr. Valenti says.
But, among many of the rank and file,
“the thinking was that the world was
bigger than the categories that K-Y played
in,” he says.
As Mr. Valenti discovered, K-Y’s R&D
team had been developing new product ideas
aligned to the brand’s reality—only to watch
them languish on cabinet shelves. “The R&D
team was afraid to bring them to Johnson &
Johnson’s management,” Mr. Valenti says.
“They were worried their ideas would be shot
down and they’d be seen as going against the
Johnson & Johnson culture.”
Once he understood the point of
resistance, Mr. Valenti could determine
how best to make new products viable. He
shifted the organization’s thinking about K-Y
products by reframing the brand as helping
to build and enhance healthy relationships.
They changed the name of his group from
Women’s Health to Intimate Health. “When
we redefined the category and the thinking
about the business as the world of intimate
health, then Johnson & Johnson was very
open to new products,” he says.
With that shift made, Mr. Valenti and his
team began aggressively pursuing the new
future they were trying to create, starting
with a goal of testing and validating 100
new concepts every quarter. “The mindset
became, let’s get ideas, let’s go test them,
let’s not try to be perfect,” he says. “Let’s get
a lot of shots on goal and then from there
assess where we want to go.”
Under the Intimate Health banner, Mr.
Valenti’s team ended up launching new K-Y
products that generated tens of millions of
dollars in annual revenue. As a result, K-Y’s
sales grew fivefold over the next five years.
SEEK OUT INNOVATION
At Bausch + Lomb, Mr. Valenti found a
scenario similar to the one at K-Y: a stagnant
business line that resisted change. The
organization’s vision care revenue had
been falling for 10 years and employees had
become rather jaded. “Winning was a long,
long time away,” Mr. Valenti says. “So when
we talked about bringing in innovation to
drive sustainable growth, the general attitude
was, ‘Not going to happen, we’ve heard it
before.’”
And in fact they had. Mr. Valenti was
the seventh leader over Bausch + Lomb’s
vision care division in only a decade. So
while he could certainly understand his
employees’ wariness, he had to get them
past it. “Pete had a huge challenge ahead of
him; he needed to intervene in the invisible

more product ideas, the R&D team became
busier and more valuable.
Ultimately, Bausch + Lomb made major
breakthroughs in building an industry-
leading new product pipeline, resulting
in three new lens materials, more than all
the others combined. Importantly, there
were unintended benefits of pushing for
breakthroughs. For instance, while driving
toward a new lens vision design, the R&D
team reduced the design-to-molding time
from six months to six weeks on each SKU,
and there could be 1,200 SKUs or more for
one product. In another case, when shooting
for a new low-cost product, they came up
with a more efficient and less expensive way
to do product sterilization, saving significant
time and money that could be applied to
other products.
NO IDEA TOO BOLD
With any transformation, an effective way
to overcome people’s resistance to change is
to solicit their ideas on how to change, Mr.
Valenti says. They then become an active part
of the breakthrough, rather than barriers to it.
At Bausch + Lomb and now at Hologic,
Mr. Valenti established a process where
employees across the organizations regularly
contributed their ideas about how to improve
products and processes. Teams of employees
from all functions then scored the ideas, and
the best ones were implemented. Along the
way, contests were held to recognize the
people and functions with the best or most
ideas. The goal is to get this ingrained in the
culture, Mr. Valenti says, so people do it every
day as part of their routine.
Even ideas that seemed completely off-the-
wall were seriously entertained. “If people
bring ideas and all you do is sit there and kill
the ideas, you won’t generate the risk-taking
you want and people won’t step forward with
other ideas,” Mr. Valenti says. “You have to
ensure, when you’re trying to be open to
new ideas, that your first signal isn’t that you
killed the first 10 that came in.”
There is another advantage to hearing
out even the most far-fetched ideas,
forces that were inhibiting people from
thinking differently, often described as the
organizational corporate gravity and myopia
that ‘certain things just can’t be done’ here
at Bausch + Lomb,” says Jennifer Zimmer, a
partner at Insigniam.
One of the first things he did to gain buy-
in at Bausch + Lomb was make innovation
a centerpiece of the organization by
rolling it up into its values. “At its core,
transformation is about bold goals and bold
declarations that make people look at things
differently,” he says.
Mr. Valenti and his team created what
would eventually become known as the
Patient-Centric Innovation Process, which
brought every function together to drive
innovation instead of having separate
functions on separate teams.
At the same time, Mr. Valenti began
looking to outside sources for innovation.
He decreed that 40 percent of innovation
would come through
external partnerships.
It was not a magic
number, Mr. Valenti
explains; it was just a
large number. “Whether
or not 40 percent was
the right number, it
was significantly more
than we’d ever done.
So it made people
change their thinking.”
Working with outside
partners forces an
organization’s people
to think and work
differently.
The 40 percent figure had another benefit:
It was less than 50. Mr. Valenti wanted to be
clear that, while a big chunk of new ideas
would come from external sources, the
majority would still be derived internally.
He needed to assure a concerned R&D
group. “They worried that if we did so
much outside, we wouldn’t need them,” he
says. Just the opposite turned out to be true.
Because Mr. Valenti’s team came up with
INSIGHT
BLOOD, SWEAT
& TEARS
“To be
innovative,
you need
to engage
the whole
organization.
You can’t do
it on your own
as a leader.”
—Pete Valenti
ISTOCKPHOTO

