pqr ctpartners may 2013

PQRPERFORMANCE QUALITY RESULTS

A CTPartners Publication

EDITIONONE 2013

CTPartners

American EagleOutfitters CEO

Robert Hanson

PILLARS

A TALK WITH AMERICAN EAGLE OUTFITTERS’

OF

SUCCESS

TECH-EMPOWEREDLEADERSHIP

4 GLOBAL EXECS ONCAREER MOMENTUM

ROBERT HANSONROBERT HANSON

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EDITORIAL

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04 Cover Profile: Robert HansonThe CEO of American Eagle Outfitters outlines key strategic priorities forthe company—and his core focus as a leader + Sherry Harris on talent,Joe Megibow on multichannel e-commerce

EDITIONONE 2013

ON THE COVER (and above), Robert Hanson photographed by Peter Vidor

CTPartners PQR | Page 03

14 Management How companies acrossall industries are getting ahead in the cloud +Sound Bites: The CIO’s journey into the cloudwith Western Union’s David Thompson, SAIC’sCharles Beard, Jr.

10 Momentum Politics, accounts receivable,and other sources of career momentum

20 Management Banks grapple with theexpanding digital mandate + By The Numbers:Today’s digitally demanding consumer

26 Five Google’s Daniel Alegre on the fiveguiding principles of his career + Sound Bites:Daniel Alegre on seizing career opportunities,integrity

28 To Lead How cutting-edge technologyempowers leaders and defines top-tier organizations

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CTPartners PQR | Page 05 Photography: Peter Vidor

PROFILE ROBERT HANSON, SHERRY HARRIS & JOE MEGIBOW

n today’s intensely competitive global retail

sector, the race is on to maximize the power

of the brand and the customer experience

across regions and sales channels alike. PQR

spoke with American Eagle Outfitters CEO Robert

Hanson and two key executives about their strategic

vision, business opportunities and challenges, and

key talent priorities.

I>>>

Robert Hanson, CEO, American Eagle Outfitters

HOW A TOP TALENT TEAM IS

LEVERAGING AMERICAN EAGLE

OUTFITTERS’ BRAND—

AND GLOBAL POTENTIAL

THE

PILLARSOF

SUCCESS

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PROFILE

PQR You joined American Eagle Outfitters just aboutone year ago. What attracted you to make the move?

Robert Hanson What most surprised and ex-cited me was the level of resonance that existedwithin the marketplace for this brand. That cre-ates tremendous potential. When I consideredthat, along with the caliber of the talent here andthe values of the people who work at this com-pany, it was a powerful combination.

From my perspective, there were some prettyclear, near-term opportunities to pursue by morethoroughly leveraging the brand in a variety ofways, as well as a long-term growth story that Ibelieved I could help to create with this team.

PQR You established some exciting priorities earlyon. Would you share those with us?

Robert Hanson In terms of the shorter-termpriorities, really there were five. First, we neededto maintain a competitive top line in a veryvolatile and demanding environment. The secondpriority was to ensure that we could delivergreater margin flow-through with more robust in-ventory management. Third, was to rebalancedistribution across the brand in order to be moreprofitable. Accelerating the growth of our e-com-merce business was the fourth priority (see side-bar, “Joe Megibow on e-Commerce”). And thefifth was to get more leverage on the corporate in-frastructure.

PQR That was an aggressive set of short-term goals.What progress do you see one year into this effort?

Robert Hanson I’m very proud of the team intheir having demonstrated their ability to deliveragainst all five of those priorities during 2012. It’snot that we don’t have a lot more to do—and thatthere aren’t plenty of opportunities ahead for usto make much more progress. There are chal-lenges and opportunities ahead. But this team hastruly done great work.

American Eagle Outfitters experienced 11%revenue growth and 41% EBIT growth in 2012.

Even more importantly, we have effectively im-plemented against those five near-term prioritieswhile at the same time developing a long-termstrategic plan that has received sound endorse-ments from our board and investors.

PQR What is that long-term plan?

Robert Hanson I like to keep a strategic planfocused, which helps the management team en-sure that it remains relevant as the corporationmoves forward. In our case, the strategic plan hasfour pillars. Together, they will enable us to growprofitably and create sustainable enterprise value.

The first pillar is “fortify,” by which I mean,fortify our core assets, our brand, our processes,our core capabilities. This will give us thestrongest foundation to compete in North Amer-ica and, increasingly, around the world. There aremany important elements for us to focus on here.For example, do we have the right assortment ar-chitecture? Are we in the right locations? Have wedeveloped and implemented the best inventorymanagement systems?

The second pillar is to grow in North Amer-ica. When I got here, many investors saw NorthAmerica as a mature business for AmericanEagle. But I don’t like the term “mature business.”I think it leads to, for lack of a better term, lazybehavior. My team and I have taken a long-termlook at North America and we have concludedthat we have great sources of profitable revenuegrowth in this region, through a combination ofopening new stores, accelerating the growth ofour e-commerce business in the U.S. and Canada,and moving into Mexico, where we just openedour first store.

Pillar three is about transformation of this re-tailer to its true potential as a viable, profitable,investment-grade competitor on a global stage.Success here depends upon two areas of prof-itable expansion: e-commerce and non-U.S.storefronts. We currently have stores in 14 coun-tries and e-commerce business in a good manymore. Yet we’ve just begun to scratch the surface.We hope to open storefronts in eight to 10 coun-


PROFILE

tries per year during the course of the next fiveyears. We’ll tailor that strategy to whatever is bestsuited for the country itself, which means that theexpansion might take place through direct own-ership, joint ventures, or franchise licenses.

PQR And the other pillar?

Robert Hanson The fourth pillar is all aboutmaking certain that we have a strong balancesheet and are demonstrating our investmentgrade to shareholders by providinghigh returns. Among other metrics, weaim to consistently deliver a 14% to17% return on invested capital. Thisteam is committed to investing behindour growth and returning excessivefunds to shareholders through compet-itive dividends and, when appropriate,stock repurchases.

