The Leader s Guide to Sustainable

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1 The Leader s Guide to Sustainable Competitive Presentation Advantage Title It s Not What You Think! Subhead Can Be Placed Here ATD Webinar Presented by John R Childress Dec 8, 2016

2 A little about John R. Childress Co-founded an international management consulting firm CEO and President for 23 years, offices in Los Angeles, New York and London Focused on Advising CEOs and Senior Teams on Leadership, Culture and Execution LEVERAGE: The CEO s Guide to Corporate Culture published in 2013 FASTBREAK: The CEO s Guide to Strategy Execution published in 2014 Major transformation engagements in Nuclear Power, Pipelines, Retail, Financial Services, Transportation, Energy, Manufacturing, Defence and Aerospace Currently, CEO Advisory and Keynote Speeches

3 John s Blog: Rethinking...

4 The Search for Competitive Advantage Comparative Advantage: a firm s ability to produce a good or service at a lower cost than its competitors Differential Advantage: when a firm's products or services differ from its competitors and are seen as superior than a competitive offering

5 Competitive Advantage Can Be Short Lived British Airways Air France KLM SAS Lufthansa Swiss Air Alitalia Iberia

6 Is There Such a Thing as Sustainable Competitive Advantage?

7 Sustainable Competitive Advantage A capability or set of conditions that confers a long-term advantage that is not easily duplicable or overcome by competitors and that provides resilience and/adaptability to external forces of change.

8 Foundations for a Sustainable Competitive Advantage Healthy Corporate Culture (aligned with Strategy) Robust Execution Process (with Governance and Discipline) Leadership Courage

9 Corporate Culture as a Competitive Advantage

10 A Healthy Corporate Culture (aligned with the business strategy) Culture is how employees act when the boss isn t watching! ~ Herb Kelleher, Southwest Airlines Corporate Culture is not an initiative, but the enabler of all initiatives. Culture impacts performance, either positively or negatively, by setting our the informal rules on how employees go about their work, how they interact with each other, what they believe about the company and management, and how they treat customers.

11 Corporate Culture is like the water in an aquarium. If it s clean, everything works; if it s foul, the whole aquarium is impacted.

12 Global Forces Competition Regulation New Technology Strategy Structure New Strategy New Structure Pockets of resistance Malicious Obedience Increase in Meetings Cynicism Work Around the New Structure Poor policy implementation Previous Culture Culture

13 Impact of Corporate Culture on Business Three Mile Island Nuclear Plant, accident Enron: collapse RBS: aggressive risk, expansion, bailout Parmalat: corporate fraud, bankruptcy Lehman Bros: aggressive risk and bankruptcy AIG: risk losses HSBC: money laundering JP Morgan: London Whale trading losses CitiGroup: rate rigging Barclays: Libor Bank of America fraud and fines BP Deepwater Horizon: 11 deaths, $61B costs Olympus: hid loses and fabricated financial statements UBS: trader fraud and money laundering Chrysler-Daimler merger: destroyed value Korean Airlines: decades of fatal accidents Blackberry: 50% to 2% Volkswagen: Diesel falsifications Wells Fargo: 2 million fake bank accounts

14 Questions You Should Be Asking About Your Corporate Culture Do we have a corporate culture statement the fully describes the behaviours we expect from all employees? (Netflix Culture Deck) Are these behaviours fully described as examples of real work behaviours and not just buzzworks like teamwork or trust? Is corporate culture a part of our company strategy, with specific initiatives, accountabilities and milestones? Do we measure or asses our culture on a periodic basis? Do we act on what we learn? Do we have a Culture Committee? Do we have hiring profiles that are aligned with the behaviours we want in all employees? Do we have a strong Employee On-Boarding process that stresses culture, has good examples, and that every employee must attend?

15 Culture as a Sustainable Competitive Advantage While other companies may copy your strategy, your products and your market reach, no one can copy your corporate culture!

16 A Robust Execution Process as a Competitive Advantage

17 The key isn t having a strategy, it s getting it implemented! - Jack Welch

18 The ability to effectively execute business initiatives may be the best competitive advantage. -Larry Bossidy and Ram Charan Execution: The Discipline of Getting Things Done

19 Disconnected Initiatives In the average company, approx. 35% of projects and initiatives not connected to current strategic objectives. 35% Projects and Initiatives Not connected to Current strategy 65%

20 Disconnected Initiatives Disconnected initiatives Lack of resource alignment Slower forward momentum

21 Enterprise CEO Strategy VP VP VP VP VP Dir Dir Dir Dir Dir Dir Dir Dir Dir Functional Objectives & Goals

22 Danaher Business System The DBS process system is the soul of Danaher; the system guides planning and execution. ~former CEO Larry Culp

23 Danaher Execution Process based on Hoshin Kanri Policy Deployment Matrix

Continental Airlines 1994 Amalgamation of 7 airlines (and very different cultures) with 40,000 employees 10 years of straight losses Company facing it s third

24 Continental Airlines 1994 Amalgamation of 7 airlines (and very different cultures) with 40,000 employees 10 years of straight losses Company facing it s third bankruptcy in a decade Worst record among the 10 US airlines: Baggage complaints On-time departures and arrivals Involuntary denied boardings 10 CEOs in 10 years

Continental Results Continental Airlines returned to profitability in 1995, the first year after the new strategy was implemented 1996: Voted airline of the year, against 300 global competitors

25 Continental Results Continental Airlines returned to profitability in 1995, the first year after the new strategy was implemented 1996: Voted airline of the year, against 300 global competitors Ranked in the top 5 of all global airlines ever since 1996 Among the top 4 in all DOT airline service statistics since straight quarters of record profits Share price from $3.30 to $50 in 4 years Employee turnover reduced 45%