Mr. Valenti says: They typically come
from vocal employees. Listening to their
suggestions sends them a clear signal that the
organization is genuine about innovation,
and those vocal employees then spread
that message to their colleagues, becoming
change agents. “To be innovative, you need to
engage the whole organization. You can’t do
it on your own as a leader,” Mr. Valenti says.
“Two of the key leadership principles Pete
stands for are inclusion and accountability,” Ms.
Zimmer says. “He truly believes that everyone
has a contribution to make and is accountable
for speaking up. He develops a big-picture
vision then walks the talk every step of the way.
This builds an energy in the organization where
people want to participate.”
CARRYING IDEAS THROUGH
When Mr. Valenti joined Danbury,
Connecticut-based Hologic Division in 2014,
he found an organization with a long history
of developing market-leading products—
while too often going over budget and way
over schedule. “Innovation has a broad
definition,” he says. “The products [Hologic
was] doing were innovative. The how we got
them done was not ideal, and the readiness to
take them to market was not good.”
Mr. Valenti had to find a way to make better
products more efficiently. “It’s not just speed for
speed’s sake. It’s doing things faster and better—
meaning better alignment with patient and cus-
tomer needs, quality, safety and regulation.”
The first step was creating a vision statement
around innovation, which became the Insights-
Driven Innovation Approach. Next, Mr.
Valenti brought various functional leads from
throughout the organization that had been
involved in the successes and failures of the past
to decipher what worked and what did not.
“[The team members] were high performers
from every function,” Mr. Valenti says. “They
could help drive change, so instead of just
impacting the 30 people in the room who were
involved with that team, they were impacting
the 1,400 overall that are in the division.”
The team also created the concept of
inclusive innovation—Hologic’s form of
soliciting, scoring and rewarding employee-
driven ideas for change. Through the
organization’s first wave of inclusive
innovation, it came up with more than
400 suggestions for improving products
and processes. Winning ideas ranged from
creating a mammography product that
enhanced patient comfort to streamlining the
organization’s documentation process.
Hologic tested its new approach to
innovation and more efficient processes
while developing its Affirm Prone Biopsy
System. With this new product, the
company aimed to take its 3-D imaging
mammography technology, which it had
launched in Europe in 2009 and in the United
States in 2011, and use it on a biopsy table.
The product would yield more accurate and
less invasive biopsies for women and better
workflows for their medical providers.
To get there, the team examined the issues
that had caused pain in the past. “One of the
major breakthroughs was we did not have
enough floor space in our plant to physically
make the volumes we were forecasting,” says
Mr. Valenti.
So the team identified ways to make the
product in less space, and the biopsy system
is now produced with just 40 percent of the
manufacturing footprint that older, similar
products required.
As a result of its more efficient process,
Hologic completed the new biopsy system
eight months faster than anticipated. The
product received approval from the U.S. Food
and Drug Administration in April 2016 and
has since seen more sales in its first months
than any other Hologic product. Orders have
doubled every quarter since launch.
“In all these transformations, you have to set
a bold vision with innovation at its core,” Mr.
Valenti says. “You’re driving people to under-
stand that their role is not to accept the status
quo but to innovate to make breakthroughs.”
“This in turn catalyzes the teams to be
focused, owning the result and driving high
performance,” Ms. Zimmer says. “People
love to work hard to deliver what they create.
Pete inspires bold, decisive leadership.” IQ
“At its core, transformation is about
bold goals and bold declarations that
make people look at things differently.”
—Pete Valenti

UNDERSIEGE
When an activist investor comes calling, there are right
and wrong ways for a company and its board to respond.
he most feared man in corporate
America.
That infamous title was
bestowed upon activist investor
Jeffrey Smith, CEO of New
York-based hedge fund Starboard
Value, by Fortune in 2014 after he
executed a game-changing proxy
fight against Darden Restaurants,
which owns chains such as
Olive Garden and LongHorn Steakhouse.
In a nearly 300-page presentation to
shareholders, Mr. Smith and his cohorts at
Starboard Value made the case that Olive
Garden was poorly run, arguing (among
T
other things) that Darden’s food costs had
become some of the highest in the industry
while quality had declined.
In the end, Mr. Smith—with the backing
of a majority of other shareholders—won
the fight and gained free rein to replace all 12
board members and then-CEO Clarence Otis.
Though he owned less than 10 percent of the
business, Mr. Smith effectively took control
of the Fortune 500 company.
This coup d’etat has become a piece of
corporate legend. Never before had such a
complete boardroom takeover happened at
a company as large as Darden. Since then,
however, the list of Mr. Smith’s corporate-
warfare casualties has only grown. He has
infiltrated several major companies he
considered to be underperforming, including
Yahoo, Office Depot, Perrigo and Marvell
Tech. In each instance, his arrival resulted in
the ousting of several board members and
sometimes even the CEO.
INSIGHT
FROM THE
BOARDROOM

