Beware the Lazy Thinkers

“The rise and fall of empires is dramatic in the consumer and industrial technology space,” says Andy Griffiths, CEO of the Consumer Appliances Division at Glen Dimplex. “Getting teams together to continuously challenge and reappraise your market, which changes every day in this digital world, is fundamental.”

This continues to be a central challenge for companies across myriad sectors, whether they’re in B2B or B2C. “You have to get away from the running of the business because it can be intellectually lazy. Studying this month’s figures, working out this quarter’s results – that’s not interesting,” continues Andy, who is also former President for the UK and Ireland at Samsung Electronics.

“You need to challenge yourself and your teams to something longer term. You’ve got to do it realistically and for as far as you can see. Normally that’s between two and five years.”

Anita Chandraker, Head of Digital at PA Consulting Group, agrees. She warns: “Beware the lazy thinkers – there are many of them out there. It’s also important to take accountability for tomorrow, because too many people are looking at today. If no one is accountable for innovation, it won’t happen.”

There are very real difficulties for organisations in achieving this, from resetting KPIs to developing a tolerance for failure. “Leaders must put the right framework in place so that individuals and teams can share ideas,” comments Alison Mills, Relationship Manager at Criticaleye. “Setting up cross-functional teams that include a range of individuals with varying skills and experiences could be one way of doing this.”

For Andy there is a simple, yet crucial, point that boards and executive teams need to bear in mind: “The last thing you ever want as a start point is a bunch of clones marching in one single direction going off doing the same things.”

In most cases, a shift in mindset is required. Kevin George, CEO at passenger ferry company Red Funnel Group, reflects on his experiences at British Airways when his team were first tasked with inventing a flat-bed business class seat.

“To come up with a seat that would lie flat and be economically viable just seemed impossible,” he explains. “But it was a question of overcoming that mental barrier and finding a way of doing it.”

When BA created the fully reclining seat in 2001, Kevin said it broke new ground in the airline industry. Now, almost every international airline has adopted them.

From incubation to execution

Those organisations faced with the prospect of having to relearn the art of innovation need a clear understanding of who will be responsible for generating ideas, and who delivers on going to market.

On that point, Anita noted the client challenges highlighted in PA Consulting Group’s ongoing research into innovation. “Certainly the data shows that the biggest challenge companies face is the ability to scale up once they’ve got a good idea,” she said.

There will be serious questions about investment, resource allocation and the risks around how to integrate a new product or service into an organisation.

This is why it’s vital to reflect on the structure, what the levels of accountability and oversight should be, and how this all runs in parallel with ‘business as usual’. David Hollander, CEO at Aqualisa, a UK-based shower manufacturer, comments: “Coming up with new concepts is the easy bit; it’s almost all about execution. That’s where management plays a big part in driving fledgling ideas, presenting visible confidence, allowing time to discuss and evaluate the viability of an idea. Then, it’s about enabling the processes needed to see it through.”

At Aqualisa, David says the company is preparing to launch a new product and different teams are fully involved, working on a collaborative basis: “Our R&D and marketing teams are closely linked. R&D may work to develop a new product in response to a marketing imperative, but equally it can be the other way round. They are led by a Brand and Design Director, who oversees both teams.”

According to Andy, proper thought should be given to creating teams for different stages of the innovation process: “It’s relevant to keep your good thinkers thinking, and have your good doers doing. That, in a consumer market is a more natural segmentation of skills, because you have end users who are continuously demanding, as well as a bunch of competitors agitating your business.

“The innovation team, once they catch their breath post-launch, need to come back to the table two or three months later and start again, using some of the data from how the last project landed.”

That’s the Holy Grail for any business when it comes to innovation – how to keep that cycle going. One great idea and seamless execution won’t guarantee success. Rather, a winning approach lies in the ability to empower those within an organisation to do it time and again.

By Dawn Murden, Editor, Advisory

This Community Update includes insights from a recent Discussion Group: How to Create a Successful Innovation Team

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A Bird’s-Eye View on Innovation

Managing risk and allowing innovation to flourish are two sides of the same coin. Today’s board directors must understand the value of both and create an environment that rewards them appropriately.

Sir Howard Davies, Chairman of the Royal Bank of Scotland, explains that while directors clearly should not be relied on for new product ideas, they have a key role in setting the right tone. “The board should be able to create an environment in which innovation is valued, supported and where people feel self-confident enough to take appropriate risks,” he says.

It’s a point shared by Andrew Minton, Managing Director at Criticaleye. He reasons: “It’s becoming increasingly clear that if a business wants to develop an innovative culture, the board has to create an environment within which people can experiment.

“As a result of increased transparency, non-executive directors must be cognisant of their role in setting the right culture and attitudes. If NEDs don’t appear to value innovation and fresh thinking, the rest of the business will follow suit.”

For Rita Clifton, Non-executive Director at ASOS and Nationwide, this goes beyond simply saying the right things. The modern boardroom must have vibrant, curious individuals who symbolise the behavioural standards and values that they expect from the wider organisation.

She says: “When I started sitting on boards 15 years ago, I would hear many chairmen, chief executives and directors talking about how the business needed to be more innovative; that it needed to move faster. I would look around the table and think: ‘Guys, you’re the problem, you don’t look as though you want to be innovative’.

“In my view, the board directors need to symbolise the best of your organisation. The standards and expectations they set are so important; people pick up cues from what the board appears preoccupied with. Regardless of what you say about culture, if your staff know that your main driver is profit you’re going to encourage fearful and short-term behaviour.”

Complaining about compliance

The challenge for boards is to find the time for strategic thinking when the immediate focus needs to be on regulatory compliance, corporate governance and effective risk management.

Sir Howard, who has sat on FTSE 100 boards for over 25 years, has seen a shift in the board’s approach to governance. He believes that time, which would otherwise be spent looking forward and assessing growth opportunities, is being eaten-up by “the pressure to demonstrate a robust control framework”.

What can you do to redress the balance? Sir Howard answers: “You can make better use of the risk committee, which should take a lot of the heavy-lifting off the main board. However, be careful that you don’t create two classes of director, one who is focused on risk and the other who can ignore it”.

“The key thing is that the board isn’t dragged too far into the detail and can afford to pull itself into more strategic thinking. You could also ensure that there are board and off site meetings in which risk and control are banned topics and you focused on innovation.”

