Effective Leadership & Strategy for Steering Through Turbulent Times

Nissan Seminar Yokohama, Japan

October 2009

DestinHaus LLC
Strategies for Success in a Multicultural World

Current State of the Global Economy

The Global Economic Crisis

In the Autumn of 2008 Credit markets stopped functioning normally Governments began nationalizing financial systems Governments began considering bailout of other troubled industries Major US banks disappeared or became bank holding companies Currency values, oil and other commodity prices lurched wildly Housing prices in Spain, UK, US and elsewhere dropped steeply

Lack of consumer confidence High unemployment Global economic contraction

Some of the Indicators (Chronological)

US Manufacturing output is expected to decline 12% this year Wall St. Jl., May 28, 2009 Corporate bankruptcies set to surge by 35% in 2009
Rate of corporate collapses will reach historic heights in 2009 following a 27% increase last year

Financial Times, June 4, 2009

The Recession Some US Statistics Wall St.Jl. July, 2009

7.2 million people have lost their jobs since the beginning of the recession. Unemployment rate is at 9.5% Job losses over the last six months greater than for any other half year period since World War II Downturn began in December 2007 Decline in GDP is deepest since 1957-58 recession. Americans have not seen so much of their wealth evaporate sine the Great Depression Home prices have fallen by $5.1 trillion, a 41% drop People have lost trillions of dollars in the stock market As households struggle to cope with their wealth reduction, they spend less Through first quarter, GDP was down 3.1% from peak it reached last year

LA Times, Sept 11, 2009

US poverty rate reaches 11-year high 46 million people without health insurance Unemployment at 8.9% Poverty rate at 13.2% Median household income fell 3.2% to $50,300

Now Some good News !!!

The Turnaround
Several indicators point towards a recovery

Business Week, Sept 28, 2009

Commerce Dept. said on Sept 15 that retail sales excluding automobiles increased by a better-than-expected 1.1% from July The cash-for-clunkers program helped inflate sales by 10.6% from the previous month Producer prices jumped 1.7% in August (but still 4.3% below their year-earlier level Consumer price index rose by 0.4% Year-over-year decline in CPI eased to -1.4% VS -1.9% in July

Fed Chief Ben Bernake called the recession very likely over

So, what was the fundamental cause for this mess?

Lack of Vision Lack of Strategy Lack of Ethics

Lack of proper Leadership

What can leaders do to steer their businesses through such turbulent times?

What can each one of us do?

Each one of us has a responsibility within our own sphere of influence

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Business Culture
A corporate culture is the sum of the unwritten norms, beliefs and values that define appropriate behavior Like human personalities, corporate cultures result from the interaction of temperament and experience Over time, their dictates slip from the consciousness into the realm of habit: Changing the culture is the most nebulous area of corporate management, by far the most challenging It is about changing the often unspoken values and beliefs that guide any organizations conduct Executive power cannot accomplish much here Subordinates voluntary cooperation becomes essential The difficulty of the task is such that even revolutionary leaders usually place cultural change last on their agendas However, no transformation is complete without it
Control your destiny or someone else will Noel Tichy & Stratford Sherman

Culture as it should be The way in which a group of people solves problems and reconciles dilemmas

Creating the right business culture Could transform a company Make the difference between success & failure Create significant increase in stakeholder value

The Wall Street Jl. October 13, 2008

Ford Finance Chiefs departure said to reveal tensions in auto makers management Financial crisis, shrinking prospects push Detroits big three to explore once-unthinkable options GM to close plants, restrict lending Honda to trim sport-utility output, add sedans Ford executive rejects talk of Mazda stake sale Nissan will cut jobs at Spain plant Toyota keeps idled workers busy, honing their skills

A Study in Corporate Culture!!!