“It’s the board’s job to guide management. If an activist
gets involved, they are directly or indirectly saying the
board has failed to uphold its responsibilities.”
—Daniel Romito, senior analyst and head of strategic capital intelligence, Nasdaq
Advisory Services
But Mr. Smith is only one activist in an
ever-growing pool. According to research
firm Activist Insight, the number of
companies publicly subjected to activist
demands worldwide since 2014 has jumped
more than 30 percent—from 572 to 758. This
means boardrooms and CEOs who fail to
deliver value are increasingly under threat of
being challenged by activist investors who
seek to upend the current business model,
leadership team or capital structure in order
to drive up shareholder value.
“They come with a plan and a directive
to management outlining how to enhance
shareholder value,” says Daniel Romito,
senior analyst and head of strategic capital
intelligence for Nasdaq Advisory Services in
Chicago. “It’s a much more aggressive, value-
driven investment strategy.”
Board members and CEOs who fail to
respond could easily find themselves left out
in the cold.
A MEASURED RESPONSE
As soon as an activist investor makes it
known that he or she has taken interest in
an organization, board members should
brace themselves. “It’s the board’s job to
guide management,” Mr. Romito says. “If
an activist gets involved, they are directly
or indirectly saying the board has failed to
uphold its responsibilities.”
That does not mean digging in your heels,
however. “There is a natural tendency to
become defensive in these situations, but
that plays right into the activist’s hands,”
Mr. Romito says. Instead, he encourages
companies and their board members to view
activist requests as the starting point for
intense negotiations.
The activist will come to the company with
a plan that may include major shifts, such as
spinning off divisions, changing leadership or
paying out dividends with reserved cash. In
response, the management team—including
the CEO—should take the time to understand
what the activist wants and why, and then
prepare a strategic response, he says. That
includes creating various scenarios that lay
out which aspects of the activist’s plan are
feasible and what the long-term implications
of such changes will be for the business, the
employees and the stakeholders.
“When the CEO and the C-suite are
willing to engage, it becomes a lot easier to
work with the activist investor,” Mr. Romito
says. “That professional courtesy can go a
long way in these negotiations.”
The board should also work with the
CEO and other key executives to dissect why
the company became a target in the first
place, and consider any good suggestions
the investor may have for improving the
business, says Tobias Carlisle, a Santa
Monica, California-based partner at Carbon
Beach Asset Management and author
of Deep Value: Why Activist Investors and
Other Contrarians Battle for Control of Losing
Corporations.
He urges managers and boards to at least
listen to what activists have to say. “If it’s
reasonable, implement it, and if it’s not,
explain why,” he says. “It’s a lot easier to
make these decisions with management
involved than to let activists steer the way.”
HIT THE CAMPAIGN TRAIL
But being reasonable does not mean rolling
over. The CEO and board of a company
under siege should consider launching a
campaign to defend their strategy—and their
reputation—to the rest of their shareholders,
says John Coffee, the Adolf Berle Professor
of Law at Columbia Law School in New
On the Map
More and more
companies outside
the United States are
facing public activist
demands, according to
research group Activist
Insight. In 2016, the
breakdown for some
of the world’s largest
countries was:
Australia 60
Canada 49
China 11
France 7
Germany 9
Hong Kong 14
Ireland 6
Israel 5
Italy 12
Japan 15
Korea 5
Malaysia 4
Netherlands 4
Singapore 12
South Africa 9
Sweden 3
Switzerland 6
United Kingdom 43
United States 456
Source: Activist Insight,
Activist Investing: An annual
review of trends in shareholder
activism, 2017
PHOTOBYTAYLORNICOLE/UNSPLASH

“That kind of operational success—rejuvenating a once
high-performing company in decline—has given rise to
more activist investing around the world.”
—Tobias Carlisle, partner, Carbon Beach Asset Management; author, Deep Value:
Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations
Valeant’s financial reports and convincing
stakeholders that the rival’s business model
was unsustainable.
“He was right,” Mr. Coffee says.
“Within two years Valeant imploded, at
one point losing 90 percent of its value
after overstating its earnings target by
$600 million. Its stock price crashed due
to allegations of improper accounting and
predatory pricing practices designed to
boost growth. Allergan was very lucky it
was able to fight off Valeant. This example
shows activist investors don’t always win.”
Be wary, however, of where the fight is
staged. The biggest reputation hits happen
when these deals go public. “If the negotiation
between management and activist remains
private, the company’s legacy may remain
intact,” Mr. Romito says. If the activist
involvement gains media attention, it can
affect a brand’s or a CEO’s reputation.
“While we most often see this take place
with the larger Tier 1 activists who approach
traditional blue-chip and mega-cap companies,
it can occur with small- and mid-caps as well.”
A CORPORATE REVIVAL
For all the chaos activist investors can create,
there are also tales of positive transformation
that board members and executives should
keep in mind.
Take Darden Restaurants. With his new
board and CEO in place, Mr. Smith went about
overhauling the company’s Olive Garden brand
by tweaking the chain’s menu and kitchen
practices, improving alcohol sales and putting
an end to the restaurant’s endless breadsticks.
The result has been a 47 percent rise in the
company’s once struggling stock value and
an increase in year-over-year sales at existing
chain locations for six straight quarters, The
York and author of The Wolf at the Door: The
Impact of Hedge Fund Activism on Corporate
Governance. Most activist hedge funds only
acquire 5 to 7 percent of a company’s shares,
he says, but as much as 20 to 25 percent if it
is a “wolf pack” of investors. “That means
the balance of power is still in the hands of
the remaining investors.”
If management and the board can make a
case to the majority shareholder group that
their current strategy will deliver long-term
business value, they may be able to fend off the
activist investor’s plans, or at least gain leverage
to force a compromise, Mr. Coffee says.
Take DuPont, for example: In 2015, the
U.S. chemical company was able to block
activist investor Nelson Peltz’s efforts
to replace four members of its board by
convincing shareholders to back the 12
directors nominated by the management
team. Winning the battle required a $15
million shareholder campaign from DuPont
leadership, which explained their plans for
retooling the business. Although DuPont
did not itemize the specifics of how it
spent that $15 million, corporate funds are
typically spent on things like hiring law and
public relations firms, printing and mailing
shareholder letters and ballots, and traveling
to meet with investors, according to USA
Today. Leaders also focused on securing
support from three of the company’s largest
shareholders, all of which are index funds.
David Pyott, CEO of pharmaceutical
company Allergan, also aggressively
fought off a hostile takeover bid from
activist investor Bill Ackman and rival
pharmaceutical company Valeant in 2014.
Mr. Pyott told Fortune that he spent 90
percent of his time that year dealing with the
attack, and ultimately won by questioning
INSIGHT
FROM THE
BOARDROOM
High Activity
Source: Activist Insight,
Activist Investing: An annual
review of trends in shareholder
activism, 2017
23% Services
21% Financial
16% Basic Materials
16% Technology
8% Consumer Goods
7% Health Care
7% Industrial Goods
2% Utilities
1% Conglomerates
All percentages are rounded to
the nearest whole number.
A breakdown of
global activist
investing by sector:
520 572
673
758
2013 2014 2015 2016
The number of
companies publicly
subjected to activist
demands worldwide
since 2013 is on the rise
around the world.