PQR Robert, you’ve set the bar very high,both with your short-term priorities andAmerican Eagle’s longer-term strategicplan. How important is procuring top talentand assembling the right team in order tosucceed on these fronts?

Robert Hanson Let me answer thatquestion by stepping back a moment.From my own career, as well as my ob-servations of business leaders and myexperience of being coached and advised by peo-ple I admire, my view is that a great CEO focuseson five to six things. These usually include strat-egy, performance management, the brand orproduct and customer experience, company cul-ture, talent, and stakeholder engagement—bywhich I mean the board of directors, investors,various partners, and the company’s employees.These are my major focus points.

I believe that talent is the most important partof all this (see sidebar, “Sherry Harris on Talent”).Talent is the commonality that underlies all ofthese issues. Great talent drives great performance.Talent creates the product or service that hopefully

is going to delight the customer and keep the cus-tomer coming to you. It’s what helps build yourbrand identity. I could go on and on.

Right now, we’re in the process of rounding outthe teams that will be responsible for geographicand channel management—both key elements inour strategic plan—and we’re doing this througha combination of the promotion of high-qualityperformers and the recruitment of external talent,as appropriate.

I probably spend 25% of my time on talentmanagement-related issues and thisinvestment is well worth it. We’llnever succeed without the right teamin place.

PQR It sounds as though it’s beenquite a year. Looking back on it, howwould you assess this experience ofleading American Eagle through theseimportant changes?

Robert Hanson I am excited byand appreciative of the performanceof our team in 2012. They exceededall of our near-term priorities and fi-nancial metrics. We have a plan inplace that we believe positions usfor a transformational period ofgrowth and sustained top-tiershareholder return. We have a ter-rific brand, great customer-service

experience, we are executing well, and we arehungry as a team.

What can I say, except this: It’s truly a pleasureto be able to coach and mentor a great group ofpeople like this, including our tenured talent andpeople who have joined us from elsewhere, bring-ing their skills to the table. This is a growth com-pany from all aspects, people and business. Thefuture will bring untold possibilities and whatwe’re fostering here is a values-based, high per-formance, collaborative teamwork culture thatwill drive our business success. In turn, our finan-cial successes give us the reward opportunities tocreate a best-in-class place to work.

“In our case, thestrategic plan

has four pillars.Together, they

will enable us togrow profitably

and create sustainable

enterprise value.”

>>>

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PROFILE

PQR Joe, you joined American Eagle during thepast year as its Senior Vice President/GeneralManager of Omni-Channel eCommerce. Would youdefine this role for us and give us a little contextwithin the retail sector?

Joe Megibow Retail has been around a longtime. Arguably, even e-commerce has a certainmaturity about it, although it’s a relatively recentdevelopment when compared to retail in general.But they’ve kind of existed as separate buckets.A lot of the brick-and-mortar retailers have set

up online arms, which may havebecome very large and reputable,but they’ve developed largely asseparate operations. You haveboth Walmart and walmart.com.What has happened recently,though, especially with the adventof mobile devices, is that con-sumers are effectively walkinginto stores with their computers.

So there’s a convergence thathas occurred in consumers’

minds. We’ve seen this before, in more limitedways. Consumers want to know, if I boughtsomething online, why can’t I return it to thestore? Why is there a different assortment in thestore and online? At the core of the retail expe-rience, there’s a single customer: That customerhas a single view, but there’s been a lot of chan-nel conflict. And from the retailer’s perspective,there’s been confusion. Is the sale that I makeonline stealing from a store’s P&L? If we’reworking so hard online to drive sales, what hap-pens when the sale gets credited to the store?

The challenge, and the opportunity, forsomeone in my position is to figure out how wecan use technology to seamlessly drive a satis-fying experience for our customer. How do weremove these channel conflicts so that the realworld and the digital world work together togive the customer the best experience?

PQR What has the company done to help empoweryou and your team to achieve these objectives?

Joe Megibow Robert Hanson is very clearabout this being a core element in our strategyto transform American Eagle. That’s why myposition was created and that’s why I report di-rectly to the CEO. It is a very forward-lookingapproach. We don’t define this as online versusbrick-and-mortar. I am focused on everything.Loyalty programs. Outreach. Customer engage-ment. Everything that I do is about helping ourcustomers, making sure that they like ourbrand, they like our product, they can find outabout the right deal for them.

It’s a holistic approach. After all, there maybe many channels, but at the core, we’re talkingabout the AEO experience for each one of ourcustomers.

PQR There’s so much going on right now relatingto new technologies, new media developments.How do you decide which opportunities are worthpursuing first?

Joe Megibow There’s a temptation in compa-nies to chase what I call “shiny objects.” What’sthe next big new thing? What’s coming up on so-cial media, Facebook, mobile payment possibili-ties? These things just keep coming along. Andyou can quickly end up with a disjointed strategyor a large collection of “things” without steppingback and asking, how do I build a seamless expe-rience for the customer? Am I building that experience or just moving in a lot of fragmenteddirections? The real trick is simplification.

From my perspective, the key question is: Arewe working to do everything we can to make allthe touch points for the AEO customer as goodas possible? And, have we built a platform thatwe will be able to innovate on? It’s easy to havefeatures. It’s hard to achieve that objective. Butthat’s what matters.

JOE MEGIBOW ON E-COMMERCE

“There’s a temptation in companies to

chase what I call‘shiny objects.’What’s the nextbig new thing?”


PROFILE

PQR Sherry, you were one of American EagleOutfitters’ key recent hires as its Chief Talent andCulture Officer. How have evolving marketplacedemands for retailers impacted talent needs?

Sherry Harris Everyone is on a globalstage. The retention of top talent and the ac-quisition of critical talent on a global basisare so closely linked to a retailer’s strategicgoals and performance that these issues can-not be divorced from other aspects of orga-nizational success. The health of your P&Ldepends upon the quality of your talent andhow well they perform.

