Industrial Goods Five Leadership Issues Worthy of Board and … · 2015-11-19 · Industrial Goods...

Industrial Goods

Five Leadership Issues Worthy of Board and Executive Attention

R511012 - rr-0064 - Industrial Goods v14 electronic version.indd 1 04/11/2015 15:05:41

2

Introduction

The industrial goods sector, including manufacturing of electric goods and electronic systems, as well as discrete manufacturing and industrial machinery, is transforming due to the changes in technology and company structures, as well as globalisation. The increased pressure to innovate, influx of private equity investors, ongoing mergers and acquisitions, and a host of other major risk drivers all are contributing to dialogues in boardrooms and executive offices. Most significantly, executives are asking if they have the right leadership talent in light of the challenges they face.

From our conversations, the following five issues and their implications on leadership talent have emerged as top of mind for industrial goods sector executives:

ɳ Capitalising on the industrial Internet

ɳ Fostering innovation to fuel future growth

ɳ Creating an agile and flexible supply chain

ɳ Identifying and developing next-generation leaders

ɳ Building a board to tackle the future

We hope this executive briefing document will serve as a discussion starter for thinking through how to attract and retain the right talent in the face of these challenges.


3

Capitalising on the Industrial Internet

THE INDUSTRIAL INTERNET ENABLES COMPANIES TO OPTIMISE BUSINESS OPERATIONS

ɳ Manufacturing industries have always worked with data to enhance processes. The industrial Internet holds opportunities for further operational improvements, as well as the creation of completely new business models.

ɳ Industrial goods companies should prioritise building out Data & Analytics teams that collect and convert data into tangible knowledge and intelligence through modeling and analytical processing. These teams are key in delivering timely insights to shape major business decisions and strategies.

KEy POINTS

ɳ Develop and recruit forward-thinking leaders who can build innovative and diverse teams to drive digitisation.

ɳ Establish infrastructure, supporting tools and systems to enable world-class data collection, storage, quality and access.

ɳ Consider acquiring talent from adjacent industries (software companies, systems integrators, startups) to fill the gaps in capabilities.

THE MAJORITy OF INDUSTRIAL GOODS COMPANIES ARE NOT CONFIDENT THAT THEy HAVE THE RIGHT TALENT NOR ORGANISATIONAL STRUCTURE TO REALISE DIGITAL OPPORTUNITIESF

% of respondents who believe …

IN COMPARISON wITH OTHER SENIOR EXECUTIVES, DIGITAL TRANSFORMATION LEADERS ARE MORE INNOVATIVE, DISRUPTIVE AND BOLDG

THERE ARE THREE MAIN BARRIERS FACING DIGITISATION IN INDUSTRIAL GOODS COMPANIESF

48% 38% 27%… they have the right people to

define their digital strategy

… they have the right people to execute their

digital strategy

… their organisation is structured in the right way to realise

digital opportunities

Organisational inertia—functional departments are too fixed in their ways.

Competing departments want to own digital.

Functional silos create barriers to effective coordination.

SociallyAdept

Bold inLeadership

Disruptive

Determined

Innovative

New ProductConception Prototyping Sourcing of

Materials Manufacturing Distribution A�ermarket/Services

Smart factories connect manufacturing units and hold the potential to create customisable products on the assembly line.A

Trial with 3D; test virtual parts in virtual labs before production commences.C

Telematics and sensor-equipped devices track goods real time in transit and minimize delays and bo�lenecks.E

Real-time communication enabled by connected devices and cloud-based technologies across site and company boundaries will lead to enhanced issue resolution.D

Remote monitoring systems improve issue resolution and collect performance data that inform development of new products and services.B

3D printing drives accelerated prototyping.


4

Fostering Innovation to Fuel Future Growth

INDUSTRIAL GOODS COMPANIES LAG FAR BEHIND OTHER SECTORS IN TERMS OF INVESTMENT IN R&D AND PERCEIVED INNOVATIVENESS

ɳ In order to succeed in the future, industrial goods companies must continue investing in research and development (R&D) and innovation. Treating R&D and innovation as a strategic priority means carefully assessing and handpicking talent that understand how to commercialise R&D efforts without stalling creativity.