Wall Street Journal reported last year.
“Starboard understood the problem, and
they turned the restaurant chain around,”
Mr. Carlisle says. “That kind of operational
success—rejuvenating a once high-performing
company in decline—has given rise to more
activist investing around the world.”
Last year, U.K.-based Rolls-Royce became
the first FTSE 100 company to surrender a
board seat to an activist. And according to
Activist Insight, activism outside the United
States in general has surged, “despite the
preference for privacy in European and Asian
countries, where investment communities
are averse to public spats, shareholders do not
have stringent disclosure requirements for
their plans and most activism takes the form
of behind-the-scenes negotiations.”
At this point, the marketplace has grown
so accustomed to turnarounds driven by
rumors of a takeover or merger that the
mere act of making an activist play for a
company can drive up its stock price, Mr.
Coffee says. He notes that stock prices will
often jump the day an investor files with the
U.S. Securities and Exchange Commission
announcing they own more than 5 percent of
the voting class of a company’s stock. “The
market sees that as a sign that the company
is in play, which raises its potential value,”
Mr. Coffee says. Buffalo Wild Wings, for
example, saw its stock price jump 5 percent
the day activist investment firm Marcato
Capital Management revealed its stake in the
company last July.
In the end, “activist investing is just a
tool,” Mr. Carlisle says. “There are good and
bad activists, just as there are good and bad
management teams. The good ones seek to
correct issues and can improve the value of
the business. Listen to the requests, consider
whether they are appropriate for the business
and implement those that are beneficial to
the company’s long-term success.” IQ
“There are good and bad activists,
just as there are good and bad
management teams.”
—Tobias Carlisle
ISTOCKPHOTO

Future
Buildingthe
As chief
safety and
sustainability
officer for
Carillion, David
Picton is adding
£40 million to
the bottom line
by ensuring a
profitable—and
lasting—green
legacy takes
shape.
BY SARAH FISTER GALE
PORTRAITS BY JON ENOCH

Each category includes ambitious targets,
such as reducing the amount of water used
and waste generated on a project and sourcing
materials from local suppliers, as well as
employee education targets, such as establishing
apprenticeship programs and setting goals for
volunteer hours in the community.
“Businesses without visionary engagement,
inspiring stories, responsible compliance or
public trust are businesses without competitive
futures,” he says. “For Carillion, sustainability
is how we shape our future, how we add value
and how our people create even more inspiring
stories for a better tomorrow.”
Before Mr. Picton could begin his reign
over Carillion’s sustainability efforts, however,
he needed to get up to speed on the subject.
“There was simply so much to know in
such a vast area of expertise, views, opinions
Some
executives
Executives at the launch of
Carillion’s 16th annual
sustainability report,
in May 2016
spend their entire careers knowing exactly
what kind of legacy they want to build. That
was David Picton—until his career took a
sharp turn.
For nearly 30 years, Mr. Picton built a
name for himself in logistics and supply chain
management, working for the British Royal
Air Force, Motorola and U.K. entertainment
media company Sky. Then he joined Carillion,
a £5.2 billion British multinational integrated
support services firm. He signed on as
supply chain director in 2012, but one year
later everything changed when Carillion’s
executive team asked him to join their ranks
as chief sustainability officer (CSO). It seemed
like a natural fit because the company’s
goals—which go far beyond going green for
goodwill—were so directly tied to supply
chain management and industry partnerships.
Suddenly, Mr. Picton was responsible for
contributing £40 million to Carillion’s bottom
line by the start of the next decade. The strat-
egy aggregates all sustainability efforts across
Carillion’s 48,500-employee operation, which
includes offices and projects throughout the
United Kingdom, the Middle East and Canada.
And the company was serious about its strategy:
In 2011, even before Mr. Picton arrived, Carillion
created a 2020 Sustainability Strategy for achiev-
ing measurable targets at all operational levels. It
is driven by six outcome categories:
1. Enabling low-carbon economies
2. Protecting the environment
3. Supporting sustainable communities
4. Providing better prospects for employees
5. Leading the industry
6. Building a successful business

and knowledge,” he says. To ramp up, he read
as much as he could about business strategies;
attended relevant discussion groups, events
and presentations; and talked to employees
throughout the company about how
Carillion’s priorities impacted their roles. “I
learned quickly and soon had the key priorities
clear in my head.”
Mr. Picton also spent time thinking
about what his own legacy would look like.
The beginnings of Carillion’s sustainability
strategy had already taken root prior to him
ascending into the CSO role in 2013, and it had
a clear business focus that people generally
understood and rallied behind. “I recognized
that I didn’t have to ‘sweep a new broom’
across everything and stamp my mark on it,
just for the sake of change,” he says.
So Mr. Picton decided to focus his efforts
“Businesseswithoutvisionaryengagement...
arebusinesseswithoutcompetitivefutures.
ForCarillion,sustainabilityishowweshape
ourfuture,howweaddvalueandhowour
peoplecreateevenmoreinspiringstories
forabettertomorrow.”
—David Picton, chief safety and sustainability officer, Carillion
PHOTOCOURTESYOFCARILLION

“Fifteenyearsago,
mylegacywasall
aboutwhatIwanted
todo.NowIthink
abouthowtohelpmy
peopleachievetheir
goals.Itunderpins
everythingIdo.”
—David Picton