Here at AEO, when we talk about ourstrategy and long-term vision, we’re alwaysasking: Do we have the right talent in placeto drive our strategy over the next few years?What does this mean in terms of skills, expe-riences, core competencies? And how well isour talent executing on these strategies?

PQR Would you talk to us about the company’stalent plan and priorities?

Sherry Harris Robert Hanson hasbrought tremendous clarity about the strate-gies surrounding the future of our brand. Weall recognize that the organization is highlyreliant on our ability to identify and align keytalent that can understand and execute thestrategy. We believe that the ability to ac-complish this depends upon creating ahigher level of engagement than the com-pany might have enjoyed in the past. Inorder to recruit and retain great talent, it isincumbent on us to create a workplace thatis worthy of it. Put another way, you can’tchange the marketplace if you aren’t willingand able to change the workplace.

PQR What does that mean in terms of the corpo-rate culture and values?

Sherry Harris One important distinc-tion—and it’s part of the reason why I joinedthe company—is that Robert Hanson has awinning strategy, and it’s not just aboutdoing better. It’s about doing something thatis meaningful and different.

The top performerswant to work for awinning team. That’snot a news flash. Buttop talent also wantsto contribute to some-thing that is biggerthan what they aloneare responsible for.They want to be chal-lenged by meaningfulwork and meaningfulbusiness problems.

Every organizationhas a culture. If you don’t consciously designit or don’t work at clearly conveying it, thenyou may not get what you want. Who do wewant to be? What do we want to be knownfor? For any organization, retailer or not,it’s important to nurture connections andcommunity, spirit and values, and all thosethings that sometimes feel like they’refluffy or intangible—you’ve got to work tomake them visible.

I like to tell people, a company’s culturehas to be designed but it cannot be manufac-tured. And it must be nurtured by everyonefrom the CEO on down. This is an importantelement of the transformation that’s takingplace here at American Eagle Outfitters. I’mproud to be part of it.

SHERRY HARRIS ON TALENT

“In order to

recruit and retain

great talent, it

is incumbent on

us to create a

workplace that is

worthy of it.”

■

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C A R E E R I N S I G H T S F R O M F O U R T O P G L O B A L E X E C U T I V E S

MOMENTUM

Photography: © Mölnlycke Health Care

Maarten van Beek, Executive Vice President for Human Resources, Mölnlycke Health Care, in Gothenburg, Sweden

“I’m working in one of the fastest growing healthcare companies. Our people and culture are the main reason behind thissuccess. Our people develop, manufacture, and sell the leading products and services in our industry. Our whole companyis focused on growth and innovation. As an executive, I understand that if we maintain our momentum, and continue to ex-pand at this pace, our people must grow. Our organizational structures must adapt and our capabilities must grow. Thesepriorities are lined up within my role and responsibilities, and that is very exciting.

I studied psychology and human resources at two universities in the Netherlands and developed a strong theoreticalbackground. I studied at Cornell University, where I learned how to ‘commercialize’ that theoretical knowledge into a practi-cal perspective that could bring value to the world of business.

I’ve had a fascinating career that has taken me to all the continents except, at least so far, Australia. While previouslyworking in the consumer goods industry, I held managerial roles while I was based in Brazil and Singapore. These experi-ences taught me a great deal. When you work in different cultures, you learn to be humble. You can’t assume you have allthe answers. You need to be open to asking questions and learning from the people you are working with. I still keep thatin mind. After all, when you are in a fast-growing company and you are focusing on developing the people and the organi-zation, you must also foster the culture that has brought the company to the place where it is today.”

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Javier Rodriguez, President, DaVita HealthCare Partners Inc., in Denver

“I have been with DaVita since 1998, through the company turnaround and the time since then, and I havelearned many career lessons. The first is that, too often, people want to plan out their job moves and careerpath. Yet my career path did not follow any normal standard. Instead, when the organization had trouble, I asked, ‘Where can I add the most value?’ People said, ‘Accounts receivable is not a good career move.’ I said, ‘They need me there.’ Then I went to payor contracting, and people said the same thing. While bothof these areas are critical to the overall business, they were an unexpected turn. But the senior teamnoticed. At the end of the day, you start to think about the enterprise more broadly, as opposed to just your career, and it ends up being good for your career.

Second, don’t fear risk. I speak to many young MBAs and they often ask for career advice. I say, ‘All ofyou are very smart, analytical, and want upward mobility, but you don’t want the risk associated with that.You want it to be smooth and predictable. That is the surest way to make sure your career is kind of vanilla.’You don’t have to seek risk, but to create a differentiating opportunity, it does take risk.

During DaVita’s turnaround, when most companies would have focused on economics, we focused onpeople and capabilities, and figured the economics would follow. It worked. We invest in the individual.We want people to get that extra juice out of life. Part of that is to avoid making a big distinction aboutwhere work ends and play starts. They should become blurry lines.”

Photography: Courtesy of DaVita Inc.

>>>

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MOMENTUM

Photography: Antonio Carlos Carreiro

Michel Levy, General Manager, Microsoft Brazil, in São Paulo

“I started my career as an entrepre-neur. After graduate school at Stan-ford, I founded the first computerreseller store in Brazil, and I hadthat business for approximately 15years. This was a great journey,and extremely challenging, be-cause I’d had no prior experience. I learned the hard way, in the highlyunfavorable economic environmentof the 1980s, with high inflation.But it was an absolutely fantasticlearning experience. I found men-tors along the journey who had theexperience to guide me.

I learned many lessons aboutleadership. It is difficult for a small company to hire and retain people. I found that you have to make employees part ofthe challenge, make them part of the excitement of building something, and make them part of the rewards. In the corpo-rate world, you have many other tools that help you to develop people. At Microsoft, the amount of tools and programs wehave available for developing people is amazing. But I’ve learned that what motivates people most, especially greattalents, are new challenges. Offer your employees a challenge that is a little bit of a stretch and they will want thatopportunity to contribute at a higher level.

