William J. Holstein

Avatar
49 POSTS 0 COMMENTS
William J. Holstein is a journalist, consultant and speaker. He is the author of, "The Next American Economy: Blueprint For A Sustainable Recovery." For more of his work, visit www.williamjholstein.com.

The Next American Economy

Can America’s idea factories save the day?

The Next American Economy

U.S. companies can leverage innovation expertise to create new industries - and build employment back up - if the country can get manufacturing right

The six things CEOs don’t understand about PR people

 

There's a huge gulf between chief executive officers and their public relations people, whether on staff or at an outside agency. The vast majority of CEOs don't understand what PR people actually do. As a business journalist, I'm now going to spill the beans.

No. 1: PR people don't like to talk to the media. When we call them, we usually get the runaround. The worst one is the voice mail message that goes like this: "Hi, it's John Q. Flack. I'm not here right now, but your call is very important to me. For immediate assistance, dial 456 to reach Michele." Only when you dial Michele, she's not there, either. The reporter leaves a message. No one calls back. That can go on for days.

No. 2: Top PR people hire children, the little Jasons and Jennifers, as we call them, to do most of the talking with reporters. They don't know anything, which usually irritates the reporter. But if something goes wrong in how a reporter covers your organization and you get angry, the children can be sacrificed. The SVPs and EVPs for Corporate Communications evade all responsibility. It's called job security.

No. 3: PR people go on so many offsite training sessions because they want to hide from both senior management and the media at the same time. It's their only escape from the crossfire. They feel safe when they're together.

No. 4: PR people don't really understand your business. If they did, they wouldn't be PR people.

No. 5: PR people waste a lot of time and money. One of their favorite pastimes is calling up reporters and asking them a bunch of questions so that they can "update our database" or "update our mailing list." We journalists don't want to be in those databases or on those mailing lists. We're already so overwhelmed with junk emails that many journalists have dummy email accounts where they direct all communications from PR people. And they never check those accounts.

No. 6: When you tell your PR people to put out a press release, they'll do it, of course. But the vast majority of press releases are awful. Editors and journalists don't want to see them. It may actually hurt you more than help you. Here's the lead of the worst one we at Chief Executive have received lately:

[MEMPHIS, Tenn. - Feb. 27, 2006] - ASURYS™ and RFID4U™ have recently partnered to offer CompTIA RFID certification training. There is an increasing need for education and certification around RFID technology, but most training companies have put their certification training on-hold until CompTIA's new RFID certification exam is released this spring. ASURYS and RFID4U are offering this certification training in spite of the exam closure

Got that? I rest my case.

What are your thoughts?  Email me at bholstein@chiefexecutive.net


Reponse: The six things CEOs don't understand about PR people

In a twist on the ad business adage that "the client always gets the work he deserves," as regards corporate PR people and programs, "The CEO almost always gets the PR results he deserves." Most corporate PR people and programs are ineffective because the CEO and his/her team have not invested time or thought into how PR is going to support the company's key strategic goals, nor has the senior team invested time into making sure PR people know what they need to know to be successful. It's a case of the careless leading the clueless.

Best regards,

Ed Pitoniak, President & CEO


Reponse: The six things CEOs don't understand about PR people

I recently read you column on PR professionals and I found it insulting and inaccurate. I was a journalist for eight years before becoming a media consultant so I've seen both sides of the story and I find your article filled with incorrect stereotypes that are dangerous. Your column is the equivalent of me sending out an article entitled "All Reporters Are Inaccurate Jerks" - while there may be some reporters where that applies- it's inaccurate, insulting and wrong- just like your column.

I dealt with PR professionals every day when I was a journalist and yes, there are bad PR professionals and firms out there, just like there are in ANY profession. But to write a "informative" article where you are supposedly speaking as an expert and you use damaging and inaccurate stereotypes that paint the entire industry with a broad stroke is irresponsible as a journalist.

Allow me to address your points one by one-

No. 1: PR people don't like to talk to the media. When we call them, we usually get the runaround. The worst one is the voice mail message that goes like this: "Hi, it's John Q. Flack. I'm not here right now, but your call is very important to me. For immediate assistance, dial 456 to reach Michele." Only when you dial Michele, she's not there, either. The reporter leaves a message. No one calls back. That can go on for days.

My job is to talk with the media, not avoid them. I do not want to be quoted by the media- that's never my goal- my goal is to connect you to the CEO or company representative and let them present their answers and be quoted.