where they really count—on the bottom
line and on inspiring people to engage with
sustainability.
Breaking From the Pack
Carillion is hardly the first company to
make bold claims about charting a new and
sustainablepathforward.Overthepast15years,
most large organizations have adopted similar
goals at some level. According to KPMG’s 2015
Survey of Corporate Responsibility Reporting,
92 percent of the largest 250 companies in the
world publish corporate responsibility reports,
and nearly 3 in 5 of the world’s largest 100
companies include corporate responsibility
data in their financial reports.
3QuestionsWith
DavidPicton
1. How do you stay on top of the latest
industry trends?
Networking events, daily news feeds and strong
links with trusted think-tank partners.
2. What is the best piece of advice you have
ever received?
A slower day is not coming, so live for today
or this week. You never want to turn around
one day and regret something you didn’t say to
someone or do with your life. That’s my motto—
and my Twitter synopsis.
3. How do you take your mind off work?
Mostly just being with my two teenage girls and
my wife. They are my rocks and my reasons.
The growing popularity of sustainability
as a business driver has been both a help and
a hindrance to Mr. Picton’s efforts. On the
positive side, it has made it easier to engage
stakeholders in achieving the company’s
vision outcome goals, find cost-effective
materials and solutions, and connect with
partners who help the company measure its
impact and set new stretch goals.
But the fact that so many companies now
claim to be pursuing such initiatives has
diluted the concept. “There is a lot of criticism
levied at the sustainability space right now,”
he says. “People say it’s greenwashing or just
another ‘nice to have’ program.”
That has put pressure on Mr. Picton to
deliver groundbreaking results. He has had
to ensure that every declaration the company
makes about its accomplishments is provable
and linked to the company’s financial
performance. To avoid getting bogged down
in arguments about the cost-benefits of
individual initiatives, Mr. Picton implemented
strict outcome goals that are measured
monthly. These have helped the company
achieve many of those goals ahead of the
2020 vision schedule, including a 37 percent
reduction in operational water use since 2012,
a 95 percent diversion of waste from landfills
and a 34 percent carbon footprint reduction.
The company also now spends 55 percent of
its supply chain spend on local suppliers.
What makes these accomplishments
particularly impactful is that Mr. Picton
can translate them into specific financial
benefits. Carillion’s annual sustainability
report includes a financial metric called
“profit contribution through sustainability
strategy” that links the company’s endeavors
to bottom-line results. It breaks out specific
savings related to individual initiatives, such
as costs avoided by diverting waste from

landfills, using less water, reusing materials
and implementing innovative technologies.
In 2016, the company attributed £36.1 million
in savings to its sustainability programs,
surpassing its target of £34 million for the year
and making progress toward its 2020 cost-
savings goal.
Savings are being achieved across Carillion’s
footprint. For example, the company saved
£212,000 by reusing materials on project sites
in the Middle East and North Africa in 2015.
“Being an international company means
having a strategy that’s flexible enough to
allow for regional adaptation and relevance,”
Mr. Picton says. “It also gives us a chance to
share some really clever and often simple ideas
across three continents.”
To confirm all targeted practices are
being followed on each of the company’s
construction and services projects, Carillion
includes a carbon-reduction plan and a
community-needs plan in all of its operations.
Mr. Picton and his team then audit projects at
key milestones and calculate annual savings.
“The audit process is how we can be sure our
expectations are being met,” he says.
Mr. Picton acknowledges the company
does not always achieve each and every goal.
“In cases where we haven’t met our targets,
we engage people to focus on that activity
and then work toward it over the following
year,” he says. For example, Carillion set a
2015 goal of having 22 percent of employees
participate in volunteering, but only reached
18 percent. So leadership worked with
multiple business units to identify more
volunteer opportunities and barriers to
participation. In 2016, the company achieved
30 percent, exceeding its goal.
This has become a differentiator for
Carillion in winning work, because it shows
clients how the company can do the right
thing while benefiting financially, Carillion
CEO Richard Howson has said. “Responsible
business generates trust in Carillion, helps to
win more work, protects the environment
and creates long-term benefit where we live
and work.”
A Team Effort
Along with those benefits, many of Carillion’s
initiatives stemming from its 2020 strategy
help make the business and its brand more
resilient. For example, the company’s
apprenticeship program and paid work
program targeting hard-to-reach community
groups have established a strong pipeline of
talent in an industry facing a talent crisis. (The
U.K. Construction Industry Training Board
has reported the industry needs to fill 232,000
new jobs by 2021, yet there is a huge lack of
qualified applicants.)
“If we are to develop and maintain
tomorrow’s buildings and infrastructure, we
must act today to ensure the next generation
of tradespeople are suitably skilled, prepared
and conscious of their impacts,” Mr. Picton
says. “It is another way that doing the right
thing is good for business.”
And because the executive team and
board of directors see sustainable practices
£36.1
millionThe amount
Carillion’s sustain-
ability program
contributed to the
bottom line in 2016
34Reduction in
Carillion’s carbon
footprint since 2011
37Carillion’s
reduction in
operational water
use since 2012
Carillion’s sustainabil-
ity report launch in
May 2016

as the best foundation on which to build a
profitable business, they have been invested
supporters of Mr. Picton’s efforts from the
start. “We know there is a sound business case
for integrating sustainability into everything
we do, and we believe that being a champion
for sustainability is vital to the long-term
success of our business,” Mr. Howson said in a
company sustainability report.
Mr. Picton meets with Mr. Howson and
board Chairman Philip Green on a regular
basis to review goals to date and discuss future
projects. He briefs them on accomplishments
for the month, and they brainstorm solutions
when targets are missed. “It’s not just about
ticking a box for them,” Mr. Picton says. “This
matters to them on a personal level in terms
of the ambition they have for our people
and for our future business. If I had to fight
the leadership team to get all of this done, it
would have been much harder.”
Mr. Picton has also built relationships with
a number of nonprofit organizations to help
Carillion define the best path forward, identify
best practices and be sure its measurements
are relevant. “If you are trying to build a
legacy around sustainability, collaboration is
so important,” Mr. Picton says. “You always
achieve more together than you do alone.”
Some of the company’s partners include the
World Wildlife Fund, which helped Carillion
establish its timber sourcing policy, and
the CDP (formerly the Carbon Disclosure
Project), which guided the organization in
benchmarking its efforts to reduce its projects’
carbon footprints and pursue eco-building
design strategies in the Middle East.
But of course Mr. Picton does not have free
rein to implement every tool or project that
inspires him. When his team identifies a new
strategy, such as using solar panels to power
job sites, they have to build a business case,
run a pilot and measure results—just like any
other business unit. And that is a good thing,
Mr. Picton says. “Asking if something is really
the best way to spend our resources is in itself
an act of sustainability.”
Four years into his executive role, Mr.
Picton feels like he has already created a
lasting legacy for the company—one that
is continuing to grow. In March, Mr. Picton
also ascended to the company’s chief safety
role. His expanding C-suite vantage point has
transformed his mindset as a leader, he says.
“Fifteen years ago, my legacy was all about
what I wanted to do. Now I think about how
to help my people achieve their goals. It
underpins everything I do.” IQ
“Beinganinternational
companymeans
havingastrategy
that’sflexibleenough
toallowforregional
adaptationand
relevance.”
—David Picton
PHOTOCOURTESYOFCARILLION