Culture Spurs Innovation

(Source: Textron survey of 150 senior executives)
What is the most important driver of innovation for companies? Supportive Corporative Culture (53%) Top Management Support (21%) Clear Processes and Measurable Goals (13%) Creative Talent (5%)

Inspiring them to soar, The Wall St. Jl., Oct 1, 2007

Engage the workers hearts and minds Direct correlation between employee engagement and the productivity, profit and revenue growth Employees who contribute the most to corporate performance also tend to Trust management Be stimulated by their jobs Believe their work affects corporate performance See opportunities for career growth Take pride in the company Have co-workers who feel the same way Believe the company wants to help build their skills Like their bosses (Conference Board Study)

How to stay ahead of the curve

Build and protect the culture Stay focused on culture, people, and values; it is the area most likely to get compromised in this environment Eric Foss, Chairman & CEO of Pepsi Bottling Group If you dont invest in the future and dont plan for the future, there wont be one George Buckley, CEO of 3M Companies that nurture flexibility, awareness and resiliency are more likely to survive the crisis, and even to prosper
Leading through uncertainty Lowell Bryan & Diana Farrell, McKinsey & Co.

Food for Thought

Think about
The culture that exists in your business What have you done to create / change that culture?

Ask yourselves the following questions

Strategic Assessment of Your Business

Which issue is absorbing more of senior managements attention? Reengineering Core Processes Reengineering Core Strategies

Within the industry, do competitors view our company as more of a rule-taker than a rule-maker? Rule-taker Rule-maker

What are we better at, improving operational efficiency or creating fundamentally new businesses? Operational Efficiency Fundamentally New Businesses

What percentage of our advantage-building efforts focus on catching up with competitors versus building advantages new to the industry? Catching-up New

To what extent has our transformation agenda been set by competitors actions versus being set by our own unique vision of the future? Driven by Competitors Driven by Our Vision

As a senior manager, am I working mostly on the present or am I an architect designing the future? Present Future

Leadership Self-Assessment

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Communicate
Clear communication Builds alignment Builds confidence Lets people know that they matter Builds trust in leadership Motivates the troops
Tell me & I will forget Remind me & I might remember Convince me & I will understand

Even the best organizational ideas are worth nothing if they are not communicated and supported clearly, with a thoroughly concrete explanation of why and how -- Carlos Ghosn

To lead, create a shared vision

Kouzes & Posner, Harvard Business Review, Jan 2009

Being forward looking, envisioning exciting possibilities and enlisting others in a shared view of the future This is the attribute that most distinguishes leaders from nonleaders What leaders struggle with the most is communicating an image of the future that draws others in that speaks to what others see and feel Leaders need to listen closely to others Appreciate their hopes Attend to their needs

Engaging Others
Engagement is not just about conversation Small voices can silence a room if used at the right time

Motivating People The Power of Alignment

The work has to be understood as important It has to lead to a well-understood, shared goal Values have to guide all plans and actions The Spirit of the Squirrel

The Way of the Beaver Team members control achieving their goal Respect your people; listen to them

The Gift of the Goose 2 A little encouragement goes a long way e = mc Enthusiasm = mission times cash and congratulations
Gung Ho! Turn on the people in any organization Ken Blanchard & Sheldon Bowles

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Culture Spurs Innovation

(Source: Textron survey of 150 senior executives)
What is the most important driver of innovation for companies? Supportive Corporative Culture (53%) Top Management Support (21%) Clear Processes and Measurable Goals (13%) Creative Talent (5%)

Innovation
McKinsey Study
Innovation: Whats your score? Berwig, Marston, Pukkinen, Stein

Business model innovation tends to generate bigger gains than product or process innovation Harder for competitors to copy Strong innovators do consistently well as regards stockmarket performance Top innovators continued to outperform their peers even during the tough times Agility & capacity to innovate made it easier to cope with challenges Many important products have been introduced during times of crisis

Innovation and Recessions

Digital computers were born during the Great Depression The Ethernet during the 1970s oil crisis The IBM personal computer in the early 1980s recession The World Wide Web emerged from the recession of the early 1990s During the last recession (in the early 2000s), innovative companies began staking out new leadership positions via the Internet Apple changed the business model in the music industry when it launched its popular iPod music player synched to its popular iTunes music store Google became an online industry leader by linking its search engine to advertising

Innovation
To become a world-class center of innovation, a society/organization / business must have three basic elements Drive A culture that supports change and hungers for it Human Capital The personal abilities that make world-class innovation possible A capacity for mobilization a societys ability to pursue ambitious new goals

DestinHaus Workshop: Creating an Innovation Culture

Thinking Out-Of-The-Box
Coca Cola Tata Nano The Computer Apple

Problem or Opportunity?

