The Human Dimension of Globalizing Mid-Caps - as Seen by their Leaders. Welcome to the Flight Deck»

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1 Welcome to the Flight Deck A Global C-Suite Study The Human Dimension of Globalizing Mid-Caps - as Seen by their Leaders Chapter 6 Becoming the Carrier of Choice A Culture of Innovation

2 Introduction This study is a deep exploration of the world of globalizing mid-caps. It draws upon 83 interviews conducted exclusively face-to-face with C-suite leaders from every continent. Lasting up to two hours, the interviews were conducted by Amrop Partners over the Summer and Fall of 2013, using a structured framework designed by researchers at IMD, the top-ranked global business school based in Lausanne, Switzerland. Our focus: the human element: Talent Management at Top Levels Culture and its Implications for Performance Board Governance This is your personal invitation to enter the Flight Deck of today s globalizing mid-caps - a place beyond public declarations or annual reports - to hear what C-suite leaders are confidentially, and often spontaneously, revealing - in their own words. Welcome On Board.

3 Foreword Maury Peiperl Professor of Leadership and Strategic Change, On behalf of IMD

4 Foreword Ulrich Dade Chairman of the Executive Board, The Amrop Partnership On behalf of the Amrop Partnership

5 Welcome to the Flight Deck: Headlines 1 Successful mid-caps take an ambitious, long-term view. 2 79% were studying the successes (and failures) of other companies: 3 If many mid-caps already have a successful international business, only 9% felt truly ready for globalization. 4 Managerial and cultural capacity for globalization are top-ranking, critical issues. 5 Three main factors are positioning successful mid-caps to win the war for customers and talent. 6 Successful mid-caps strike a compelling balance between local autonomy and corporate influence. 7 Globalizing mid-caps have powerful employer branding to attract leadership talent: 8 Many mid-caps are ideally positioned to be innovation and entrepreneurship champions. 9 Mid-cap Boards are tailoring themselves for globalization.

6 Contents View From Feet 1 Introducing the High-flying Mid-Caps 2 Global Trade Winds 3 Key On-Board Conditions for a Successful Flight 4 Piloting Skills: Agility and Consistency Closer to the Terrain 5 The Flight to Leadership 6 Becoming the Carrier of the Future: A Culture of Innovation 8 7 The Flight Controllers: Board Governance 8 What s Next? 20 9 Appendix 32

7 Introducing the High-Flying Mid-Caps Capturing the notion of a globalizing mid-cap

8 6 Becoming the Carrier of Choice: a Culture of Innovation Mid-caps are ideally positioned to be innovation and entrepreneurship champions. In this chapter, we discover that the innovation spectrum is wide, moving from product, to process, involving employees beyond the usual suspects or dedicated divisions, to the most operational levels The freedom to experiment and fail as we have seen is a cultural feature, with top managers taking a personal interest in employee initiatives. In this chapter we examine underlying systems and motivational mechanisms. While creativity is flourishing, resources may be lower than those of larger rivals. We will see how mid-caps prioritize new ideas. We also ask, could mid-caps risk losing innovative vitality with growth and globalization?

9 6 Culture - the Story So Far Connectivity Freedom C-suite stewardship

10 Innovation and Entrepreneurship Are Closely Associated Concepts for Several Mid-Cap Leaders Innovation is More Than an Attitude it is an Imperative The resources obtained by going public allowed us to invest in innovation and to strategically develop from a manufacturer into a retail chain. - CEO, South America

11 Every year we target around three hundred new SMEs - new entrepreneurs or new members that need help to grow We help them to do micro-financing to support themselves. The impact is not only improvement on the wealth of the people but also, surprisingly, we could unite the migrants from Java with the local people. - President, Asia Pacific

12 We have installed a yearly engineering meeting where our top 300 managers are invited to listen to our top engineers and get educated on the best innovations. The best will be awarded with an extra R&D budget of 700,000, the second with 500,000 and the third with 300, CEO, Northern Europe Extrinsic Motivation backs Intrinsic Motivation 1

13 Focus is Essential in Challenging Environments and Mid-Caps are Finding Ways It has been working the pool of talent with a mix of madness, conviction, survival instinct, and commitment to the project. - CEO, Asia

14 Some Mid-Caps Are Experiencing Growing Pains The promoter and children are very entrepreneurial. Below that at operating level CEO's [and] business leaders, we fall short. - CEO, Asia