34 INSIGNIAM QUARTERLY | Summer 2017PATHFI
PHOTOBYANDERSJILDÉN/UNSPLASH

BY SARAH FISTER GALE
Three executives reflect on
the legacies they are working
to build at their organizations.
NDERS

company’s legacy
is almost always linked, at least by
perception, to its CEO. But CEOs do not
operate in a vacuum. They have a team
of leaders around them who execute
their vision for the business, and in turn
craft legacies of their own.
“Behind every legacy, there are many
who have contributed,” says Naz Haji,
senior vice president and managing
director of India R&D solutions at
QuintilesIMS. “You need to allow others
to succeed and remember that nothing
successful is ever a one-person show.”
But what does that legacy-building
process look like when you are not in
the CEO’s chair? We spoke with three
top executives to find out what kind of
future they are working to create for
their organizations and what marks they
are striving to leave.
Naz Haji
Senior vice president, managing director, India
R&D solutions, QuintilesIMS, Mumbai, India
S
ometimes the best legacies are
forged when facing the biggest
challenges. For Mr. Haji, that time
is now—and the challenges are
twofold.
QuintilesIMS is a multinational provider
of integrated information and technology-
enabled services for the health care industry.
As the leader of the company’s India opera-
tions, Mr. Haji strategizes for and supports or-
ganizational growth in the country. The prob-
lem is that he is battling preconceived notions
about its clinical research environment.
Biopharma companies are increasingly in-
terested in India as a destination for clinical
research because of the low costs and large
pool of potential patients to recruit from.
But an unpredictable regulatory environment
from 2013 to 2015 created inconsistencies and
delays in gaining regulatory approvals, which
negatively impacted global perceptions about
doing clinical research in the country.
“The biggest challenge I face is one of
awareness and perception,” Mr. Haji says. So
two of his primary goals are ensuring inter-
nal and external stakeholders are well-versed
in the positive regulatory changes that have
recently occurred and changing the narrative
about doing clinical research in India by high-
lighting the advantages the country offers.
QuintilesIMS is also in the midst of a ma-
jor transition. Last year global pharmaceuti-
cal contract-research organization Quintiles
merged with IMS Health, a global health care
information and technology services provid-
er, to create the new organization. Mr. Haji
and many throughout the organization are
A

Ken Goldman
CFO, Yahoo, San Francisco, California, USA
C
EOs are not the only ones whose
legacies are impacted by contro-
versy. Just ask Ken Goldman.
Mr. Goldman has spent more
than 40 years working in Silicon
Valley, and prior to joining Yahoo in 2012 he
served as CFO for six other firms. At each or-
ganization, his foremost objective has been
still getting familiar with new teams, col-
leagues and protocols.
But when he looks past those challeng-
es, Mr. Haji sees an amazing opportunity to
chart a new path and build his legacy. He is
responsible for defining the vision, strate-
gic business direction and operational ca-
pabilities for QuintilesIMS India to support
the company’s R&D solutions business and
growth. The merger, he says, has provided a
sort of blank slate, and Mr. Haji plans to push
his team outside their comfort zones and to
prioritize data and advanced analytics when
decision-making. “I empower staff to make
decisions and stand by their values,” he says.
“As difficult as it is sometimes, allowing peo-
ple to fail if necessary is an integral part of
the leadership experience, and learning from
those failures is key. Legacies are built on peo-
ple being bold and decisive, and preparing the
next generation to create their own legacies is
just as important. The canvas is now a lot larg-
er and so is one’s ability to make an impact.”
On a personal level, Mr. Haji wants to use
his role in the health care organization to be
remembered as someone who made a differ-
ence in the lives of others. “It might sound
clichéd and generic, but this is something that
can transcend through the internal organiza-
tion all the way to customers and patients.”
uncomplicated: “I go into a company and I
make investors money.”
Mr. Goldman has built a reputation for help-
ing companies improve profits, prepare for
public offerings and execute full financial trans-
formations. At Yahoo, for instance, the stock
price nearly tripled to around $45 since he took
over as CFO.
It was not easy, though, as Mr. Goldman
came on board when revenues were lagging
and employee morale was low. It was the same
year now-embattled CEO Marissa Mayer was
brought in to rebuild the struggling internet
brand. Mr. Goldman, for his part, spent the
first three months of his tenure getting to
know the corporate culture and the team.
“I have always believed that you need to
listen and learn before you can start making
changes,” he says. “Whether that takes 30 days
“Behind every legacy, there are many who have contributed.
You need to allow others to succeed and remember that
nothing successful is ever a one-person show.”
—Naz Haji, senior vice president, managing director, India R&D solutions, QuintilesIMS