For Guy Elliott, Deputy Chairman at SABMiller and Non-executive Director at Royal Dutch Shell, boards need to embed their obligations into strategic discussions.

“Often compliance and risk are segmented as a special discussion on the board. Board members may think they tick that off every six months, and if the audit committee has said that the processes are fine, they feel they’ve done their job,” he says.

“You have to go further than that. What you should be doing with risk, a lot of the time, is integrating it with strategy and futurology. For example, one might think about what’s going to happen to consumer habits; what rate of growth you’ll see in emerging markets compared to a developed one. Integral to that is exploring how you are going to chase an upside risk or mitigate a downside one.”

All-pervasive technology

The nature of innovation in the digital age means that directors require a much deeper understanding of technology. Natarajan Chandrasekaran, CEO and Managing Director of Tata Consultancy Services, says: “All of us, in every industry, are going through a transformation; the biggest [challenge] is that before technology was supporting business, now it’s leading it.

“It’s no longer the case that once the business model is decided, you deliver the technology to support it. Now, it’s absolutely essential that you appreciate the power of technology so that you’re able to define the future of the business.”

This sentiment is echoed by Stine Bosse, Member of the Supervisory Board of Allianz and Chairman of BankNordik. “I would argue that you can’t talk about anything in the future without considering technology. Last year, it took up about 30 per cent of board time. That included educating the board – we have to go into the machine room and understand the technology, then we can think about its impact strategically,” she comments.

“At Allianz, we have just had a full day looking at where disruption is likely to come from – a full day for the board is a lot of time. We were thinking about driverless cars and the implications for insurance.”

Even with this level of education, Stine believes that the composition of the board room will change. “The average age will fall because boards will need to have age diversity. Intuitive knowledge of technology [needs to] enter the board room. Of course, [everyone] has to be able to satisfy the regulators’ requirements, but let’s not be too frightened about that; you can educate yourself to that end.”

Ultimately, it’s a case of developing a board that has the confidence to invest in change and encourage the business to move forward. Guy says: “We have to have more discussion about technology and disruption in the boardroom. That doesn’t necessarily mean that a CIO needs to sit on the board, but they need to be there, talking the language of the board. It is important that what they say actually means something to everyone around the table. It’s difficult to make that linguistic transformation, but it can be done.”

Of course, the other side is that to ignore market disruption is a dereliction of duty. Rita notes: “Risk management can be seen as putting a brake on proceedings and trying to stop things from happening. With the speed at which most markets change these days, a key risk is not to innovate. If we’re not careful, the board will be seen as trying to stop things from happening.”

These comments were made during a panel discussion at Tata Consultancy Services’ European Summit in Berlin.

By Joshua Tearney, Account Manager, Advisory Practice

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4 Lessons on Innovation

What some call innovation, others say is simply staying close to their customers, but surely there’s more to it than that? Here, we highlight four key learnings on how to nurture innovation in order to keep your organisation fresh and relevant.

During the recent Criticaleye Global Conference Call, Creating Innovation Teams, we heard from two speakers, Andrew Miller former CEO of Guardian Media Group (GMG) and Non-executive Director at The Automobile Association (The AA) and Anita Chandraker, Head of Digital at PA Consulting Group.

Here, we highlight four key themes to emerge from the event:

Start with Your Core Offering

According to Charlie Wagstaff, Managing Director at Criticaleye: “It’s not about what you do, it’s about why you’re doing it. As a leader you need to understand your organisation’s purpose, that’s your starting point.”

This is something Andrew, who is also former CFO of Auto Trader, has found to be true. “I’ve been lucky to have organisations that know what they are at the heart,” he said. “Some forget the real thing they should be innovating is what they are at the core.”

At the Guardian the mission was to envisage how its readers wanted to consume news now, as well as in the future, whereas at Auto Trader the focus was on moving its marketplace for people to buy and sell cars online.

When Andrew joined Auto Trader in 2002, the business had around £18 million profit, 24 magazines and no digital presence. Now all of its content is solely online and it’s valued at over £3 billion.

“You should celebrate the heritage of the business but accept that ‘celebrate’ doesn’t mean ‘protect’. You’ve got to know what you are to get that excitement back in the organisation and then innovate around it,” Andrew added.

Anita from PA Consulting Group, noted: “Innovation has to be linked to the core of the business, its objectives and challenges, and what customers or clients want. If an organisation is under threat from disruption then the imperative should be to solve that.”

It’s About Leadership, Not Technology

“A lot of people overthink what has to get done, but actually the fundamentals of innovation and change are what most people would refer to as common sense. It’s not really about technology, it’s about leadership,” Andrew said.

“It’s getting the leadership team, the board and your employees to accept that there is a need for change. Unless there is a real desire to change then there’s no point investing time and money.”

It has to start with the CEO and the board, and then the CEO has to get the exec team behind it. “You have to be quite brutal and accept that some people won’t make that journey and proactively manage that,” Andrew commented.

Charlie added: “Scale is no longer a differentiator for businesses, it’s all about speed and leaders need to work out how to drive that in their organisations. They need to provide a framework that supports that.”

Find Out What ‘Agile’ Means to Your Company

Businesses must learn how to exhibit speed and build momentum. “It’s about iterating fast,” Andrew said. “It’s about seeing ideas that work and trying things. The speed at which I see tech companies iterate is phenomenal. Look at Snapchat, which is the fastest growing media distribution brand.”

Change won’t happen overnight, especially in large organisations, but big businesses need to trial new ways of working. Anita noted: “There has been a lot of talk about agile from a software development perspective; now that conversation has moved on to how you make large organisations more agile, how to break down siloes to make an organisation simpler and faster so it delivers results.”

Matt Barry, Chief Operating Officer for Mass Hosting at web company Host Europe Group (HEG), has worked both in organisations in which innovation is kept separate from the core business, as well as one with a more collaborative cross-functional approach.

Prior to joining HEG, he spent four years at a Fortune 50 cable TV company as Product Manager in its newly formed Converged Products division, tasked with rebuilding the experience from the ground up.

“They realised they needed to get something going quickly without the normal politics you get in a big organisation,” he explained. “So, they set up a completely separate team, got new blood in – web people rather than TV – and put us in a new office.”