No. 2: Top PR people hire children, the little Jasons and Jennifers, as we call them, to do most of the talking with reporters. They don't know anything, which usually irritates the reporter. But if something goes wrong in how a reporter covers your organization and you get angry, the children can be sacrificed. The SVPs and EVPs for Corporate Communications evade all responsibility. It's called job security.

I am 36, not a child- with 15 years of journalism and media experience- I deal directly with reporters, we do not allow Jr members of our firm to do so.

No. 3: PR people go on so many offsite training sessions because they want to hide from both senior management and the media at the same time. It's their only escape from the crossfire. They feel safe when they're together.

I can honestly say I have never attended a PRSA event or meeting and don't waste my time with meetings of little or no impact- where would you get the idea that this conjecture on your part is at all true?

No. 4: PR people don't really understand your business. If they did, they wouldn't be PR people.

When I get a new client I spend the first month doing research on their company and sector so I can present it accurately to the media. Do I know each client's business as well as they do? No, that's impossible and it's also not my goal- if a reporter wants specifics about the company that I cannot answer for him/her, I then connect them with the CEO or company spokesperson to answer them- as I said, it's not my goal to be quoted- it's my goal to get the CEO or company spokesperson quoted.

No. 5: PR people waste a lot of time and money. One of their favorite pastimes is calling up reporters and asking them a bunch of questions so that they can "update our database" or "update our mailing list." We journalists don't want to be in those databases or on those mailing lists. We're already so overwhelmed with junk emails that many journalists have dummy email accounts where they direct all communications from PR people. And they never check those accounts.

I never call a reporter and tell them "I am updating my database" and did you ever think that if you actually used accurate contact info instead of a dummy account then PR people wouldn't have to call you to update their database?

No. 6: When you tell your PR people to put out a press release, they'll do it, of course. But the vast majority of press releases are awful. Editors and journalists don't want to see them. It may actually hurt you more than help you. Here's the lead of the worst one we at Chief Executive have received lately:

This is the one point I agree with- most press releases are written poorly and should have more thought given to them. But 99.9% of the time the client themselves has to review and approve a press release and they often make bad edits that result in a diluted or garbled press release. This doesn't explain the wealth of bad press releases out there but it may give you some insight.

[MEMPHIS, Tenn. - Feb. 27, 2006] - ASURYS™ and RFID4U™ have recently partnered to offer CompTIA RFID certification training. There is an increasing need for education and certification around RFID technology, but most training companies have put their certification training on-hold until CompTIA's new RFID certification exam is released this spring. ASURYS and RFID4U are offering this certification training in spite of the exam closure.

If you would like to further discuss I encourage you to give me a call- but who knows if you will even get this email, it may go to your dummy email account.

Sincerely,

James McCusker, Vice President, Integrated Corporate Relations


Reponse: The six things CEOs don't understand about PR people

An odd indictment. You throwing all P.R. folks under the bus, or just annoyed that many of us are looking for "free advertising through editorial content"?

Rob Leighton, Thompson Brands


Reponse: The six things CEOs don't understand about PR people

I always read your brief emails first thing. I'm amazed at how well you see what's going on. The one that first impressed me was about what's happening to USA business when so much is being made overseas.  I was surprised that THE EDITOR of CEO could really take such a world view.

I'm here in the trenches trying to get a company going, and we're having to get our consumer electronic product made overseas (and designed also), even though we wanted to keep it all here. And now I read about PR. My first professional job (18 years old) was working in PR as the only help to a very talented PR lady, and I learned how to do it right. Since then, over the last 45 years, I've still done PR. And I do it myself - cause I haven't yet found a "PR" person who can help me - I'm always having to "train" them. I learned that to get a good story, we must go to the horses mouth, and for me that's often my mouth. 

Keep up the good comments; I really find them enlightening.

Regards,

George Forester, CEO, EkaTetra


Reponse: The six things CEOs don't understand about PR people

I think you are dead wrong......

Excellent Public Relations people keep up with the times, know how to write a press release, a fact sheet, and how to speak with the press. I don't know from whom you are basing your points, but you have obviously never encountered people in the profession who make the grade and do the job for their employers and their accounts.

I have been in public relations for close to 37 years and I have kept up with the times (meaning technology and equipment and the proper way to write that which I am sending to the press).

I wish I could have worked for you to show you how Public Relations is crafted.

Phyllis B. Brotman,  President and CEO,  Image Dynamics, Inc.