During my career, I’ve also found that the ability to transform, learn, and relearn is key. And you must prepare yourpeople for the unknown. You’ll find this in every book, but being able to lead through change and help your people to copewith change is key to success. This is especially true in our business, with rapidly changing technologies and businessmodels. The challenges differ by the hour.”

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John Engler, President of the Business Roundtable, in Washington, D.C.

“Earlier in my career, I was privileged to serve as Governor of Michigan. In anycareer, it is important to continue to learn and prepare, not just for the role youhave, but for future roles. That was true many years ago when I was a freshmanin the Michigan House of Representatives, on the furthest back bench of the minor-ity, and it was true in my third term as Governor. Every day there was somethingnew to experience and learn.

At the Business Roundtable, I work with the CEOs of the world’s top companies.These men and women are incredible leaders in their specific fields, and collectively,they care deeply about this country and want the United States to be successful. Our nation has to be focused on a growth strategy. We cannot look forward to a futurewhere a 2% annual increase in GDP is considered the new average. That is a per-formance that does not bring out the best of America.

In today’s complex society, political and corporate leaders need to understand thatit is not important or even possible to know everything.The skill lies in building networks and developing thekind of loyalty and trust that allows you to talk to people,gain insights, and avail yourself of the knowledge andexpertise that is out there, yet still function in an inde-pendent fashion to put the information together andmake your own judgment. Also, I think it is important tobe clear-eyed in terms of your purpose and direction.What is the focus? Where are we going? You must beable to articulate that in order to bring people onboard tomake the journey together. That is the art of leadership.” ■

| CTPartners PQR Illustration: © istockphoto.com/retrorocket

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MANAGEMENT

CLOUDCloud Computing Redefines Strategic Management

AHEADIN THE

t’s practically a cliché to talk about management or technological

trends that offer the potential to transform the global marketplace,

along with the way we live and work. True transformation is rare,

however, with examples such as the Internet and the Industrial

Revolution. More often than not, even the most exciting new

developments end up prompting incremental changes, relatively

small steps forward, when viewed from history’s larger perspective.

Yet for organizations and management teams in industries and regions

around the globe, cloud computing seems poised to be a rare exception: a

pathbreaking development that holds the potential to change nearly every

aspect of a company’s strategic business model, including the ways that it

conceives and delivers products or services to the market, interacts with its

customers, manages its operations and IT infrastructure, controls costs and

achieves efficiencies, and above all, maintains its competitive edge. >>>

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MANAGEMENT

During this era of rapid-fire change, an or-ganization’s ability to fully realize cloud com-puting’s transformative potential willdepend upon successfully accessing a rarebreed of executive. A company’s targetprofile will include relevant and provenexpertise, what might best be described as“innovation DNA,” and exceptional skillsin communicating and strategic partner-ing across a variety of functional organiza-tions and business units within an enterprisecompany.

We are still at the early stages of this bravenew world, but cutting-edge corporations arealready making bold moves into the cloud,whether as users, providers, or some combina-tion of both. They are developing sophisticatedtalent-management strategies to fully supportthese endeavors, but much is still evolving. Inorder to assess the management opportunitiesas well as the challenges presented by cloudcomputing, PQR reached out to a number ofleading global executives and business ex-perts. Their insights were revealing.

Moving into the CloudTo understand the current state of the cloudcomputing market—as well as organizations’readiness to embrace this new IT consump-tion model—PQR spoke with Saar Gillai,Senior Vice President and General Manager,Converged Cloud, at Hewlett-Packard Com-pany. In this role, he and his team interactcontinuously with CIOs from a broad rangeof industries and regions across the globe.

“I’m meeting with major CIOs perhapsevery day, talking to them about their strate-gic objectives, what is working better or lesswell for them right now, and trying to helpthem understand what cloud computing nowmakes possible,” he explains.

“One of my objectives is to help changemindsets, because cloud computing reallydoes offer a different lens with which to view

and understand what is possible.” The po-tential impact upon the broad spectrum ofmanagement strategies may be profound.After all, as Mr. Gillai notes, “Things thatpreviously were the most important in termsof technology and its potential now may bemuch less important. But people can onlyappreciate that if they learn how to think dif-ferently about technology—and it’s one ofour goals here at HP to enable this process.”

One subtle but significant insight that Mr.Gillai offers is that large organizations “con-ceptually get it” when it comes to recognizingthat cloud computing offers the promise ofspeed, agility, cost savings, and other effi-ciencies. “But in terms of concrete details,understanding the way that this concepttranslates into a range of possible cloud com-puting solutions, which can be fine-tuned tofit each large organization and its own par-ticular needs and vision, in terms of all this,corporate leaders are still gaining insights.”

In today’s environment, CEOs and boardsof directors frequently encourage CIOs tomake moves into the cloud. But as with anyrapidly developing, disruptive technology,it’s hard to figure out exactly how best tostart. This can lead to confusion, false starts,and plenty of missed opportunities.

“When we think about cloud computing,the image we like to use is of a journey.Everyone will move to the cloud, over time,”Mr. Gillai emphasizes. “Some changes willhappen soon, others will develop more grad-ually.” Concerns about security, existingtechnology investments, and other matterswill be addressed throughout the journey.One of the ways that HP is trying to supportthe process is by offering different types oftraining and certifications through the HPExpertOne program for customers, includ-ing courses to help IT employees, as well asexecutives, develop a cloud-savvy mindset.

There are a number of different models

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MANAGEMENT

for cloud computing: private clouds man-aged by corporations themselves, or publicclouds, managed by a service provider for anumber of clients, or some combination ofboth models. HP’s Converged Cloud com-bines the cloud models to deliver hybridclouds, which help enterprises leverage bothprivate and public clouds to their advantage.While some startup companies operate en-tirely in the cloud from their earliest daysand may leverage one cloud model, largerorganizations often will have thousands ofapplications and perhaps millions of dollarsinvested in their technology infrastructureand need flexible hybrid models. HP Con-verged Cloud extends to both small andlarge enterprises.