Problem or Opportunity?

Infrastructure!!!

Growth Values at GE
Need to embed growth into the DNA of a company Leadership traits necessary for innovating, creating new businesses and expanding into new markets External focus Clear thinking Communicates clearly and concisely Imagination Takes risks; displays courage and tenacity Inclusiveness Expertise Has domain knowledge; continuously develops self; loves learning

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Critical Success Factors

Constantly step back and think about organizational effectiveness

View this as your company. Every action should be justified by asking yourself Would I do this if I owned the company Encourage risk taking It is okay to make mistakes The most important things are What did you learn from the experience? What do you do to prevent such a mistake from happening again? Learn from the past but do not focus too much on the past Use the past to make the future a brighter one People who focus too much on the past will get confined to the history heap Cowboy Good judgment comes from experience; Peopleproverb: who ignore the past will tend to repeat mistakes and a lot of that comes from bad judgment

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Conflict Resolution: What is It?

Methods for reducing or eliminating conflicts Conflicts between nations, within governments, between companies and governments, between and within companies, between individuals Usually involves tools such as negotiation, mediation, and diplomacy Always involves communication

The United Nations

The Six Party Talks

EU-3 Talks with Iran (FRG, UK, France)

World Trade Organization

Japanese Supreme Court

External Corporate Disputes

International Trade Intellectual Property Labor Cases Tax Cases General Commercial (joint ventures, M&A) Product Liability Anti-trust cases (anti-competitive issues)

Internal Corporate Issues

Personnel Management Productivity Sales Subcontractors Delivery Customer Service Overseas affiliate issues

Different Cultural Approaches

Individualistic Culture More contentious, shorter term approach; Want answers now and clearly outlined; Less likely to negotiate, and if they do, prefer to do so on their own terms; Can walk out of talks, especially if must answer to constituents Collectivistic Culture More consensual, longer term approach; Want to develop a longterm positive relationship; More likely to negotiate, and when they do, more likely to cooperate; More likely to concede or engage in problem solving

A Spectrum of Cultural Values That May Affect Negotiation

Informality: Informality is the norm, almost everyone uses first names. Mobility: One often leaves family and friends for a new job and so must make home, new friends quickly. Direct communication: each person is expected to have an opinion and express it freely. Saying what is on your mind is important and expected. Competition: Competition, ambition encourage superior performance. Future Orientation: Emphasis is less on the past and more on the present and future. Focus is on youth. Reputation: People are measured by what they do. Formality: Permission is needed to use first names; some never use them. Stability: A great number of the worlds people have never left home. Friends are those they have known all their lives. Indirect communication: Deference is given to those in power or authority; directness and open criticism are considered rude. Harmony: Harmony is valued and personal ambition frowned upon. Reverence for past: Reverence for the past and ancestors drives behavior. Age is respected. Reputation: People are measured by family and origin.

Cultural Values Affecting Negotiation in Business

Individual vs. the group values: Do we value individual vs. teamwork accomplishments, who gets the credit, the reward? Power distance: Manifested in a hierarchy or equality of role of the individual (formal vs. informal values) High vs. low context: Are we making direct statements or hints direct statements, using code words or the naked truth? (direct vs. indirect styles of speech) Monochromic vs. Polychromic Thinking: Do we do one thing at a time or multi-task? Tolerance for Ambiguity: Must we know the end goal before we start, or is it alright not to know?

Principled Negotiation Technique

Separate the people from the problem Negotiate from interests, not positions Work together to develop new options Make decisions using objective criteria you have all agreed upon

(From Roger Fisher and Bill Ury, Getting to Yes, Harvard Negotiation Project)

A Strategy for Solving Conflicts

Build Relationships, answers Who am I dealing with? Be Non-Reactive, answers, What does each of us really want? Do Something Disarming, and unexpected, answers What are our real interests Problem Solve by Participation, answers: What are we willing to do?