At his current organisation Matt has implemented a group-wide way of working that uses agile development practices whereby a number of small teams take ownership of a particular project, which is typical of software development companies.

Andrew also had two different experiences at Auto Trader and GMG. “At Auto Trader we set up new business… that essentially cannibalised the old,” he explained.

“At the guardian it was about the disruption of content in the new world therefore we couldn’t isolate the new from the old, it had to be much more intertwined – that was much more complex.”

Don’t Get Hung Up on ROI

New propositions will call for different metrics and measures, rather than return on investment alone.

Anita noted: “If you’re encouraging the organisation to come up with ideas, you’re not going to be looking at financial return over a short period. You might be looking at the potential for an idea to disrupt a market, or the opportunity for growing market share. That can be a big challenge for large companies.”

Small wins in terms of revenue can be huge in terms of customer engagement; it’s about changing the mindset.

Andrew, a former CFO with a financial background, agrees that ROI can be stifling: “At Auto Trader the targets were the number of dealers that we had on our CMS system, then the number of people on the website, followed by revenue. If we had set ROI parameters, we would probably have shut down in 15 months. At the Guardian, the most important measure was the engagement of users.”

You do, however, need limits on investment and this can often come down to ownership structure. Matt explained: “Realistically, it depends on which stage the company is in to answer the question about metrics. A PE-backed company in late stage investment will argue that it’s all about ROI — and that’s true if you are preparing for sale.

“However, early-stage investment companies or one that is well-funded and seeking market share, or one that holds a leader position and wishes to maintain it, will be more flexible.”

By Dawn Murden, Editor, Advisory

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Innovation Vs Corporate Antibodies

When Google gave birth to its own parent company, Alphabet, earlier this year it may have been onto something. By creating an umbrella company it was able to separate not only Google and its web-related products, but also Google X, its experimental research division.

“They recognised that you can’t set up innovative ideas in a mainstream business so they’re allowing them to be separate. I think that’s probably the only way that you’ll overcome the gravitational pull of the big organisation,” says Martin Hess, VP of Enterprise Sales for the UK & Ireland at Hewlett-Packard.

In Criticaleye’s recent Global Conference Call, Building a Culture of Innovation, held in association with BDO International, leaders agreed that pockets of innovation are often more effective than trying to reshape the entire organisation. But support is needed if those green shoots of creativity are to grow.

Edd Read, Co-founder and Chief Technology Officer at snacks company Graze, explains how, like Google but on a smaller scale, it has fenced off its sapling ideas. “In the last few months we put a focus team together to resolve a particular problem we had with the business. We gave them a mandate to do their own thing. We were really clear on the objective but ultimately left them to it,” he explains.

It meant not only separate KPIs but also a different room in which they could talk freely about their ideas without colleagues listening, assessing and infiltrating.

However, he also realises that there are limits to this approach: “We can’t keep putting people into rooms to solve problems. We need to learn from the process they’ve been through to understand how we can make changes in the business.”

As Andrew Minton, Managing Director of the Advisory Practice at Criticaleye, notes: “Companies must protect and nurture their innovative side projects if they’re to benefit on a wider level and stay competitive.”

If the innovation behind a skunkworks is to grow outside the context of its own silo, it must find something to stick to, or what Martin calls “corporate Velcro”. Skunkworks have a finite life, so this ‘Velcro’ is essential if innovative ideas are to “overcome the organisational antibodies that come out,” he reasons.

Martin gathered a team of 12 people at HP to create an independent digital practice within the company. The remit was to build a new revenue stream and to reposition the brand. The success of the skunkworks became its own burden. Everyone wanted a piece of it, which threatened the project’s autonomy.

“Digital crosses the organisational boundaries,” Martin explains. “For example in HP, we have an analytics practice, security business and integration division – digital is a theme that weaves its way through all of those organisational entities and they each wanted to grab it as theirs. Although they probably didn’t realise they were doing it, they were fighting against it being a separate entity.”

Failing with fortitude

Recreating your company in the image of an innovative virtuoso like Google or Graze can be a daunting task.

Beverley Eagle Head of HR at Veolia Water Technologies, warns that “in order for any skunkworks to succeed, the culture within which it operates needs to be open to innovation and change and there must be commitment from the top of the organisation. It’s vital that senior management communicate the objectives of the skunkworks with clear goals and guidelines.

“Resources need to be agreed in advance and communicated to everyone so the larger organisation understands the benefits of the skunkworks and why it may not be carrying full costs,” she adds.

Simon Pringle, Head of Sustainability and Innovation at BDO agrees that it can be hard to stand firm and alone in strong headwinds, which is why he heartily argues for a clear mandate: “In the absence of a really well explained purpose and intent, a systematic approach to innovation can lead an organisation to march briskly in completely the wrong direction.”

In addition, it’s not unusual for people to become too close to the projects they’re working on, which can lead to optimism bias – an unreasonable expectation for what can be achieved, notes Simon. As such, he advocates a sturdy corporate governance structure that “knows when to pull the plug on things, and when to be persistent and robust”.

When things do go wrong it’s important not to penalise people despite their effort. Indeed, failing is part of the process, but the trick is to recover quickly and learn from it.

Simon illustrates this point with the story of a major steel company which gave out a ‘heroic failure award’ – a pat on the back for someone who had failed but learnt through the process. “That one got the biggest cheer of the night. I thought that was a tremendous way of encouraging people,” he says.

KPIs and financial incentives are another way to encourage creative ideas, but only if you get them right. In a former role at an engineering organisation, Simon realised the targets were actually stifling experimentation with staff hitting but never exceeding them.

“We’d unconsciously placed a constraint within the business; people were beginning to fear the consequences of missing the target by being bold… so they played it very safe,” he explains.

The tincture was to reassure staff that even without success, a valiant attempt would be recognised rather than chastised.

To get all this right, you need a CEO who’s continuously signalling for change, says Martin. “Unless it’s set in your objectives, you probably won’t see it happen.”

As with many leadership issues it requires clear communication. Andrew notes: “Only if leaders voice, and continually champion, the company’s need for innovation will those lower down live by that ethos.”

By Mary-Anne Baldwin, Editor, Corporate

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Making Healthcare Better

Delivering a healthcare model that meets the needs of an ageing population takes strong leadership, an appetite for innovation and a willingness to collaborate. It also has to be built on the understanding that quality of service and care cannot be compromised in the effort to meet financial targets.

