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COMMUNITY UPDATE

Criticaleye's Community Updates are read each week by Members, registered users, and subscribers globally. Click on any of the topics below to see the corresponding newsletter. If you would like to comment further on any of these topics, write to us via info@criticaleye.com.






The levels of political and economic uncertainty have steadily increased over the course of 2018. This inevitably fosters a more cautious approach among business leaders, as they have to weigh up how to invest in the future, while also being aware that markets can quickly tighten up or close completely.  
 
According to a series of polls taken at various Criticaleye Retreats over the year, most of the priorities for executive and non-executive directors fall into the two buckets of talent and technology. At our CEO Retreat, the top three areas of focus were identified as retaining key talent and developing skills, innovation and digital disruption. 
 
At our Non-executive Director Retreat, the number one priority was once again retaining key talent and developing skills, followed by C-suite succession and then rebuilding the leadership team. By contrast, the core focus for executives and independent directors at our Asia Leadership Retreat in Singapore was innovation, followed by retaining key talent and developing skills, and greater cross-team collaboration 
 
Here, we look back on some of the articles we’ve written over the year that address these key areas: 

 
Leadership Capability 
 
When you have a team in place as a CEO, with loyal people whom you trust, it can be hard to make the decision to bring in new blood. However, it’s apparent that as new business models are emerging and markets change, there is a pressing need to evaluate the leadership team and decide whether it is fit for purpose over the short, medium and long-term.  
 
Shaun Chilton, CEO at Clinigen Group, has found that planning, with an eye to the future, is time well spent. “I was always very clear about what I wanted in terms of mix of skills and a structure. One of the things I've learned is the value of the time I put in to work out the structure needed to future-proof it, so not necessarily the structure I need there and then, but to try and balance that with what we'd need in two or three years' time. There's nothing worse than making changes and then making them all over again." 
 
During this planning period, methods of assessing the incumbent leadership team can include formal ones, like psychometric testing and bringing in external experts to review team dynamics, as well as more informal approaches, such as seeking feedback from colleagues, and the CEO observing behaviours and ways of working first-hand. 
 
Rob Walker, CEO of BIE Executive, emphasises the need to make your own assessment, and cautions against "knee-jerk" reactions: "You may have been given observations on the top team, by say the Chair, but you've got to make your own assessment – you're working with those people day-to-day," he says. 
 
So, what should you be looking for in the existing leadership team, or in potential new hires? Their ability to deliver the business strategy is key, and Rob believes that the input of a good HRD can be invaluable here. “You can take the business plan, and what you're meant to be delivering, and assess the roles and responsibilities of the management team against them. That's where the HRD can give a lot of guidance," he says. 
 
As a CEO, you also need to be aware of your own strengths and weaknesses. Amy Francis, Senior Relationship Manager at Criticaleye, says: “Be honest about any skills gaps you have, and make sure there are other members of the leadership team who can cover those bases.” She also advocates being clear about your focus: “Set out what areas you want to concentrate on – such as growth or an upcoming IPO – and then assign responsibility for the remaining areas to members of your senior team. Give yourself the time and space to deliver on your priorities.” 
 
 
The Innovation Agenda 
 
When innovation is done badly, it can be at best a distraction and at worst a strategic disaster. To avoid such pitfalls, business leaders advocate building the right structures and culture, while empowering local teams. 
 
Beth Butterwick, CEO of womenswear retailer Karen Millen, recognises the need to innovate, even though it requires financial investment at a time when the High Street is under pressure. What’s crucial is that innovation is well thought out and aligned with the business strategy. 
 
She explains: “A good business plan should include strategic innovation. However, a board will need to see that it has relevance to the plan, its direction, and is tied back to clearly-defined growth levers. Part of my role as a CEO is to ensure that any big, strategic innovations are measurable, with strong KPIs in place. The measures being: scale potential, investment consideration and a payback/profit timeline. 
 
“A frequent challenge is getting people throughout the organisation to understand that, when they come up with a new idea, an investment appraisal should be part of the due-diligence process.” 
 
However, Beth emphasises: “This shouldn’t prevent them from being innovative – it’s a safe way of putting some rigour around measuring whether the idea has credibility or not.”   
 
When it comes to multinational corporations, David Comeau, Criticaleye Board Mentor and past President of the Asia Pacific region for Mondelez International, believes that centralised innovation has its limits. He shares his experience of innovating around one of the “golden brands” at Mondelez: Oreo. Such brands traditionally had a core that couldn’t be touched and a periphery which could be innovated off.  
 
“We decided to let the Chinese innovate any way they wanted to on Oreo – which is our number-one brand globally. We took a chance. We said: ‘You guys know the market, come back with what you think works for the brand but also for the Chinese market.’ That was powerful.”
 
David admits that the innovation ideas the team in China came back with were “challenging internally”.  But the new approach paid off, with Oreo Thins becoming a “significant incremental product form” that was later rolled out to the US market and beyond. 
 
He reflects on this experience: “Brand owners, or centralised marketing teams, need to be careful not to put too many guard rails around what local innovation teams can do. Instead, you need to empower your team and let them innovate widely – you can always pull it back in later." 
 
 
Digital Disruption 
 
The impact of new technology on organisational performance remains at the top of the strategic and operational agenda for most Boards. Common questions include: “Where do I place my big bets?”; “How do I incorporate this tech into the business?”; “Do I have the skills and resource to use it correctly?”; and “Will I get a return on investment?” 
 
Dealing with these uncertainties can be difficult for business leaders. Matthew Lester, Criticaleye Board Mentor and Non-executive Director at Capita, Man Group and Barclays, comments: “With digital disruption, you have to invest at a time when you don’t know what the return will be – you can say it will probably be better than if you didn’t make the investment, but that’s about it. That’s a very different environment than in the past.” 
 
In his executive career, Matthew’s roles included being Group Financial Controller and Group Treasurer at Diageo and CFO at Royal Mail Group, where he helped to lead its IPO. He says: “When I did Group planning at Diageo, we spent six months, honing to the last million – on a £5 billion business – what the future was going to be in 18-months’ time. It is so different now – the mindset and how you bring investors along with you.  

“It requires a lot of trust in the management team and a willingness on behalf of investors to accept experimentation and failure.”
 
Matthew explains that for investors to have the necessary degree of faith and confidence in an organisation, a CFO must articulate a consistent narrative: “The key thing is demonstrating how you are going to fund the investment, saying: ‘Here’s the cashflow where it’s coming out, and it’s going back in here.’  
 
“At Royal Mail, we said: ‘It’s not just about more investment; we're taking costs out of here – and previously you’d have been able to take the saving to the bottom line – but you can’t have it now as it’s being reinvested over there, or else you won’t have any cash in three years’ time.’” 
 
 
By Marc Barber, Managing Editor, Criticaleye.
 
Criticaleye’s next Community Update will be a review of The Global Outlook for 2019