DestinHaus Stepping Stones to Conflict Resolution

Building KnowledgeAssessing managements needs and their problems they want resolved; in the process we may find other ways to improve your business Building SkillsTraining managers to cope with tensions and conflict through active listening, problem solving, developing options, writing agreements, and action Building Positive AttitudesUsing non judgmental approaches for those involved in personal or business conflicts Building ConfidenceIn your own capabilities, and in the potential of your employees to manage conflict

Ron Bees Conflict Resolution Motto

There is no limit to what you can accomplish if you are willing not to take credit for it.

Effective Leadership & Strategy for Steering Through Turbulent Times Creating the right Culture Communication Innovation Risk-taking Conflict Resolution Leading & Managing Change

Stages in the Evolution of a Business

S Curves
Organisations and teams go through natural cycles of growth from upscale to maturity Different qualities and capabilities are effective at different stages of team and organisational growth
winter spring summer autumn

The result of timely transformation

winter spring summer autumn

The result of letting things go

The Automotive Industry

1955: Four out of every five cars in the world were made in the US, half of them by GM Ford was half the size of GM VW was the largest non-US car maker; just a little bigger than Opel, GMs German subsidiary Toyota made 23,000 cars, all in Japan (GM made 4 million cars in the US)

Complacency

Toyota
Expects to sell 10.4 million cars in 2009, double what it sold in 2000 During this decade
GMs sales volume has grown at 1.5%/year Toyotas sales have grown at 7%/year

The American obsession with sales volume Market Cap, $ bil (2006 Data, Approximate)
Honda Daimler Chrysler Nissan Volkswagen Volvo Ford Fiat GM Tata Motors Toyota 60 58 52 29 19 14 13 12 8 207

Which is Toyotas biggest market: US or Japan?

Automotive Industry
The Next Frontier???

New World Order in Automobiles

Tata Geely Holding Group Co. Beijing Automotive Holding Company

DestinHaus Workshop Jump the S-Curve before getting pushed - How businesses can control their destiny by
reinventing themselves

Putting it all together to steer a business

History shows there are great opportunities during recessions
More companies achieve dramatic gains during recessions than during expansions

Take your business from your current position in the downturn to a stronger leadership position when the economy recovers by
Cutting the right costs in the right way while sustaining margins and brand Targeting the right customers, maximizing revenue while building your brand Preparing for bold moves, such as game-changing acquisitions Differentiating your firm as one of this recessions breakaway outperformers

As a leader you need to:

Manage current resources while identifying new opportunities Lead change amid new challenges

Difference between merely surviving the downturn and emerging from it stronger

How to stay ahead of the curve

Forecasting
Tell it like it is; Do not sugar-coat it Understand and adapt to drastic shifts in market and consumer behavior Consumers are likely to display substantially altered preferences and tendencies as a result of their experiences in a recession

Do not be afraid to take action and change things, even if a business is doing well Do not be afraid to take risks but manage risks carefully Need courage to make hard decisions quickly Need appropriate mechanisms and governance models to confront multiple scenarios Be receptive to different points of view Do not create a blame culture Communicate, Communicate, Communicate
The only way to address uncertainty is to communicate and communicate; and when you think you have just about got to everybody, then communicate some more Terry Lundgren, CEO of Macys

Preparing for the Recovery

Financial Times, Sept 22, 2009

Prepare for a recovery, but do not assume it is here yet. Things could still get worse; so plan for that too Maintain a close control on costs at the same time as preparing for return of growth Take a look outside your company and see what has changed in your industry and the world generally
Has the behavior of your customers changed? Do you need to change your strategy? Do not rely on old assumptions

Value your workers

Reward those who helped keep the group going and get ready to fight to hold on to your best employees

Continue to keep a close eye on finances Begin to loosen some of the restraints put in place during the crisis
Give more freedom to employees

Avoid complacency Communicate with employees honestly

In Summary

Learning Company
A learning organization involves not only the development of new capacities, but also fundamental shifts of mind, individually and collectively
Peter Senge, Fifth Discipline

Do not be afraid to dream the dream Be willing to learn from others Including subordinates, suppliers, customers, etc Innovative, open to new ideas Willing to learn from the past but not stuck in the past Tolerant of different cultures We are viewed as best-in-class; Outsiders want to learn from us

Blazing the Trail, Setting the Standard

Make the Impossible Possible