Reponse: The six things CEOs don't understand about PR people

You've probably got agency flaks running around their client offices, trying to figure out how to prevent clients from reading your latest missive.

While I don't think you can paint all PR people with this broad brush, the point about the Jasons and Jennifers certainly rang true. A wise Wall Street Journal reporter shared that complaint with me 20 years ago. Senior communications people should have enough pride and knowledge about their organization to be out front with the media, in good times and bad. Delegating media relations to newbies is just bad business.

Call me any time, and if I don't pick up the call chances are its because I'm personally handling a request from another reporter.

David Moon, Director, Marketing & Communications, DiamondCluster International


Reponse: The six things CEOs don't understand about PR people

Thanks for making me smile. It's a dreary day here in Houston and your article made me laugh. Its rare to get ballsy perspectives in print.:-)

Farida Hasanali, Xpediant Solutions


Reponse: The six things CEOs don't understand about PR people

Seems you've lost interest in taking shots at Spitzer, and now have another easy target in your sights.

Although a number of your points ring true, a very similar expose can be written about your profession.

Thirty years as a flack - on both the corporate and agency sides - have provided me with ample raw material, which I'd be happy to display in "The Six Things CEOs Don't Understand About The Press."

You're fairly adept a dishing it out. Do you have the backbone to publish the flip side?

Give me a word count and a deadline.

Gordon G. Andrew, Highlander Consulting


Reponse From Editor: The six things CEOs don't understand about PR people

Okay, sock it to me. We'll post it unless you digress into a Marxist rant or something nutso.

Bill Holstein, Editor in Chief, Chief Executive Magazine


Reponse: The six things CEOs don't understand about PR people

There's a huge gulf between chief executive officers and the people who report on them, whether they work for print publications, television, radio or the internet. The vast majority of CEOs don't understand what journalists actually do. As a public relations professional who works with them, I'm now going to spill the beans.

No. 1: Journalists don't like to talk to the people who have an opinion that's contrary to their own. When they call, they are less interested in facts, and more interested in having you supply a pithy quote or sound bite that supports their own viewpoint. Journalists are no longer Edward R. Murrow types who seek the truth at all costs. They now view themselves as multi-media celebrities who are more interested in being the first reporter to break a story than they are in reporting a story accurately.

No. 2: Top news sources hire and promote people more on the basis of politics and personality, and less on curiosity, persistence and journalistic talent. News has become entertainment. This is why most reporters chase the same superficial stories and simply rehash or embellish wire service reports. Some even resort to using poorly written press releases, verbatim, to kill space or air time. After all, media is a business too.  It's called job security.

No. 3: Journalists hang out in bars after they punch the clock because they want to hide from the world. It's their only escape from their unhappy and underpaid lives, and from the realization that they may one day need to hold a legitimate job in public relations. They feel safe when they're drinking together.

No. 4: Journalists don't really understand your business, or any business. If they did, they wouldn't be calling public relations professionals, expecting them to provide information contrary or beyond what their company permits them to.

No. 5: Journalists waste a lot of time and money. One of their favorite pastimes is pretending they are the next Woodward or Bernstein by calling up senior executives and asking them probing questions designed to uncover the dirty secrets that their companies are hiding. Journalists can also waste time and money promoting companies - Enron, for example - that are hiding dirty secrets.

No. 6: When you send a journalist a press release, they'll overlook it, ignore it, lose it and then claim you never sent it. They'll get it and screw up the facts, or will tell you they refuse to work from a press release and demand an interview that yields the same information and quotes found in the press release.

But the majority of journalists are no more like this than are the PR professionals described in the latest Chief Executive diatribe.  I'm hopeful that Mr. Holstein is enjoying an early April Fool's Day joke at the PR profession's expense. If so, a great number of flacks certainly took the bait.

Got that? I rest my case.

 

Gordon G. Andrew, Highlander Consulting


 Reponse: The six things CEOs don't understand about PR people

I can't tell you how many prospective clients we speak to that say pretty much what you've said in your overview.  It is the result of too many people entering the field with too little experience.  Even worse is the lack of desire on the part of most publicists and PR people to spend the time it takes to become knowledgeable about their client's business and about the needs of the various press and media outlets.

 

To be successful more PR people have to think less about "selling a story," and more about bringing their clients together with the appropriate press to create a mutually beneficial relationship.  Only then does the press get a story they're actually interested in, and does the client get their story heard in the proper light.  Less forcing, more fitting.