This is the challenge faced by the UK’s NHS. “Far more needs to be done to bring health and social care together in an integrated way to both prevent and better manage long-term conditions in a home and community setting,” said Tom Wright, Group Chief Executive of Age UK, speaking at the recent Criticaleye Discussion Group, Optimising the Opportunity within the NHS Five Year Forward View.

The volume of services the NHS provides is set to increase and yet if the organisation tries to maintain its current level of activity, it’s estimated that there will be a funding gap of £30 billion in the next five to six years. The proposed solution involves ‘cost efficiencies’ of £22 billion, £8 billion of additional funding from the Government and a radical overhaul of service delivery at a regional and local level from General Practitioners (GPs), hospitals, home and mental health care providers and community nursing.

At the event, hosted by Big Four firm EY, attendees welcomed many of the ideas on healthcare delivery described within the Five Year Forward View, published by NHS England. It suggests that greater investment in primary care is needed, particularly through the GP-led Clinical Commissioning Groups. This will allow for a redistribution of funding from acute and secondary care, such as hospitals and emergency services, towards community and other primary care services.

In large part, this is necessary due to the type of healthcare required. “What’s fundamentally changed is that our population in the UK is living longer and has a life expectancy of 81, which compares to 75 in 1990,” explained Tom.

“As we live longer, surviving traditional infectious diseases, we’re encountering many long-term conditions and disabilities, which need a different type of healthcare to what the NHS was originally designed for. Frailty and dementia don’t lend themselves to purely clinical and acute hospital interventions.”

Turning an oil tanker 

Since the beginning of the year, new care models have been trialled across the UK through the funding of ‘vanguard sites’. The first wave of vanguards consisted of integrated primary and acute care systems, enhanced services in care homes and multi-specialty community providers, moving specialist care out of hospitals and into the community. In July, a second wave was announced for urgent and emergency care.

One such site, the Vitality Partnership in Birmingham and Sandwell, was identified by some attendees as having made significant advances. It has attempted to integrate general practice with specialist clinics and services from local hospitals, and invested in technology to share information between different parties. It’s being watched as a positive example of how integration and an appetite for innovation can lead to more effective service delivery.

While welcoming such pockets of progress, attendees of the Discussion Group also expressed concern about how difficult it can be to contest entrenched positions across the wider healthcare system unless contracts, financial incentives and rewards are reconfigured.

Jo Pritchard, Chief Executive Officer of community services provider CSH Surrey, said: “Issues exist around integration versus competition. There are vast blocks of healthcare where providers are given long-term contracts, and then there are others on no contract at all.

“Longevity in the contract would allow for greater investment and people will be more interested in new types of service delivery and care, including digital solutions. But if contracts remain short term, they don’t encourage risk-taking and innovation. It’s one of the big issues.”

Time for some vision

Good leadership is essential if there’s going to be a breakthrough. Lewis Doyle, Non-executive Director of Brighton & Sussex University Hospitals NHS Trust, commented: “In my view, the healthcare model is extraordinarily fragmented at present and needs to be more joined-up.

“The question of talent is an important one as, while there are many excellent, committed healthcare professionals, I wonder if there is the depth of talent to really make the changes happen at the required scale and for such reforms to be sustainable.”

A potent mixture of political interference, austerity economics and the sheer size of an organisation with 1.6 million employees, makes the prospect of transformation a formidable task. Tom said: “The challenge is where the leadership and operational capacity for change will come from on the ground, particularly when it’s up against the vested interests of the pre-existing component parts. How can that be transformed when the bulk of the resources already go to the big hospitals?”

Jo said: “When we talk about moving people around and introducing different ways of working, we can forget how challenging it can be to get a team to work effectively with another team. Co-designing and co-developing new service delivery can be very exciting, but it can also be a difficult thing for people to get their heads around.”

Given that the NHS is clearly in need of leaders who understand interdependent systems, it’s alarming that the number of senior vacancies keep rising. Joe Stringer, Partner of Healthcare Advisory at EY, said: “The average tenure of an NHS chief exec is now around 18 months and there’s a worrying lack of talent coming into the system.

“There’s also no incentive at the moment to bring in successful chief execs who are able to turn an underperforming organisation around.”

Quazi Haque, Group Medical Director of mental healthcare provider Partnerships in Care, says that there is already a drain on talent: “A lot of the people who have left had allowed for a good assessment of capacity and flow. This loss of organisational memory is a real risk in terms of getting to where we want to be on this journey.”

A lack of speed remains a fundamental problem. Although the vanguard sites are beginning to show what integration may mean in practice, there is a long way to go when put into the context of such an intricate healthcare system.

Joe Berwick, Business Development Manager at Criticaleye, said: “The NHS is incredibly sophisticated but also highly fragmented. In order to deliver truly integrated pathways that utilise community-based care effectively, a more collaborative mindset is needed and that’s why leadership remains a serious issue.”
The clock is ticking.

By Marc Barber, Editor, Criticaleye

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Trust and Leadership in China

Big Western brands in China pay the price for failing to adapt to local market conditions. It’s a form of cultural blindness they would find unthinkable when operating in their home territories. As a result, they lose out to companies with senior management teams that understand what customers want and how to extract the best from employees.

Adequate thought has to be given to skills, training and leadership if foreign entrants are to keep pace with indigenous competitors that are moving quickly and at scale. Criticaleye spoke to executives that either work in China or conduct regular business there to explore what companies are doing to be successful:

1) Know What’s Expected as a Leader

The word ‘hierarchy’ crops up a lot when discussing effective leadership. Chris Riquier, CEO of Asia Pacific for market research company TNS, comments: “A leader in China needs to recognise they are in charge and be seen as such by the team on the ground. They need to gain respect, have extremely strong listening skills and be very perceptive, with a high level of emotional intelligence.

“You’ve got to have experience and an understanding of Chinese culture so you’re able to read a room and interpret what is communicated to you.”

There are nuances to take into account. Roger Steel, President of New Markets and Business Development in Asia for Sun Life Financial, says: “You need to listen to the way things work and have an incredible amount of humility in the face of innovation because China is innovating so fast.

“For example, in my industry of insurance, it’s almost a bit scary how good they are at creating new distribution channels.”