15 It is more and more difficult to be an entrepreneur. Of course we can use the word entrepreneur but with two controls a day, it is impossible. It becomes a fight when you are bigger. We are listed, we have a lot of internal control. Entrepreneurship is not so natural any more. - CEO, Northern Europe Mid-caps Risk Losing Innovative Vitality as they Grow and Globalize

16 We created an innovation committee, chaired by a specialist brought in from the USA, whose job was to broaden our view on innovation. An example of this is the creation of a Strategic Planning and New Businesses area, with its own Director. - CEO, South America

17 Finally, Innovation is Not a Universal Imperative In this industry it s a bit difficult to be classical entrepreneur in really making revolutions. I would more call it innovation driven. So it is in our DNA to be innovation driven. - CEO, Northern Europe

18 6 Becoming the Carrier of the Future: a Culture of Innovation Summary `

19 ?? 6 Becoming the Carrier of the Future: a Culture of Innovation Leading Questions????

20 8 What s Next? Towards a Leadership profile and strategies for globalizing mid-caps: the Amrop view. Who are the mid-caps? 4 distinctive features emerge as key traits. Interestingly, these are geographically agnostic. Preety Kumar Member of the Executive Board, The Amrop Partnership Could globalizing mid-caps inhabit a vitality zone?

21 Implications and recommendations What pitfalls could these positive mid-cap characteristics contain? What counter-strategies are successful mid-caps finding? What leadership profiling and related initiatives do we recommend? 1 - Successful mid-caps take an ambitious, long-term view. Strength An ambitious, long-term view Pitfall Risk What s Next: Inspiring and visionary ambitions matched by managerial and cultural capacity.

22 Organization design must allow for upscaling whilst preserving the vital DNA of entrepreneurship and connectivity.

23 Preparing Boards for globalization must embrace not only current realities and resources, but ambitions. A context driven evaluation is an essential first step. Yet the results may confront embedded perceptions, lead to tough decisions regarding existing members and a need to build consensus.

24 2 - Freedom is a further feature of successful mid-caps. Strength Freedom Pitfall Risk What s Next: it s all about balance. Freedom balanced by self-governance, management infrastructure, clarity and connectivity.

25 Leveraging the value of independent Directors must transcend box ticking and regulatory compliance. Furthermore, should your independent Directors have a seat on the Boards of other organizations, do check their commitment to yours. Connectivity a distinctive feature of mid-caps balances freedom

26 More than competent practitioners in their domain, talent in globalizing mid-caps must be skilled and ego-free teachers and coaches.

27 3 - C-Suite Stewardship is a feature of successful mid-caps. Strength C-Suite Stewardship Pitfall Risk What s Next: Preserving the owner attitude in an expanding and virtualizing world.

28 4 - Many mid-caps are positioned to be innovation and entrepreneurship champions. Strength Innovation and Entrepreneurship Pitfall Risk What s Next: Preserving the innovative spirit whilst engineering focus and relevance.

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30 5 In summary

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32 Appendix

33 Methodology Sampling Interviewing process Analysis

34 Demographics

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36 Acknowledgements Interviewees from the following organizations have given formal permission for their organizations names to be published in the report. We sincerely thank them, and all interviewees whose organization names have been withheld to respect confidentiality, for their invaluable contribution to our study.

37 About the Authors About IMD About Amrop Contact IMD Contact Amrop Secretariat We thank Panteia B.V.

38 Amrop Offices ARGENTINA GERMANY AUSTRIA BELGIUM BRAZIL GREECE CANADA HUNGARY INDIA CHILE CHINA INDONESIA IRELAND COLOMBIA ITALY JAPAN COSTA RICA KOREA SOUTH CZECH REPUBLIC LATVIA DENMARK LITHUANIA ECUADOR MEXICO ESTONIA FINLAND FRANCE MOROCCO NETHERLANDS

39 NORWAY UKRAINE PANAMA UNITED STATES PERU PHILIPPINES POLAND VENEZUELA PORTUGAL ROMANIA RUSSIAN FEDERATION SAUDI ARABIA SERBIA SINGAPORE SLOVAKIA SLOVENIA SOUTH AFRICA SPAIN SWEDEN SWITZERLAND THAILAND TURKEY

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