ɳ The cultivation of innovation cannot be done by chief technology officers (CTO)/R&D leaders alone—it also requires a culture that encourages entrepreneurialism and tolerates failures.

INDUSTRIAL GOODS CTOs AND R&D LEADERS ARE MOSTLy INTERNAL APPOINTMENTS, AND THE MAJORITy STEPPED INTO THEIR ROLE FROM GENERAL MANAGEMENTC

PRECEDING ROLE

KEy CHARACTERISTICS OF wORLD-CLASS CTOs/R&D EXECUTIVESC

68%INTERNAL

32%EXTERNAL

58%GENERAL MANAGEMENT

42%R&D/

TECHNOLOGY

KEy POINTS

ɳ Foster a culture conducive to innovation by ensuring that innovation teams are composed of diverse professional backgrounds and skill sets. Allow ideas to “bubble up” and develop innovative thinking at all levels of the organisation.

ɳ Build a talent pipeline and expose high-calibre R&D profiles to broader business and customer interaction. Create a conduit between R&D and general management.

ɳ Mandate the head of R&D to be the steward of innovation on the leadership team. He/she should be a change champion who is leading efforts relating to innovation beyond the traditional scope of the R&D department.

ɳ Consider creating an advisory board that stays in tune with what is happening externally, thus enabling the company to be open to new technologies and trends.

21 12TECHNOLOGY AUTOMOTIVE

companies companies2

INDUSTRIALGOODS

companies

AMONG THE TOP 50 COMPANIES THAT INVESTED THE MOST IN R&D IN 2014, ONLY 2 WERE INDUSTRIAL GOODS COMPANIESA

7INDUSTRIAL

GOODS

15TECHNOLOGY

companies companies48

CONSUMER

companies

ONLY 7 INDUSTRIAL GOODS COMPANIES MADE IT INTO FORBES’ 100 MOST INNOVATIVE COMPANIES LIST IN 2014B

CommercialMindedness

Awareness ofCu ing-Edge Technologies

GlobalExperience

Services and BusinessModel Innovation

InternalInnovationStewardship

ExternalStakeholderEngagement


5

Creating an Agile and Flexible Supply Chain

DIGITAL INNOVATIONS ALLOw SUPPLy CHAIN MANAGERS TO BETTER ALLOCATE RESOURCES AND ENHANCE CUSTOMER SERVICE

KEy CHARACTERISTICS OF THE CSCOA SUPPLy CHAIN LEADERS IN INDUSTRIAL GOODS ARE MOSTLy INTERNAL APPOINTMENTS, AND NEARLy HALF PREVIOUSLy HELD A SUPPLy CHAIN ROLE

FOUR ELEMENTS THAT MATTER FOR SUPPLy CHAIN LEADERS IN THE DIGITAL AGEA

Dig

ita

l Data Automation

Digital Acce

ss

Connectivity

Broadband Mobile Internet

Internet of Things

Big Data

Connected Devices

Robotics

3D Manufacturing

Cloud Computering

Social Network

ɳ The supply chain of the future must be able to respond to changes in supply and demand before they impact production. Sophisticated data and analytics tools are an important part of the solution.

ɳ The chief supply chain officer (CSCO) is becoming a key C-level report integrating planning, procurement, manufacturing and logistics in industrial goods companies.

87%

48%

ARE INTERNALAPPOINTMENTSB

held a supply chain role as their previous roleB

Finance

26%Operations

SupplyChain 4%

22%

48%

GeneralManagement

Understanding of data, related systems and potential for value add from connected solutions

Influential and collaborative approach

Cross-functional and global experience

Ability to develop new skills, innovate and train others

GreatCommunicator

MasterCollaborator

DigitallySavvy

Global

SystemsPerspectives

Flexible andAdaptable

Strong BusinessAcumen

KEy POINTS

ɳ Develop analytical capabilities in the supply chain team. Metrics matter to the CEO, CFO and COO, and the ability to interpret and make data-driven decisions is increasingly important.