“So it’s only realistic,” Mr. Gillai con-cludes, “to assume that these organizationswill combine some traditional operationsusing technology they already have inplace with sourcing from a public cloudand some internally managed operationsin a private cloud. The challenge is to makesure that there’s a commonality through-out the organization’s cloud computingstrategies, so that you don’t end up with asiloed approach to the cloud which willcreate new inefficiencies.”

Pursuing the PossibilitiesGiven the pace and magnitude of cloud-dri-ven change, it can be difficult to assess wherecloud computing is heading, both for serviceproviders and the exponentially increasingnumber of organizations they serve acrossthe globe. PQR turned to Kerry Bailey, Sen-ior Vice President of Corporate Developmentfor Verizon. He previously served as Presi-dent and CEO of Terremark, Verizon’s cloudservices business and a recognized leader inthe infrastructure-as-a-service space.

It’s Mr. Bailey’s belief that, ultimately, thecloud computing market will be dominated

by a handful of global platform providers.“When the IT market finally shakes out to aplatform-based delivery model, there may beonly six or seven providers able to operate ata level of scale and efficiency, and withenough comprehensive services to be able tomigrate large applications from the Fortune

500 and other major organizations to thecloud. After all, the cloud itself is truly allabout economics and that requires scale andefficiencies.”

Verizon’s own experience offers an illumi-nating case study, since the company is verylarge and has utilized its own cloud to runmany of its applications. “That brings scale,”Mr. Bailey comments, adding, “as we bringmore internal workloads and external cus-tomers over to our cloud, we can keep scal-ing these systems and increasing theeconomics. Just think about the scale andeconomics that we can offer customers byrunning a company the size of Verizon onour cloud computing platform.”

Part of what can make cloud computingso confusing right now is that, as Mr. Baileynotes, “it’s a new world in the IT industry,everything is moving very fast, and it canseem as though ‘everybody’ is trying to be acloud service provider these days. There’s aherd of companies from the traditional ITworld rushing to become cloud providers.That doesn’t mean they are all createdequal,” he emphasizes, “but they are alltrying to do it as this is the new buying

“When we think about cloudcomputing, the image we like touse is of a journey. Everyone willmove to the cloud, over time.”

—Saar Gillai

| CTPartners PQR

pattern of the enterprise.”Meanwhile, he adds, “we have what I

would describe as the original disruptivecloud computing companies, such as Ama-zon, Google, and I’d even say Facebook,providing plenty of motivation, becausethey’ve created large platforms and demon-

strated that the cloud can work and drivegreat economics. We’ve seen this new con-sumption model turn everything on itshead, with cloud companies beginning totake on new ownership of the IT customeras this will increasingly become the waythat IT is procured.”

Right now, Mr. Bailey notes, total cloudspending is still at an extremely early stage,representing only a tiny fraction of the infor-mation technology and communicationsmarket. “But we’ve made it through the‘hype’ stage, when traditional legacy playerswere stamping the word ‘cloud’ on every-thing, to now seeing major enterprises mov-ing large amounts of workload to the cloudand benefiting from the speed, agility, andnew business models that can be created.Acceleration is pretty strong, which onlymakes sense because cloud computingmakes it easier to consume IT. We expectthat by 2020, as much as 60% of this totalmarket, or even more, will be cloud. Thatwill be a huge change.”

For Mr. Bailey, as a leading cloud servicesexecutive, these are exciting times. “It’samazing and rewarding for me to watch allthese different trends coming together. Ulti-

mately, the legacy IT players—hardwarecompanies, software companies, system in-tegrators, and telecom providers—will needto shift to this new delivery model, but onlythe most innovative will survive and thrive.”

Which brings the conversation back toVerizon, where senior leadership is commit-ted to capitalizing upon the opportunities of-fered by cloud computing. “We have a sayinghere at Verizon: Change energizes us. We’redriven by the idea that what made Verizonsuccessful yesterday will not make us suc-ceed in the future. We first started talkingabout possibilities connected with cloudcomputing in 2009,” Mr. Bailey recalls, “andour CEO and board have encouraged us tonot only understand these big changes, butalso to get ahead of them.” But challenges re-main. “The biggest challenge for us right nowis talent, finding people from the engineeringand software level all the way through tosenior executives who really understand thecloud and its potential, and who can be partof the process of making this happen.”

Meeting the Talent ChallengeWhile cloud computing concepts have beenaround for some time, and prior deliverymodels met some of the criteria now used todefine “cloud,” the infrastructure, software,and platform-as-a-service marketplaces arestill in the early stages of their evolution. Asa consequence, only a small number of com-panies are accepted as true cloud leaders,with successful business models and revenuegrowth, along with the history of truly deliv-ering ‘cloud services.’

Therein lies the challenge. “From a skillsand expertise perspective, larger enterprisetechnology and services companies will needto find individuals who understand how tonavigate large, matrix-based, and complexorganizations, while also possessing the en-trepreneurial enthusiasm to drive whatamounts to a startup business within many

MANAGEMENT

“We expect that by 2020, as muchas 60% of this total market, or evenmore, will be cloud. That will be ahuge change.” —Kerry Bailey

CTPartners PQR |

of these Tier 1 organizations. That’s a verydifficult combination to find under any cir-cumstances, but most especially within anenvironment like this one,” notes MichaelDeSimone, a CTPartners Managing Partnerwho has led executive searches in the cloudservices space for both large Fortune 500and private equity/venture-backed firms.

CTPartners Managing Partner Debra Ger-maine agrees. From her own experienceleading executive searches in the cloud serv-ices space, she notes, “The biggest obstaclewe face in our quest for talent is the smallnumber of companies that have actually fig-ured this out and monetized cloud comput-ing at a level that captures the attention oflarge organizations. There is a large andgrowing demand for skilled executives withproven records in this space, however, weneed to cast a wide net and be quite creativein identifying promising candidates.”