or 100, it is important not to jump to conclu-
sions before you have a sense of what’s going
on.” At Yahoo he sat in on meetings and talk-
ed to the staff about their needs and where
they saw opportunity for improvement to de-
termine which changes would have the big-
gest impact on the company’s financial per-
formance. He also discovered that his team
needed more structure and review processes
to better manage revenue growth.
His strategy was all about getting the right
people, products and processes in place to
drive revenue growth, he says. This included
run-of-the-mill operational improvements
such as the creation of a capital-authoriza-
tion review committee that oversees expen-
ditures and an approval matrix for spending.
Mr. Goldman also established more formal
revenue metrics and review processes to track
progress and measure growth.
“We worked closely on creating better rev-
enue metrics—by product, by region and by
advertising product,” Mr. Goldman said in an
interview for EY. “We created it so that we had
daily metrics—we didn’t have those before.
Having the daily, weekly and monthly met-
rics gave us the knowledge on a regular basis
about how our business is working.” The met-
rics gave Mr. Goldman and his team a better
appreciation of what they were accomplishing
and where they needed to do more work.
He also oversaw the retirement of 75
products and services that were no longer
producing sufficient revenue. “We had too
many balls in the air,” he says. The retire-
ments included both individual products
and regions that showed low market share
or revenues. “It was a collaborative effort
that was closely aligned with the goals of the
CEO and management team.”
All of these efforts ultimately enabled Mr.
Goldman and his team to maximize cash-flow
performance and drive up stock prices. “It is
challenging to reinvent any technology com-
pany, but we were able to stay strong and prof-
itable,” he says.
Recenthigh-profilechallengesatYahoohave
not left Mr. Goldman unscathed, however. The
company is still dealing with fallout from ma-
jor data breaches in 2013 and 2014 that were
not publicly disclosed until late 2016. Roughly
1.5 billion user accounts were compromised.
As of this issue’s print date, Verizon is still in
the process of closing the sale transaction with
Yahoo, but the breaches have caused many to
call into question actions by both Ms. Mayer
and Mr. Goldman. In January, for example, The
Wall Street Journal reported that the U.S. Securi-
ties and Exchange Commission is investigating
whether Yahoo should have disclosed to inves-
tors information pertaining to the data breach-
es sooner.
As Mr. Goldman prepares for the Verizon
deal to close, he remains optimistic that he
will be remembered for his contribution in
turning Yahoo around during this turbulent
time. That is exactly the legacy a CFO should
create, he says.
“I’m so appreciative of the fantastic team I
inherited here at Yahoo, and I’m grateful for
their support over my years here. I’d say my
only regret is that we didn’t have the stellar
executive team we do now when we started
five years ago. That said, overall, I feel very
good about what I’ve accomplished here with
the support of the team.”
“I have
always
believed that
you need to
listen and
learn before
you can
start making
changes.”
—Ken Goldman,
CFO, Yahoo
PHOTOCOURTESYOFYAHOO

David Harkness
Senior vice president, business systems, and CIO,
Xcel Energy, Minneapolis, Minnesota, USA
D
avid Harkness is determined to
build a legacy that transcends
obsolescence. To him, that
means not only being a posi-
tive and innovative force on the
business side of the equation, but also work-
ing to create a successful new generation to
drive the utility company forward once he and
his fellow executives are gone.
He does not want to be remembered as the
man who moved Xcel Energy to the main-
frame or digitized the customer experience,
because 10 years from now, no one will care,
he says. “As a CIO, you can’t build your legacy
around technology—it moves too fast.”
Instead, he seeks to be remembered as the
CIO who taught his people how to collabo-
rate and problem solve to achieve the com-
pany’s strategic goals through the innovative
use of technology. He wants to create “a leg-
acy of enablement.”
This starts with building a culture of em-
powerment on his teams and acting as a coach
more than a director. For instance, from the
moment new hires come on board, rather
than prescriptively tell them what to do, Mr.
Harkness expects that they will be innovative
problem solvers who can find answers and
set goals on their own. In turn, he supports
them and their career trajectories at Xcel En-
ergy by providing on-the-job leadership and
educational opportunities, such as taking on
a project in a new vertical or moving into ven-
dor management.
“I encourage my team to look at every
situation as an opportunity to build their
résumé,” Mr. Harkness says. Whether it is
taking the lead on a big project or helping to
streamline operations to remain competitive,
he wants them to constantly look for ways
to develop new skills and learn new things.
“That’s how we build leaders who will move
Xcel Energy into the future.”
Creating a tech environment that prioritiz-
es skill development is the best way to keep
good employees, he adds, which is a vital
part of setting the company up for long-term
success. “People in tech want to be in a place
where they can continuously learn,” he says.
“If you create that, they will stay.”
While Mr. Harkness feels his true legacy
lies in his people, he is also proud of the dose
of innovation he and his team have injected
during his tenure. When he started as CIO
seven years ago, Xcel Energy had a strong op-
erational team, but they were mostly focused
on keeping things running smoothly. Now,
his team oversees more than 100 projects—
up from just 40 when he came on board—
which include new applications of analytics,
machine learning capabilities, mobile tools,
cybersecurity features and functionality that
allows consumers to sell energy from their
own solar panels back to the grid.
As part of this innovation influx, Mr. Hark-
ness has spent a lot of time keeping the team
focused on the strategic goals behind the
technology. Too often, he says, IT depart-
ments can get so enamored with what they
are building that they forget to think about
whether it is best for the company and its
most important stakeholder. “You can nev-
er lose sight of who your customer is,” Mr.
Harkness says. “My goal is to make Xcel En-
ergy great—not the IT department great. We
are doing that by thinking strategically, in-
creasing efficiency and maximizing the value
we provide our partners.” IQ
“My goal is to make Xcel Energy
great—not the IT department great.”
—David Harkness, senior vice president, business
systems, and CIO, Xcel Energy

An enterprise’s future cannot
be predicted—it must be built.
Effective executives can summon
the necessary creativity and enroll
employees in a radical vision.
BY NATHAN OWEN ROSENBERG SR.AND SCOTT BECKETT
ILLUSTRATION BY DANIEL HERTZBERG

he best way to predict the future is to
create it.” Management guru Peter
Drucker’s words resonate in this
volatile era of breakneck innovation.
Good CEOs know exactly what
he meant—and most likely, they rue the
fact that daily duties and challenges crowd
out what they know they must do and can
uniquely do. Every day they feel the tyranny
of the urgent; creating the future never makes it
to their calendars.
Part of this disconnect is understandable:
Humans are primed to constantly assess close
threats and opportunities, and this results
in small changes through an incremental,
iterative approach. As they climbed the ranks,
executives got used to, well, executing. Good
executives are master problem-solvers. They
solved problems left and right and did not
spend time thinking, “What am I building
here?” They were not taught to contemplate
the unimaginable or create the future. It
therefore seems foreign and overwhelming. It
would be a rare business school that teaches
strategy formulation as a creative endeavor.
We recently attended the Fortune
and Time Global Forum in Rome with
top executives from among the largest
companies in the world, talking about how
business might solve some thorny issues
facing the globe today. The main obstacle
to their companies making the difference
they are capable of ? The nearsighted cycle
of quarterly earnings was the consensus
among these powerful executives.
Inabetterbusinessworld,seniormanagement
would be working on the present, while the
CEO and her/his team focus on designing and
building the future. In fact, we say that the
executive function is designing a proprietary
future for the enterprise, enrolling the people
who are the enterprise in that future as their