Ultimately, organisations require people that are at ease with the way business is done. Andrew Minton, Executive Director at Criticaleye, states: “As stakeholder bases become more diverse, you need to really understand your customers, employees, suppliers and the regulatory environment.

“It’s clear that the make-up of executive teams must reflect this diversity, otherwise they will struggle to navigate the different market conditions and will not perform at the highest point. This can’t be overstated for a market as varied as China.”

2) Map Your Talent Strategy 

Opinions about how to attract and retain people vary by sector. Barrie Goodridge, former Chairman and CEO of Edipresse Media for Asia, says: “Generally, getting quality talent in China is not easy…The growth they’ve had in the last 15 years has outstripped their ability to produce enough talent.

“My experience is it’s quite difficult to find internationally orientated people over the age of 45, and the younger people, if they speak English and have international experience, know their value. With our office in China, we had a very high turnover of people.”

It’s not helped by the fact that the cachet and lure of working for a Western brand isn’t what it used to be. Roger says: “If you’re super talented in China, you want to work for one of the big Chinese companies because they’re growing fast, they’re innovative and very dynamic.

“It’s increasingly difficult for Western companies to attract top talent, unless they have a very strong market proposition.”

Chris says: “At the senior level it can be difficult, but at the mid-level the economy is maturing and, to a degree, you’re starting to see more people with 10, 15, 20 years of experience. If you’ve got the right remuneration structures, it shouldn’t be a difficult proposition.”

According to some commentators, events that have occurred in China over the last 40 to 50 years, from the Cultural Revolution and the one-child policy to its re-emergence as a superpower, mean there are marked differences between the generations. This puts additional emphasis on gauging the mindset, motivations and values of employees.

Jingru Liu, Director of China Advisory Services for professional services firm BDO, refers to how “one of the largest Chinese IT companies trains its middle management staff, who were born in the 1980s, on how they’re going to manage people born in the 1990s.”

3) Don’t Rush into a Joint Venture

There are industries where a joint venture (JV) is mandatory. For other companies, a partnership won’t be legally necessary but it may seem a simpler way to combine resources, share knowledge and improve chances of gaining market share.

Ann Coughlan, Managing Director of Bupa Asia, comments: “China has multiple layers of rules and regulations, plus distinct cultural characteristics and consumer preferences. For some companies, particularly those without previous experience of doing business in China, JVs or partnerships can add a lot of value, insight and knowledge that you would not necessarily have as a foreign investor setting up on your own for the first time.”

Like any JV, it’s a case of remembering the basics:

• Conduct extensive due diligence
• Be clear about expectations and financial rewards
• Use advisors and make sure there is a break clause
• Adopt a hands-on approach

George Yip, Criticaleye Thought Leader and Professor of Management and Co-Director for the Centre on China Innovation at China Europe International Business School (CEIBS), says: “When strategic objectives are aligned it’s a win-win for the two of you. You have to be as sure as you can that the JV partner isn’t someone who is likely to turn into a competitor in the future – that is one of the biggest things to worry about.”

4) Results Take Time

New entrants to China can be dazzled by headline growth rates. However, supply chains, logistics, market compatibility, the cost of labour and knowing how to build relationships all require significant research and effort. It’s also easy to underestimate the impact politics has on the way business is done and decisions are made.

In this context, good risk management is another essential. The issue of intellectual property rights and piracy remains problematic, notably for businesses operating in industries designated as high-priorities for China’s economic development. If a JV / partnership is struck with a private or public company, it’s wise to adopt a cautious approach to commercially sensitive information.

On a positive note, there is a crackdown on corruption and it’s also acknowledged that China’s Government is more internationally focused than the previous leadership. This is creating greater openness in terms of how trade is approached, helping companies from an export and investment point of view, and there are hopes this will improve with China taking Chairmanship of the G20 Summit in 2016.

5) Study Where Your Company Fits

As the e-commerce giant Alibaba showed with the marketing magic of ‘Singles Day’, whereby an estimated $9 billion was spent in 24-hours last November, it seems plenty of Chinese consumers have cash to burn.

That said, such stories shouldn’t lull businesses into thinking it’s an easy market to crack. Jingru of BDO says: “China is not one market – it’s larger than Europe and it’s diversified. If a foreign player wants to enter China for anything consumer related, they would have to research by region to find the right market segment.”

Roger warns: “You do not want to go into China with ambitions to run a national business. Your first entry ought to be in one or two selected cities. Get to know the places before you seek to expand.”

When examining where to start trading, businesses are frequently advised to note China’s system of ranking cities into five tiers (one being the most advanced). But for Chris at TNS, there is a danger that focusing too much on this grading system could result in poor decision-making.

He explains: “China usually gets segmented by marketers and commentators as having its cities separated by tiers, all reflecting different levels of development, economic status and various other things. It’s an oversimplification – for a company entering the market, which is a small part of the overall Chinese economy, there may be little difference between a tier three and tier one city, in terms of category.”

It will depend strictly on what service or product a company is looking to trade. “They need to really come and do their own landscaping with the category they’re operating in, to understand the consumer and market opportunity,” he adds. “They can’t just rely on a consultant’s point of view.”

I hope to see you soon.


The Millennial Mindset

It’s not all hashtags and selfies when it comes to the millennial generation. Beyond their comfort and ease with new technology, those born between 1980 and the early 2000s think differently about the world of work. This is something boards need to understand as these digital natives inevitably replace older employees and, in the not too distant future, become the leaders of tomorrow.

It’s predicted this demographic will make up approximately 40-50 per cent of the workforce by 2020. Jo Whitfield, Vice President of Operations, eCommerce and Strategy for George at Asda, says: “Businesses are adapting but at a slower rate than customers and millennials expect… You’ve got to change your mindset and understand the world that millennials have grown up in is actually the world we are trading in.”

Being born into an environment of rapidly evolving consumer electronics – from laptops and MP3 players, to tablets and smartphones – means new technology has become second nature. “We have individuals who have grown up with technological advancement at a pace never seen before, with information at their fingertips,” comments Kris Webb, Senior Vice President of Pharma Europe and Emerging Markets, Asia Pacific & Japan at GlaxoSmithKline.

Payal Vasudeva, Managing Director for Accenture Strategy and UK & Ireland Talent & Organisation Lead, says: “The way they integrate with technology is more seamless and they expect to use the same devices at work as they do in their social lives, with the majority using two or three devices a day.