Ms. Germaine pauses, and then adds,“This is not a market in which we can definespecific competencies and backgrounds andthen go out and recruit people with the ‘right’current accomplishments. Very few of themexist and the competition is fierce. We findourselves needing to explain to clients thateverything about the cloud, even the waysthat they evaluate and interview candidates,will be different from what they have experi-enced in the past.”

Functionally, Mr. DeSimone says, “clouddemand is highest for product/solutions,technology, and strategy executives whocan help shape these businesses.” But sinceattracting top functional leaders from thefew proven, large-scale cloud players canbe difficult, “companies may need to con-sider those who have helped build cloudbusinesses that never really took off or arestill in relatively early stages. Until there isa greater supply of people with successfultrack records in the space, top leadershipsmay need to forego this in favor of finding

individuals who have at least created acloud operation of some sort and who showpromise of producing better results nexttime around.”

This same dynamic is playing itself out inbusiness centers around the globe, with ex-pansion into the cloud a high priority formore and more management teams. “Whenwe speak about cloud computing, I like to saythat we have moved from a very trendy topicto a very real trend with strong momentum,”notes Lilian Poilpot, a Partner in CTPartners’London office.

Mr. Poilpot concludes, “Globally, the huntis on for people who not only understand thebasic parameters of the transformation thatis taking place—they know how to thinkabout the cloud in tactical as well as techno-logical terms. Desirable candidates,” he con-cludes, “will possess the right DNA to be anagent of change.”

Making the move into the cloud won’t besimple. But for organizations with the rightcloud team in place to help navigate the jour-ney, the rewards will be well worth the effort.

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PQR asked two prominent CIOs for a first-handaccount of what it has been like to migrate amajor organization to cloud computing.Listen to interviews with:Charles Beard, Jr., Senior Vice President, Chief Information Officer and General Manager Cybersecurity, Science Applications International Corporation (SAIC)

David Thompson, Executive Vice President, GlobalOperations and Technology, Chief Information Officer, Western Union

Sound Bites:The CIO’s Journey Into the Clouds

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| CTPartners PQR

CTPartners PQR |

MANAGEMENT

As Customers Clamor for Digital Options, BanksFight to Gain Momentum and Relevance

DIGITAL

>>>

s the digital revolution continues to disrupt and remake abroad swath of industries around the globe, banking is nowcenter stage in what may prove to be a long fight for digital

relevance. With consumers no longer content using mobile technolo-gies merely to check account balances, demand for holistic mobileservices from their financial services providers is skyrocketing, somuch so that the once distant risk of non-financial services companiesencroaching on market share is now an active threat.

Customers wish to pay for a cup of coffee at a Seattle café with theirphone, transfer funds by laptop in London, then pay bills in selectedcurrencies via a tablet in Hong Kong, all from the same account. Thisis only the beginning. As the marketplace bursts with new mobileand digital options from both new and established players, banksurgently need to keep pace with customers’ evolving preferences anddigital demands.

A

THE

MANDATEBANKING

Photography left (top): © istockphoto.com/deenphoto; (bottom): © istockphoto.com/kizilkayaphotos

| CTPartners PQR

MANAGEMENT

The management challenge issignificant. As Sam Plowman,Executive General Manager ofDirect Banking for National Aus-tralia Bank in Melbourne, suc-cinctly puts it, “Traditionalistsare embracing the digital future,but are not sure how to lead it.”The marketplace is aggressivelydefining new challenges and op-portunities for financial servicescompanies and their manage-ment teams. To maintain theircompetitive position and rele-vance with current and futurecustomers, banks must develop aclear digital strategy that takesinto account their digital offer-ings as well as third-party products andjoint ventures.

Most critically, banks need leadership tal-ent with the strategic vision and politicalfortitude to ensure they not only meet butanticipate—through innovative productsand services—the consumer demand for adigital economy.

Rapid GrowthMobile payments are projected to reach $90billion in the U.S. by 2017, according to For-rester Research, Inc., the Cambridge, Massa-chusetts-based technology and businessresearch firm. And Hampshire, U.K.-basedJuniper Research Ltd. sees worldwide mobilepayments leaping to an eye-popping $1.3 tril-lion by 2017. More important, digital ad-vancements will drive efficiency and begin toisolate lesser channels to the backwaters, verysimilar to what the digital camera did to film,

and at quite the same pace.Digital banking is expected to overtake

branch utilization by 2015, according to aPwC (PricewaterhouseCoopers) survey of3,000 banking customers across nine devel-oped and emerging markets. What’s more,the majority of the respondents said theywould be willing to pay an additional fee forthe convenience of digital banking services.Branch banking surely will not die, but itsreign as the foundation of banking sales andservice now is coming to a swift end.

The OpportunitiesAt a time when banks globally are battlingthinning margins and aggressive regulations,one of their saviors is, surprisingly enough,their own consumer base. As customers be-come more comfortable with digital solu-tions, financial service companies can takeadvantage of the efficiencies offered by digital

Pay for coffee with a smartphone swipe

Photography: © istockphoto.com/RyanJLane

CTPartners PQR |

MANAGEMENT

services as well as the multitude of cross-sell-ing initiatives driven by the rapid advance-ments of big data.

In established markets, digital technolo-gies will allow banks to design a futurebranch strategy, one that allows for aggres-sive cost savings and increased services if ex-ecuted correctly. Equally important, bankscan begin to plan acquisition strategies, forboth customer and competitor, with spiriteddiscussions around significant cost savings inbranch infrastructure.

As banks pursue growth, digital access isan especially valuable tool for reaching thosewho reside in remote areas outside of urbancenters and may not currently have access totraditional branch banking. “Think of thescale of countries like China, India, and Aus-tralia. Customer acquisition is no longer de-pendent on having a countrywide network.Banks instead can build technology platforms

to address a greater percentageof banking needs to comple-ment a more efficient branchnetwork,” says Nicholas Evans,a Singapore-based Partnerwith the CTPartners FinancialServices Practice.