ɳ The CSCO must work with other senior internal stakeholders to ensure that newly implemented tools are used and that the supply chain team embraces innovation.

ɳ Look for supply chain talent from other industries, leveraging the data analytics capabilities in the consumer sector and the end-to-end supply chain perspectives in other advanced manufacturing industries such as automotive.


6

Identifying and Developing Next-Generation Leaders

COMPARED wITH FORTUNE 100 CEOs, INDUSTRIAL GOODS CEOs HAVE A SIGNIFICANTLy LONGER TENURE, AND THEy ARE MORE INTERNATIONALLy DIVERSE BUT LACK GENDER DIVERSITyA

ɳ Industrial goods companies need to think more strategically about their talent pipeline in order to foster diversity in the company and to meet the challenges of the future.

ɳ Fresh perspectives will come from exposing internal professionals to a variety of challenges and geographical rotations, as well as from pinpointing talent from industries such as technology and software companies.

THE MAJORITy OF INTERNALLy APPOINTED CEOs STEPPED INTO THE ROLE FROM COO OR HEAD OF BUSINESS UNIT (BU) OR REGION. EXTERNALLy APPOINTED CEOs wERE PREVIOUSLy MOSTLy A GROUP CEO OR HEAD OF BUSINESS UNIT OR REGIONA

PROACTIVELy wORK TO RECRUIT AND RETAIN LEADERS wITH A FRESH PERSPECTIVE FROM EXTERNAL COMPANIES, FROM OTHER INDUSTRIES AND wITH GLOBAL wORK EXPERIENCEA

KEy POINTS

ɳ Design a robust talent management programme to identify and develop high-potential executives.

ɳ Groom high-performing internal professionals for when a promotion opportunity arises by exposing them to a variety of challenges and rotating them through different areas of the business.

ɳ Create robust incentive systems to retain high-performing talent.

ɳ Look externally for complementary capabilities in the leadership team.

ɳ Ensure that some members of the leadership team have experience in strategic global markets.

Industrial Goods CEO

F100 CEOs

Female

0%

10%

Nationality differentfrom company HQ

19%

7%

Average years spentwith company

16.9 Years

24.6 Years

Tenure in role

4.7 Years

5.4 Years

Professionalexperience in

a differentworld region

38%

Recruits froma non-industrialgoods company

16%

Externalrecruits

19%Industrial Goods CEOs

81% 19%INTERNALLYAPPOINTED

EXTERNALLYAPPOINTED

4%8%

42%

46%17%

50%

33%

Head of BU or RegionCOOCFOOther

Head of BU or RegionGroup CEOChairman


7

Building a Board to Tackle the Future ɳ In addition to key tasks such as CEO succession planning and remuneration, boards need to respond to new

challenges like cyber security, shareholder activism, the industrial Internet and board composition regulation. ɳ In order to prepare for the future, industrial goods boards must bring in diverse skill sets, as well as board

members who appreciate the industrial Internet and who can help steer real transformation.

THE PROPORTION OF FEMALE AND MALE INDUSTRIAL GOODS BOARD MEMBERS IS SIMILAR TO THE F100A

THERE IS AN OPPORTUNITy TO REFRESH PERSPECTIVES ON INDUSTRIAL GOODS BOARDSA

NEARLy A THIRD OF INDUSTRIAL GOODS BOARD MEMBERS HAVE BEEN ON THEIR BOARD FOR OVER 8 yEARS

INDUSTRIAL GOODS BOARD MEMBERS ENCOMPASS A VARIETy OF INDUSTRy EXPERIENCE AND NATIONAL DIVERSITyA

KEy POINTS

ɳ Build a diverse board that can help to future-proof the business.

ɳ Conduct regular director and board evaluations—this will help ensure that director performance is aligned with the company’s strategic objectives.

ɳ Monitor all advance warning signals. Assess and address vulnerabilities and maintain an effective, ongoing shareholder outreach programme.