26 Continental Airlines Strategic Breakthroughs People: Working Together Product: Make Reliability a Reality Restore employee confidence in management Establish a results-oriented culture. Marketplace: Fly to Win Make efficient use of core assets Expand customer mix from backpacks and flip-flops to suits and briefcases. Enhance relationships with travel agents, corporations, and frequent fliers. RUN AN AIRLINE WE CAN ALL BE PROUD OF BE PROFITABLE IN 1995 Perform in top 50% of the industry on key service metrics Improve image of fleet: Financial: Fund the Future Secure liquidity Restructure the fleet:

a Reality Improve the Image of the Fleet Top 50% of Key DOT measures Fly To Win Rebuild Relationships with Travel Agencies Win Back the Business Flyer Make Efficient Use of Core Assets Fund Our

27 Continental Airlines 1994: Strategy-on-a-Page Example Run an Airline We Can All Be Proud Of. Become Profitable in 1995 PEOPLE PRODUCT MARKETPLACE FINANCIAL Breakthrough Objectives Working Together Restore employee confidence in management Establish a Results-Oriented Culture Make Reliability a Reality Improve the Image of the Fleet Top 50% of Key DOT measures Fly To Win Rebuild Relationships with Travel Agencies Win Back the Business Flyer Make Efficient Use of Core Assets Fund Our Future Restructure the Fleet Secure Liquidity Strategic Initiatives And Accountability Offer On-Time Incentives Consistent & Reliable Flight Schedules Improve Communications Let People Do Their Jobs Without Interference Treat Each Other With Dignity and Respect Paint Interiors & Exteriors Add Phones to all Planes Offer First Class Seating Improve Aircraft Cleanliness Improve Food Service Reduce Involuntary Denied Boarding Improve On-Time Performance Reduce Customer Complaints Reduce Baggage Mishandlings Take Out Cost as We Take Out Capacity Eliminate CAL lite Build up Houston, Cleveland & Newark Hubs Improve Relationships with Travel Agents and Corporate Accounts Stop Scheduling Flights That Lose Money Win Back the Business Traveller Eliminate Above Market Leases Match Airplance Size to Market Size Reduce Fleet Types from 13 to 4 Sell Non-Strategic Assets Renegotiate our Deals with Boeing Track Cash Daily Key Performance Indicators Improve Employee Survey Scores to X% Productivity to $XX/person Top 50% DOT Rankings Upgrade 100% of Fleet by 1996 Reduce Operating Costs to $XXM Business Flyers X% of Total Rank Top 3 Frequent Flyer Programs $$$ Cash Flow Average Flight Capacity to X% PEOPLE PRODUCT MARKETPLACE FINANCIAL Enterprise Metrics $$ Sales $$ Profit Customer Satisfaction Restructure The Balance Sheet

28 Ford Motor Co. Strategic Breakthroughs People: Working Together Globally Tell the Truth One Ford Culture Superior Sales and Service ONE FORD ONE PLAN ONE TEAM ONE GOAL Product: Best-in-Class Vehicles Focus on the Blue Oval Lead in Quality, Safety, Fuel Efficiency Build cars people want to buy Marketplace: Global Responsibility Operate Glocally Take a positive stand for the environment Match capacity with business realities Financial: Fund the Future Secure Liquidity Grow the business profitably

29 Key Requirements for a Robust Execution Process Breakthrough Objectives: beyond business as usual Avoid initiative overload: Will it make the boat go faster? Aligned with the business strategy Easy to understand: Visual Roadmaps help Driving execution of the Breakthrough Objectives is the No 1 focus of senior team, functional objectives secondary Regular governance, monthly if not bi-monthly not a report out, but a focus on breaking roadblocks and making real progress Defined accountabilities who is responsible for what? Sr. Team members accountable, not sponsors Shared objectives at the top and shared rewards Communicating the roadmaps to all employees and regular updates

30 Questions You Should Be Asking About Your Business Execution Capabilities On a scale of 1-10, how good are we at delivering and executing? Do we have initiative overload? Have we reviewed and eliminated nonstrategic initiatives? Do we have a robust strategy and business execution process? Is the senior team accountable for execution or another department, like the Program Office? Do we have execution reviews on a monthly or bi-monthly basis? Are members of the senior team directly accountable for execution or is accountability delegated? Do we use a visual roadmap to show the entire execution process or is it managed by individual spreadsheets? Do we have a common language about execution, accountability, KPIs, etc? Do we have a common set of execution templates or does each function have their own bespoke? Does the senior team have shared objectives around strategy execution?

31 Leadership Courage

32 YOU GET THE CULTURE YOU IGNORE! YOU GET THE CULTURE YOU ACTIVELY SUPPORT

33 Organizations are shadows of their leaders.

34 Questions You Should Be Asking About Leadership Courage and Leadership Shadows Do executives and managers feel they have the right and responsibility to challenge behaviours, even if outside their formal function? Do executives give each other constructive feedback about leadership behaviours? Do we as a senior team talk about our positive and negative leadership shadows? Have we made an inventory of the behaviours we want to drive out of the company and replace with better ones? Are we role models of appropriate behaviours? Do we have a process in place to help repeat offenders? Do we enforce the rules of conduct in our meetings or do our meetings lack discipline and rigor? Do we take immediate advantage of coachable moments or just walk on by?

35 In Summary The foundation of Sustainable Competitive Advantage rests on three elements: Healthy Corporate Culture (aligned with Strategy) Robust Execution Process (with Governance and Discipline) Leadership Courage

rapid strategy deployment

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