“They want greater flexibility, with better work/life integration… They are also less inclined to work within hierarchies and would rather form networks and communities to actively collaborate and problem solve.”

This point is echoed by Susan Pointer, Senior Director for Public Policy & Government Relations across Asia Pacific, Middle East, Africa & Russia at Google: “Millennials expect straight-talking openness; interesting, meaningful and impactful work and flexible work conditions – measured by quality of output, rather than by strictly managed hours of input. There is little time for unnecessary hierarchy and the expectation is that they will be empowered to contribute to the maximum of their ability regardless of level or title.”

Digital on the inside

Businesses have been busy creating a seamless multichannel experience externally for customers, but it’s time leaders turn their focus inside the organisation. Clodagh Murphy, Managing Director of technology services provider Eclipse Internet says senior executives need to “embrace technology and think: How can I use it to make our organisation a better place to work so that I can attract and retain the best talent?”

Payal agrees: “We need to challenge our thinking on the talent lifecycle in order to foster a culture of knowledge sharing, innovation and engagement, with processes and tools that truly enable this.”

This should start at recruitment and go right through to daily operations. “A number of companies use app-based recruitment which attracts those with a ‘millennial mindset’ by putting the experience in the palm of the candidate’s hand,” adds Payal. “Workplace content sharing is on the rise, catering to how employees engage with an organisation, consume information and problem solve… Gamification of learning on-the-go appeals to the consumer in all of us and is transforming how we develop skills and capabilities.”

Mike Tye, CEO at hospitality concern Spirit Pub Company, says: “Our online training is designed to deliver bite-sized, fun, interactive learning – using the principles of gamification. This is most suitable to younger generations… but hopefully older people are used to mobile devices [as well].

“We have a closed Facebook group with around 6,000 members, which is very much run by employees for recognition, questions and support. We have also recently given all staff access to the company intranet.”

It’s about empowering staff through technology. “Engagement will not be sufficient to deliver top-class results,” adds Mike. “For that to be the case there needs to be more: a true commitment from employees to the ambition of the organisation and a belief that they can make a difference.”

Susan from Google says: “Collaboration should be as wide as possible… consciously embracing the fact that the best ideas do not always emerge from the most obvious places – and that’s OK.”

Board’s eye view  

It’s imperative that the board take the issue of talent seriously in order to bring in the right mixture of skills. “One of the most important things that a company needs to drive future value is good talent,” says Iain Ferguson, Chairman of employment services company Optionis Group and information management firm EDM Group. “It is a very competitive market, and so it’s an important board level requirement to make sure that we’re competitive and attracting the best talent, no matter what age they are…

“I’m interested in who they are, what they bring to the company and how we can help them perform better.”

Susan comments: “Businesses should focus on attracting the best talent for their current and future needs, regardless of age. Build a great organisation and people will want to come – the best talent will always be attracted to exciting and impactful organisations.”

The point is that executive and non-executive directors must have a clear line of sight when it comes to the different needs and expectations of a diverse, multigenerational workforce. Payal says: “Boards needs to ensure they are building inclusive environments that all of their employees… thrive in by creating a more customised value proposition.”

Jo says: “A diverse workforce is important. We do business in a diverse world and you need to reflect the diversity of your customer base.

“Leaders need to understand… the differences that exist between generations, and use that to create value. It’s finding the knit between your current culture for all employees.”

I hope to see you soon.


Unlocking Corporate Entrepreneurship

While the notion of ‘corporate entrepreneurship’ will always be an oxymoron to some, there can be no doubting the need for large organisations to stay competitive by encouraging new ideas to flow. External partnerships, skunkworks and, from a leadership perspective, developing a culture which can challenge the established order, are all essential if employees are going to push boundaries.

Phil Smith, CEO of UK & Ireland at Cisco Systems, says: “You need to create an environment where you continually think about disrupting yourself because, if you don’t, then someone is likely to disrupt you, your products or your business model. The advantage of focusing on innovation is that you keep giving yourself the opportunity to stay ahead of the competition.

“Innovation is also a powerful way of delighting your customers by constantly looking for new things you can do with them.”

At Cisco, Phil says there are a number of ways to capture that spirit of entrepreneurship, from collaborating with start-ups to driving ideas internally. “You can’t just assume that innovation is going to happen,” he comments. “If you’re going to be systemic about it and create it within the organisation, you need to have great leadership which is committed to saying that innovation is a vital part of doing business.”

There’s no one-size-fits-all approach. Kai Peters, Criticaleye Thought Leader and CEO of Ashridge Business School, says: “If you think about Google or Facebook, they’re constantly buying to acquire new ideas. The alternative is to throw it open for innovation and crowdsource ideas to address specific challenges, which you see [being done] in companies such as Proctor & Gamble.”

Andrew Minton, Executive Director at Criticaleye, says: “It’s vital leaders ensure curiosity is embedded into the culture of an organisation, so that employees feel empowered to share ideas and challenge orthodoxy in a constructive fashion. Without such an approach, the prevailing assumption will be that what has made a company so successful in the past will be equally effective for the future – it’s a dangerous mistake to make.”

The trick is letting the core business roll onwards while creating a microclimate to nurture new ideas. Martin Hess, Vice President of Enterprise Services Sales for UK & Ireland at tech company Hewlett-Packard, says: “You’ve got to create semi-detached organisational entities and protect them from the rest of the corporation. Allow them to grow and prosper on their own… and be measured against their own set of metrics, which makes them fully accountable. They can’t be measured against the metrics of the [wider] corporation.”

Olivier Horps, CEO for Greater China at holiday resorts company Club Med, says: “It is difficult because large companies have their own processes and cultures. But they can do it if they create a sub-team which operates independently from the rest of the company, or if they invest directly in a start-up which also functions independently.

“The best way is to keep things separate and then, when the idea gets closer to launch, often the team needs to mix with the rest of the company.”

Making it happen

Rewards have to be clearly defined if your employees are going to break the mould. “You’ve got to ask the question: are there sufficient incentives to encourage people to come up with new ideas?” says Martin. “If there aren’t, people will stop doing it as they’ll realise that’s not how you get on in the company.

“I don’t think many big companies pull it off. I’m a great believer that if you tell people to innovate without the right environment, it won’t happen.”