IndustrialGoods F100

25% 75%22% 78%

<3 YEARS31%

3-5 YEARS25%

6-8 YEARS13%

>8 YEARS31%

26% 27%

38% 39%

30%31%

5% 4%

A Quarter of IndustrialGoods Board Members

are 68+

AGE OF INDUSTRIALGOODS BOARDS

AGE OFF100 BOARDS

Under 5050-59

60-6768 and over of Board Members currently

hold an executive position

21%

30%

46%

Are of the same nationality as the company headquarters

77%

IndustrialGoods

FinancialServices

20%Government

Executive Experience of Board Members

TRADITIONALCONCERNS FORBOARDS

NEW ISSUES REQUIRINGBOARD ATTENTION

RISK

CEO SUCCESSIONCYBER SECURITY

REMUNERATION

GOVERNANCE

SHAREHOLDERACTIVISM

BOARD COMPOSITIONREGULATION

INDUSTRIALINTERNET


8

CAPITALISING ON THE INDUSTRIAL INTERNET

A “GE unveils new high-speed network for Industrial Internet”, timesunion, July 16, 2015B “Siemens to build open cloud platform for industrial customers”, Siemens, March 12, 2015C “Tours show off GE’s Brilliant new space in Niskayuna”, The Daily Gazette, July 16, 2015D Russell Reynolds Associates interviews, 2015E “IoT a reality in maritime tracking”, IT Online, November 2, 2015F Digital Pulse Survey, Russell Reynolds Associates, 2015G Productive Disruptors: Five Characteristics That Differentiate Transformational Leaders, Russell Reynolds

Associates, 2015

FOSTERING INNOVATION TO FUEL GROwTH

A “The 2014 EU Industrial R&D Investment Scoreboard”, European Commission, 2014B The World’s Most Innovative Companies in 2014, Forbes, 2015C Proprietary research, Russell Reynolds Associates, 2015

CREATING AN AGILE AND FLEXIBLE SUPPLy CHAIN

A “Digitization of the supply chain: How ready are you?” Russell Reynolds Associates, 2015B Proprietary research, Russell Reynolds Associates, 2015

IDENTIFyING AND DEVELOPING NEXT-GENERATION LEADERS

A Russell Reynolds Associates’ proprietary analysis of CEOs of 32 of the largest industrial goods companies globally, 2015

BUILDING A BOARD TO TACKLE THE FUTURE

A Proprietary research, Russell Reynolds Associates, 2015

Endnotes


9

GLOBAL OFFICES

Americas

ɳ Atlanta ɳ Boston ɳ Buenos Aires ɳ Calgary ɳ Chicago ɳ Dallas ɳ Houston ɳ Los Angeles ɳ Mexico City ɳ Minneapolis/St. Paul ɳ Montréal ɳ New York ɳ Palo Alto ɳ San Francisco ɳ São Paulo ɳ Stamford ɳ Toronto ɳ Washington, D.C.

EMEA

ɳ Amsterdam ɳ Barcelona ɳ Brussels ɳ Copenhagen ɳ Dubai ɳ Frankfurt ɳ Hamburg ɳ Helsinki ɳ Istanbul ɳ London ɳ Madrid ɳ Milan ɳ Munich ɳ Oslo ɳ Paris ɳ Stockholm ɳ Warsaw ɳ Zürich

Asia/Pacific

ɳ Beijing ɳ Hong Kong ɳ Melbourne ɳ Mumbai ɳ New Delhi ɳ Seoul ɳ Shanghai ɳ Singapore ɳ Sydney ɳ Tokyo

Russell Reynolds Associates is a global leader in assessment, recruitment and succession planning for boards of directors, chief executive officers and key roles within the C-suite. With more than 370 consultants in 46 offices around the world, we work closely with public, private and nonprofit organisations across all industries and regions. We help our clients build teams of transformational leaders who can meet today’s challenges and anticipate the digital, economic, environmental and political trends that are reshaping the global business environment. Find out more at www.russellreynolds.com. Follow us on Twitter: @RRAonLeadership.


RussellReynolds.com


Industrial Goods Five Leadership Issues Worthy of Board and … · 2015-11-19 · Industrial Goods...

Documents

Transcript of Industrial Goods Five Leadership Issues Worthy of Board and … · 2015-11-19 · Industrial Goods...