future and then providing the environment and
resources for them to realize that future.
However, in keeping with the more-
immediate threats-and-opportunities
framework and what they were taught
in business school or by watching their
predecessors, most leaders are bound by the
limiting assumption that some predetermined
future exists to be “figured out.” The truth
is that trying to read tea leaves is a waste of
time. As Peter Drucker wrote, “Trying to
predict the future is like trying to drive down
a country road at night with no lights while
looking out the back window.” Moreover,
trying to predict the future stifles creativity,
one of the single most important capabilities
a C-suite can possess.
Drift Versus Creativity
For most people and at most companies, the fu-
ture is viewed as a simple extension of the pres-
ent, which is an extension of the past. As such,
there is no real opportunity for major strategic
breakthroughs. An executive or a business will
likely get smarter, better and faster over time at
what is already being done, but this is ultimately
the same work, just improved.
This iterative, risk-averse mindset came
through loud and clear in Insigniam’s most
recent Executive Sentiment Survey. We found
that most executives do not value heavy R&D
investment as a way to create competitive
advantage, even though new product sales are
a key revenue driver. It seems most companies
would prefer to rely on minor variations to
proven products rather than assume the risk
inherent in Horizon 3 or 4 innovations.
Of course, R&D spend is not a perfect
reflection of a company’s commitment to
innovation. When Apple came up with the
Mac, IBM was spending at least 100 times more
on R&D than the scrappy upstart. But failing to
target money for research can be a symptom of
larger corporate immobility. Executives know
innovation is critically important to the health
of their companies, but they are stuck: Some 57
percent surveyed told us they are not doing well
with efforts to spread innovation throughout
the enterprise, not doing enough or still trying
to figure it out. The remaining 43 percent think
they are doing just OK.
Every organization has inertia, an
organizational drift—just like, at first, a ship
will continue to drift for a distance when its
engines are shut down. A big company drifts
due to years of capital investment, brand
building, structures and corporate culture.
The status quo tends to continue without
strong executive intervention (or an external
disruption). Without creative leadership, an
enterprise will drift along believing tomorrow
will resemble today with a few changes. Its
people will keep doing what they are already
doing.
Jennifer Mueller, a social psychologist and
professor at the University of San Diego School
of Business, has researched this conundrum.
She found that even while people aspire to
creativity, they routinely reject creative ideas
in the face of uncertainty. It is ironic that the
very asset we should rely on to get us through
periods of turmoil and ambiguity is the one
we flee from at those times.
Embrace Discontinuity
The million-dollar question is, then: How do
we move past our human wiring for certainty
and predicting the future to embrace
creativity and make great leaps that can
transform our business?
First, we must accept that the future is
inherently unpredictable. The very nature of
the future is that it is largely unknowable. We
cannot figure it out. The theoretical physicist
The very nature of the future is
that it is largely unknowable.
We cannot figure it out.

Max Planck posited that time is discontinuous:
One moment is separate from and unrelated to
the next.
We have all seen discontinuous events
in our lifetimes: Nick Leeson, a 28-year-old
derivatives trader, single-handedly brought
down Barings Bank, one of England’s oldest
financial institutions. Arthur Andersen was
one of the largest, most reputable accounting
firms in the world before the Enron scandal
exploded. Lehman Brothers was the fourth-
largest investment bank in the United States
until it collapsed overnight. When you
consider history, it makes far more sense that
the long-term future will be discontinuous—
unfathomable, really—rather than more of
the same. But our brains are wired to believe
that what is here today will be here tomorrow
with regular, known rates of change. In
fact, a current theory of the workings of the
neocortex is that it is continuously predicting
what threat might be right around the corner.
Once we acknowledge that history’s pattern
contradicts the way organizations tend to
think about the future, leaders can begin to
challenge naive assumptions. In our experience
with strategy innovation, as many as one-third
of those assumptions are proven to be limiting
or just flat wrong. Trying to predict the
strategic future is chasing a chimera and sure
to be frustrating, if not a waste of extremely
valuable executive time.
The second step is to unhook from the
highly regimented nature of corporate
thinking. Steering your company ahead is
a creative act—the corporate equivalent of
writing poetry or painting a picture, if you
will. You must step outside your current
business model to locate a strategic frontier,
where robust growth and new markets are
found. Traditional benchmarks and guideposts
do not exist here, but you will know you have
it right when you find yourself with tears in
your eyes, goose bumps on your arms, a lump
in your throat and the hair on the nape of your
neck standing straight up.
Thosebigideas,orstrategicfrontiers,cantake
several different forms. You can figure out how
to provide more, better and different products
to current customers. You can expand your
customer base to adjacent markets. Or, you can
invent markets and create customers that do not
currently exist. This is where true visionaries—
from Henry Ford and his Model T to Steve Jobs
and his iPhone—work. Only the last frontier—
the fourth horizon—generates transformations
and game-changing outcomes.
This strategic frontier does not drop into
your lap like an easy pop fly landing in an
infielder’s glove. Instead, it takes extraordinary
effort to imagine, articulate and reach—akin
to the outfielder sprinting after a massive line
drive that just might clear the wall.
You must chase down eye-watering, goose-
bumping, throat-lumping ideas relentlessly,
through inquiry, by talking and listening
keenly and generously to senior managers
and employees, and by researching cutting-

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