By way of example, Martin explains how he developed a skunkworks at HP, spending two years creating a digital practice focused on customer experience: “I had a team of people with a common vision and the company allowed me to get on with it, basically giving me the resources to build something from nothing. It’s been a success and now I think we’re looking to get it more widely adopted in the company.”

Martin says you’ve got to start with the principle that the best ideas don’t necessarily spring from the highest echelons of the business: “In the case of creating new markets, it comes from the parts of the organisation that touch the customer. You’ve got to foster a culture which means employees don’t expect all the best ideas to come from the top of the company.”

It’s a point which often gets lost. Nicola Pattimore, HR Director at outsourcing concern Equiniti, recalls how the culture in one organisation she worked for made it incredibly hard for employees to actually bring their entrepreneurial flair to life.

“It was because the organisation was so driven by hierarchy,” she says. “When you’ve got an entrepreneurial spirit, what people want is a level of autonomy and empowerment and that comes back to the leadership style within the business.”

Norman Bell, Strategy & IT Director for Travis Perkins, agrees: “This is not driven from the centre; it’s actually about having a culture and an environment where the frontline in particular are encouraged to try things and experiment, sharing experiences. It’s not head office saying: ‘Right, be innovative.’

“The best way of doing that is to build it into your measures, so individuals understand that they do have to deliver results, but they can also enhance those results by having ideas. What they can’t do is allow those things to distract them from the fact that there is a core business to deliver.”

Approaches will vary depending on sector and size of the business, but what’s evident is that breakthroughs can be made. For those organisations struggling to create that entrepreneurial verve, the problem may lie with the style of leadership and not because employees are short of ideas.

I hope to see you soon.


Leading a Digital Culture

Comm update_14 JanuaryAs new technology continues to turn traditional business models upside down, the onus is on executive teams to embrace change while encouraging employees to think and act differently. It means challenging conventional approaches, testing ideas and creating a ‘digital culture’ within an organisation which is attuned to and reflective of changing customer expectations. It’s inevitable that the companies that fail to adapt will struggle to compete effectively.

For large, well-established organisations, deep-rooted changes are required. Julian Payne, Line of Business Director for Solutions at De La Rue, a supplier of identity and product authentication services to governments and multinationals, says: “If you’re a first-generation digital start-up business or technology company, you don’t have to think about digital culture, you just have it. You have an agile development team… and you are open to change.

“Whereas if you’re working in a bigger business or a business with a significant non-digital legacy… you’ve got to think about the DNA of the culture that you want to create… It means thinking about what’s happening in the wider context around everything from hosting, to the cloud and big data analytics.”

Laura Haynes, Chairman of brand consultancy Appetite, explains that digital needs to be part of the core business: “People think about digital as being something outside their regular business issues, but it is time to think differently and recognise that the first way to reap the benefits of a digital culture is to break down silos and integrate digital thinking and processes throughout the business.

“Sure, there will be parts of digital that may need new technical expertise, but there is the opportunity to explore the potential to improve processes and communications, but this means embracing digital.”

It’s about connecting the established practices with the new, and reaching a balance which allows digital to enhance or adapt the traditional offering. Bal Samra, BBC Commercial Director and Managing Director of BBC Television, who is leading major digital projects such as BBC3 Online, the iPlayer and BBC Store, comments: “Our values at the BBC are always going to be the same… but we are in a different world – it feels like everything is speeding up… You need to create a culture in your organisation to evolve from the old to the new.”

Executives on point 

Senior executives in an organisation need to take the lead on digital. Bal says: “The CEO has to set the pace of the vision… So that means constantly talking about the world around us and how it’s changing, and moving that from being scary to being an opportunity.”

Leaders need to be open-minded. Laura says: “The challenges are understandable because if you take a lot of senior leadership, they’re having to relearn a way of thinking that doesn’t come naturally… it’s not just about learning techniques; it’s about learning to think differently about processes, about truly interactive and real-time communications, about the utilisation of information and how to analyse what’s in front of us, as well as new media.”

Julian says you have to “remove fear and de-risk digital” through experimentation and education: “Get them to play at home more. Ask them to use some of the modern apps that, frankly, kids are using.

“You need an interpreter role, it might be your CTO or it might be head of R&D. Someone who can take relatively complex concepts of digital and introduce them to a board… [Crucially] you have to be really clear about where the customer value lies, the cost to achieve it and the steps to take.”

Younger employees are increasingly being turned in order to share their digital expertise, acting as reverse mentors for an older generation. Paul Brennan, Chairman of cloud infrastructure software provider OnApp, comments: “You need to utilise younger people who are going to be the consumers of your products and services in ten years’ time, to understand how they want to communicate with you.”

Allied to this, employees should be allowed to experiment and test ideas. “You fail fast and learn,” says Bal. “What you want is an innovation kind of culture which says if you fail… and if something doesn’t work, you move on. You’ve got to create a culture that allows people to challenge the conventions.”

For this ‘digital culture’ to be meaningful, it has to be joined-up with how the information generated by technology is being used to bring about collaboration, experimentation and to inform decision-making. “New technologies enable us to act in a very different way,” says Emma Cooper, Managing Director of UK Health and Public Sector, and Organisational Change Lead for the UK and Ireland, at Accenture.

“They allow us to tap into workers anytime, anywhere… Digital is changing organisations, silos and hierarchies.”

Helen Murray, Chief Customer Solutions Officer at Webhelp UK, a company that provides outsource customer services, says: “Huge insights can be gained from analysing conversations, utilising voice and text analytics, to truly understand customers’ emotions, frustrations and behaviours, and combining that with more traditional, structured data analytics… You need to ensure all customer engagements consistently reflect and represent the brand.”

In order to fully endorse digital, leaders have to understand the tangible business benefits. Paul comments: “A lack of awareness of the value proposition means you could miss opportunities, so education is important for senior executives to fully embrace digital. You need to understand the benefit to your organisation.”

At the very least, they have to be honest about where gaps in knowledge and expertise may lie. Mike Greene, Chairman of pharmaceutical and consumer healthcare company WinchPharma Group, says: “Boards need a diverse mix of experience, energy and ambition… If they haven’t got someone who’s digitally savvy and digitally confident then their board is missing something, but unfortunately they often recruit in their own image.”