Mobile phones are the inter-action vehicles of choice in

some parts of emerging Asia and are espe-cially present throughout southern China,India, and Africa. As Matthew Dooley, Man-aging Director of the Hong Kong-based con-sultancy Connected Thinking and formerHead of Digital Experience for HSBC, puts it“Banks now can address a whole new popu-lation that was not reachable through tradi-tional banking models—‘the unbanked.’ Theydon’t need to own the infrastructure anymore;they just have to provide valuable services.”

And digital banking offers much more thana way for banks to reduce costs or ease mar-ket entry. Social media and interactive com-munication tools offer a ready capability forbanks to keep in close contact with customersto build loyalty, personalize services, andcross-sell bank products. Younger con-sumers, in particular, are expected to rewardthose banks that provide the most innovativeand customer-friendly digital offerings.

New ways to bank and pay bills

Photography (left): © istockphoto.com/Mario13; (right): © istockphoto.com/pressureUA

>>>

| CTPartners PQR

MANAGEMENT

The ChallengesThe new digital business environment pres-ents inherent leadership challenges. One ofthe greatest hurdles banks face as they ad-dress their digital transformation is the speedof change around them. Many of the newproducts and services arriving in the market-place come care of innovative companies out-side of traditional banking, some of which lieoutside of the domain of banking regulators.

Inevitably, some of these new services willhave the potential to leave traditional banksbehind. “Simple day-to-day digital paymentrelationships can quite easily live outside ofthe traditional banking stream,” says RobertVoth, a Cleveland-based Managing Partnerwith financial services and digital expertise atCTPartners. “Once consumers become fluentin digital payments without a bank at thefoundation, it opens up everything to ques-tion. Checking, savings, car loans, andmortgages—all of these products can be researched, sourced, and potentially serv-iced by non-banks.”

Challenges are plenty, including protectingclient privacy while ensuring security in dig-ital services, building an integrated andconsistent experience across channels, anddevising new products and services thatwork fluently across the digital channels.

The shift toward digital banking also givesconsumers greater freedom to choose amongbanking options. No longer are people effec-tively tied to the brick-and-mortar buildingon the corner. “Banks have been very arro-gant in the past with the sense that theycould control the customer. No one controlsthe customer anymore,” says Mr. Dooley.

What will be the combined effect of these

forces of change? Mr. Evans says, “The waythat people interact with banks will betremendously different in five years, and thespeed of this transformation will be incredi-bly quick. What banks need most are peoplewho understand the opportunities of thetechnology.”

The Leadership PerspectiveIdentifying and recruiting exceptional ex-ecutive talent to lead digital initiatives isparamount for all companies, especiallythose with deep-seated business-to-con-sumer relationships.

Highlighting the need for managementteams to adopt a customer-centric viewpointwhen designing digital interfaces, Mr. Dooleyrelayed his own experience leading thelaunch of HSBC’s Internet banking platformin Asia in 2000. He described, “The first so-lution that we used for Internet banking sim-ply mirrored the terminology, look, and feelof the systems we used at the branches.” Butcustomers using digital banking interfacesusually don’t have bank staff at hand to assistwith difficult terminology and processes.

Customers found the interface confusing.Mr. Dooley said, “We learned then that weneed to put the technology into the hands ofthe consumer and watch how people use it.That changes everything. Banks have beenvery slow to simplify their processes and ter-minology, and actually get things in front ofcustomers in a way that they could use sim-ply.” Devising digital services with intuitivesimplicity for consumers—on par with thatfound in other popular digital products—is aclear mandate for bank leadership today.

Singapore-based OCBC Bank utilizes a

CTPartners PQR |

MANAGEMENT

noteworthy process, according to Mr. Dooley.OCBC has a customer experience team,which reports directly to the CEO. The teamcreates prototypes of new products and ser-vices, and then observes customers who havebeen invited to test the services. “That teamphysically resides on the same floor as thecompliance people,” he says. “Banking is allabout risk management, so innovation isoften seen as raising red flags. Compliancepeople are brought in to say ‘No’ and businesspeople are brought in to say ‘Yes.’ Bringingthem together and letting them convince oneanother how to respond to customer needs isan interesting management strategy.”

“Banks need a top-down approach to digi-tal transformation,” says Marc Gasperino,Managing Partner and Global Head of theDigital Practice at CTPartners in New York.“The initiative must be championed by theCEO, and the commitment to change the or-ganizational structure and cultural toneof the company must bleed through theorganization.”

Responses to digital transformation willrequire leadership with strategic expertise,product development talent, marketingsavvy, and user experience insight, all withthe political savvy to push through a businessenvironment that may be loath to change.Strong demand for such digital leadership atglobal banks is ratcheting up compensationpackages for the best of these leaders. Somebanks are pursuing the needed digital know-how and creativity by engaging in partner-ships and joint ventures, or by retainingconsultants. Others are looking outside of thetraditional banking industry, as some of themost forward-looking digital talent resides in

retail, travel, and other industries.“In order to hire the most talented digital

leadership from outside markets, banks needto be prepared to align digital operations,technology, marketing, customer engage-ment, and services currently residing in otherbusiness units with the digital strategy thatthese leaders need to employ in order toachieve success,” says Mr. Gasperino.

The management hurdles are significant.Yet there is no doubt that banks enjoy atremendous opportunity to leverage their ex-tensive customer bases and product offeringsin new and as yet unimagined ways. “Con-sumer behavior is evolving at a rapid pace,perhaps more rapidly than some banks ac-knowledge. The challenge is, how quickly canfinancial institutions institute viable digitalplatforms?” asks Mr. Voth. “By viable I meaneconomically viable, internally viable with thebank’s IT systems, integrated within their ex-isting channels, and workable as a productfrom a technology and visual side for con-sumers. How quickly can banks evolve tothat? For the financial institutions that getthere quickly, the competitive advantage willbe huge. And the key to unlocking this oppor-tunity is strong, experienced leadership.”

By The Numbers:A Statistical

Look at Today’s

Mobile and

Digitally

Demanding

Consumer

click to view

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FIVE GUIDING PRINCIPLES OF MY CAREER

Daniel Alegre

Photography (right): Cindy Charles | CTPartners PQR

q NO REGRETS “If you pigeonhole yourself in one specific view of what you want to do, thenyou limit yourself in terms of opportunity. I am never disappointed with the direction of my career,because I actually don’t give much thought to it. At every juncture, there is a difficult decision thatone needs to make. Once you make that decision, you just go for it. You are happy with it, and you never look back.”

w ALL BUSINESS IS GLOBAL “There is no such thing as a local job. Every single thing thatevery industry does is impacted by the global nature of the world’s economy, and I have realizedthe importance of keeping that global mindset. There are industries that you would think are hyperlocal. For instance, you go to the doctor, get an X-ray, and a technician at the hospital looksat your X-ray. But with technology and communication today, your X-ray might be reviewed by aradiologist in Asia who sends the feedback to your doctor in real time. If one does not compre-hend that everything you do is now tied to the global economy, you are going to be left behind.”

e CULTURE IS LOCAL “After opening your mind to the global economy, flip that on its head,and recognize the importance of understanding local nuances and local cultures when doing busi-ness. By understanding—before you go into a meeting—what you can expect from the other side,it changes the dynamic of the conversation, and most importantly, the relationship that onebuilds with those individuals.”

r INTEGRITY CANNOT BE COMPROMISED “There is one thing that you own and control inyour life, which is your integrity. In the past, if you burned too many bridges in your country, youcould move to another country and no one would know you. You could escape your past. Withtoday’s global information flow, if you compromise your integrity and try to escape it anywhere,it is likely to come back and haunt you. Integrity is critical to interpersonal relationships across cultures. If you have integrity and the other side recognizes that, it is the basis for long-term and solid bonds.”

t INSIST ON PASSION “I need to be passionate about what I am doing. The second I dosomething that doesn’t have the component of enriching my life and enjoyment, that is the secondI have taken a wrong turn. Across my career, whenever I thought I might be stagnating, I was im-mediately open to a new adventure, a new opportunity that would expand my horizons and re-ally get me motivated. I am not the individual who can wake up in the morning dreading goingto work. When I am not passionate, it is time for me to make a change.”

President, Google Global Partner Business Solutions; Former President, Google Asia Pacific

Hear more from Daniel Alegre on seizing career opportunities

Hear more from Daniel Alegre on building trust

CTPartners PQR |

Whether we’re talking about cloud comput-ing, social media, digital banking or anynumber of other recent developments, thetransformative power of new and evolvingtechnologies has never been more apparent.

We live and work in an era in which tech-nology is literally redefining everything fromthe way that organizations manage theirbusinesses to the fundamental nature oftheir customer relationships. New horizonsare opening up for companies and con-sumers alike. And the pace of transforma-tion keeps accelerating.

As these changes unfold globally, this isan especially exciting time for me, as well asfor my colleagues at CTPartners.

From its inception, CTPartners has beencommitted to being the most technologicallyadvanced firm in the execu-tive search industry. That’snot surprising, since our institutional roots are in a recruitment firm that special-ized in serving the technologyand VC sectors.

My colleagues and I recog-nize and value the potential ofcutting-edge technologies todrive innovative thinking, exceptional cus-tomer service, and outsized results. Weunderstand that strategies that are “goodenough” today won’t satisfy tomorrow’sneeds—especially within a global businessarena in which top-quality talent providesthat ultimate competitive edge.

As CTPartners rapidly has evolved fromits early roots into a firm with expertiseacross business sectors and around theglobe, we have embraced technology as akey differentiator. In a profession that hasscarcely been noteworthy for its adoption ofbold, new technologies, our firm has aimedto transform the search process and clientexperience with innovative, proprietarytools such as ClientNet®, Candidate

Central®, and the 40-Day Audit™.CTPartners’ decision last year to relaunch

PQR, our highly regarded magazine forglobal executives, as a multifaceted, multi-media publication, was yet another step inthis process. PQR aims to highlight state-of-the-art strategies and insights from leadingexecutives, corporations, and business ex-perts with a potent new-media mixture ofarticles, audio interviews, and other interac-tive elements. Stay tuned for much more.

What else is happening on the technologyfront? Well, as someone who has spent myentire career in the executive search indus-try, it’s interesting to see the contributionthat social media tools can make within certain recruitment situations. When a jobsearch can draw upon a candidate pool of a

broad, more general nature, it makessense for companies to “do-it-them-selves” by drawing on social mediasites to cast a wide net.

At CTPartners, we applaud thistrend, which is reminiscent of the waythat the Internet has replaced the yel-low pages for many users. It’s a greatcost saver for companies when itcomes to what might be described as

“commoditized” HR transactions.We’ve never been interested in the race

to the bottom. A development like this oneallows our firm to collaborate with corpo-rate clients across the globe in the ways thatwe do best: by partnering with them to iden-tify, recruit, and retain the expert, high-endtalent necessary to open profitable new markets, develop and implement strategies,create and maintain enterprise value, andcontinuously outperform the competition.

Global transformational executives willalways require sophisticated recruitmentand assessment. At CTPartners, we will bethere to deliver, utilizing pathbreakingtechnologies in our commitment to trulyexceptional customer service.

TO LEAD BRIAN M. SULLIVAN

A Commitment to Technology

“From its inception,

CTPartners has

been committed

to being the most

technologically

advanced firm in

the executive

search industry.”

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Photography: Richard Howard; Illustration: © istockphoto.com/Photocanal25 | CTPartners PQR

—Brian M. Sullivan,Chief Executive Officer,

CTPartners

CTPartners PQR |

What’s on CTNet.com

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Also read“HR takes its (rightful)seat on the board”

Stay abreast of othertimely topics with ourAhead of the Curve series

FOLLOW US ON:

And to continue the conversation with topglobal leaders, stay tuned for the next edition

of PQR,arriving June 2013.

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The next edition of PQR arrives June 2013.

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