Helen comments: “Digital is so critical to businesses… It’s essential that digital is in its DNA, not a separate operating unit; not an adjunct… It needs to interface seamlessly with the rest of the organisation.”

Large corporates may struggle to embrace a truly digital culture, but senior executives must rise to the challenge. Ultimately, leaders need to ensure they are open-minded and willing to learn, while utilising new technologies and data in order to empower employees to meet changing customer demand.

I hope to see you soon


Looking Back on 2014

Comm update_31 DecemberWhen reflecting on some of the central themes to be discussed by Criticaleye Members over the past year, be it digital, the changing consumer, an ageing population, innovation or culture change, it’s abundantly clear that successful senior executive teams understand the need to be collaborative, curious and open to new ideas and insights. How else can they be expected to navigate complex and fast-changing global markets?

Steven Cooper, CEO of Personal Banking at Barclays, said: “The environment that leaders need to create, I think, is changing. They need to be much more inclusive, more visible and they need to be engaging with a broader spectrum of colleagues to create partnerships.”

It’s a point echoed by Andy Clarke, CEO of retail concern Asda: “If you turn the clock back only ten years, the pervasive style of communication for leaders was very much tell-and-do. It’s a dying style of leadership today; you have to operate with a level of openness to challenge that you wouldn’t necessarily have seen a decade ago.”

A CEO has to look to build a team that can thrive in a business environment where strategy is far more dynamic and agile. “The most common thing to do in the world of strategy in business these days is to complain about the V.U.C.A. world we live in – so everything is volatile, uncertain, complex and ambiguous – and then say that because of this it’s impossible to do strategy,” said Roger Martin, Criticaleye Thought Leader and Academic Director of the Martin Prosperity Institute at Rotman School of Management.

“But if an organisation doesn’t understand it has to make choices about where to play and how to win, it might as well not do strategy. That’s why more than eighty per cent of all strategic plans are pretty much useless.”

A numbers game 

The strategic implications of a multigenerational workforce is certainly an area that requires careful thought. Mark Purdy, Managing Director (Economic Research) and Chief Economist at Accenture, commented: “We’ve recognised that there’s a major trend around ageing and increasingly organisations are thinking about this, but maybe what we haven’t recognised is that we have a lot of millennials in the workforce too…

“[T]he successful organisations are going to be defined by their ability to bridge the gap between the ages and capitalise on the inherent strengths of both young and old.”

It’s leading to new ideas on how technology can reshape working practices, from home-working to hot-desking and job-sharing. Vanda Murray, Criticaleye Board Mentor and Senior Independent Director at manufacturing company Fenner, said: “Businesses need to invest in IT to enable flexible working, which may be from home or any remote location, as it is now expected that we are all ‘connected’ wherever we are.

“There are huge benefits to businesses that embrace more flexible working patterns and practices. It helps recruitment and retention – in particular those workers with family commitments – be it younger children or elderly parents. Young mothers often find they cannot balance work and home life without this flexibility for example.”

The way digital continues to change organisations has been another area of debate and discussion for executives. Bal Samra, BBC Commercial Director and Managing Director of BBC Television: “Digital disruption is inevitable so business leaders need to recognise it, collaborate and foster a culture of learning within the organisation so that more is understood with every new project.”

One of the biggest risks for companies is to do nothing with digital. If you’re not constantly testing, learning and evolving, you will be left behind. Simon Johnson, Group Managing Director for UK & International at publisher HarperCollins, said: “Innovative digital leaders are those who are completely obsessed with inventing things and with customer experience… They also need to create the right culture internally, encouraging the people within the business to think more like a start-up.

“This might mean starting-up a skunkworks for innovation, for example… or setting up new business units in direct competition with legacy ones.”

The question of how organisations can excel at innovation remains fiercely debated, especially as new business models emerge. Neil Stephens, Managing Director for the UK and Ireland at food company Nestlé Professional, comments: “The narrative I always put around the need for breakthrough innovation is that the customer is constantly changing and they are always eager to find new ways to enrich their lives…

“[That’s why] we are trying to bring our customers into the innovation loop as early as possible so that, by the time we go to market, we already have customers who are attuned to the opportunities and who have been part of the process from the beginning.”

George Yip, Criticaleye Thought Leader and Professor of Management at China Europe International Business School, observed that Western companies need to learn how to innovate faster and take more risks, whereas Chinese organisations need to learn how to innovate in a more formal way. “Being pragmatic about the kind of innovation companies do is the key to achieving profitability in the digital age,” he said.

If a business has any hope of performing to the highest level, it needs the best people. Creating a culture that attracts and retains those individuals and allows them to flourish is perhaps one of the biggest tests confronting senior executive teams.

Rudi Kindts, Non-executive Director for technical recruiter Matchtech and former Group HR Director for British American Tobacco, said: “We don’t know what the future will look like, so I think increasingly the skills required to be a successful leader will be around agility, curiosity, being able to work in teams and having an acute awareness of the environment around them and themselves.

“What is for certain is that leaders need to build organisations that are able to adapt to the future [and be flexible].”

For CEOs, it’s a case of asking more of the Human Resources Director. Steve Varley, Chairman and Managing Partner for UK&I at EY, explained: “A key benefit of the HR Director is to help leaders understand the link between the inputs and outputs of an organisation.

“Effective ones do two things: they understand the business model – how the business makes money – and, secondly, they work hard to build relationships with the CEO and the board.”

Doug Baillie, Chief HR Officer for consumer goods company Unilever, said: “When I came into this role three years ago, the first thing I did was to get key senior business leaders into a room together and ask them what they expect from HR.

“From this, the choice that came to me was clear: do we, as HRDs, want to be the ones laying the road for the journey ahead or are we content to just fill in the cracks as someone else lays out the path? Actually, I don’t differentiate between a HR Director and a business leader.”

The bottom line is that CEOs need to be great communicators and collaborative if they’re to be good at leading change. As Glen Moreno, Chairman of publishing and education company Pearson, said: “It is extremely rare today for a new leader to come into an organisation with a mandate for business-as-usual. That wasn’t always true. There were times when companies had locked market share and there wasn’t much of a technology challenge, nor was it global.

“It’s all changed now and there are virtually no maintenance jobs anymore because companies are either in trouble when a new CEO comes in, or they clearly need to rethink their position on what they’re already doing.”

I hope to see you soon