 

Jeff Cannon, TheCannonGroup


Reponse: The six things CEOs don't understand about PR people

Your sleazo, cheap-shot indictment of the public relations profession is insulting, inaccurate and downright ignorant.

 

I am not a PR practitioner, but I have known many smart hard-working professionals who add tremendous value to their companies, their companies' shareholders and to society.

 

PR is nothing like what you have described. It's a tough job. Just ask any PR person who has ever had to deal with you.

Bruce Rogers, CEO, Virtual, Inc.


Reponse: The six things CEOs don't understand about PR people

Bill, why do so many CEOs look down their nose at PR people, yet have no shame when whining to us like jealous teenage girls if one of their peer CEOs gets better/more media coverage then they do?

 

Anyway, one could argue that if even a small majority of journalists did their jobs correctly, thoroughly, and ethically, there would not be a PR industry in the first place. Considering that the PR industry is now worth a couple billion (and rapidly growing, unlike the news media business), what does that say?  Not much for your chosen "profession" of journalism, unfortunately. 

 

Regards, Dave Hochman 


Reponse: The six things CEOs don't understand about PR people

I saw your piece

Today’s 6 Worst Business Books

To shame the publishers of these books into improving, I hereby announce my choice of Today's Six Worst Business Books.

California Ranked Worst for Business

California Governor Arnold Schwarzenegger had a motorcycle accident recently. But he should see the even bigger train wreck that's headed his way: Readers of Chief Executive have for the second straight year named his state as the worst in the nation for doing business. "I ran a public company in Sunnyvale, California," said one of the 339 readers who responded to an email survey. "Never again in California. Go Texas!" Another said flatly, "We won't do business in California at all."

Texas once again ranked as the best state. Respondents cast 124 votes for Texas, followed by a relatively distant Nevada with 73 votes. The depth of animosity toward California was even more intense than admiration for Texas, however. Some 227 votes were cast for California as the worst state for business, followed by New York, again a distant second, with 142.

 The politically "blue states," where state governments tend to over-regulate, are clearly going to lose more jobs as CEOs shift economic activities elsewhere. California, New York, Massachusetts and Michigan all fell into that category. As one reader put it, "The Northeast and Midwest continue to isolate themselves from the world's manufacturing. They will continue to lose manufacturing jobs."

 

Louisiana made it into the top five worst states because of the impact of Hurricane

Katrina and the slipshod recovery effort.

 

Among the top five best states, which all are considered "red," the one that moved up in the rankings is North Carolina. "We operate manufacturing plants in North Carolina, California and Iowa," said Barry D. Harper, CEO of Harper Brush Works, in Fairfield, Iowa. "North Carolina is by far the most business-friendly of the three states. It is working hard to improve its education and infrastructure."

 

Asked to rank the most important attributes of a state's business climate, 20.6 percent of respondents put work force quality at the top of the list, 18.3 percent named labor costs and 15 percent cited taxes.

 

Overall, CEO Confidence rose to 182.4 points in January, the highest since the magazine began polling its readers in October 2002, using 100 points as the starting benchmark.

 

 5 Best States

 5 Worst States

 2005 Rating  

 2005 Rating  

 Texas               1 California          51
 Nevada             2 New York          50
 North Carolina  3 Massachetts      49
 Florida              4 Michigan          45
 Georgia            5 Louisiana         38

 

Map

General Motors Chairman and CEO Rick Wagoner: Exclusive Interview With GM’s...

General Motors Chairman and Chief Executive Rick Wagoner, who has announced plans to cut 30,000 jobs and close several factories, says the Bush Administration is making a mistake by targeting China's currency, not Japan's. Moreover, he sees China as a major emerging market, in which GM is able to participate.

Philip’s Big Idea

After years of earnings disappointments, Royal Philips Electronics is attempting a transformation it hopes will catapult it into a leadership role in the U.S. health care technology market. CEO Gerard Kleisterlee and his management board sat down in New York to explain their strategy. Here are highlights:

Q: How are you trying to change Philips?

Kleisterlee: We are trying to create a company that, in a more predictable way, generates value for its stakeholders and particularly shareholders. We have to create a portfolio that is less volatile. In the portfolio I inherited, medical systems has stability and good margins. We also felt we could generate more growth in our lighting division by driving innovation and also in our domestic appliances and particularly personal care products such as shaving and dental care. That is the part of the portfolio where we have margins in the teens and opportunity to drive growth through innovation or acquisition.

Q: What about the less promising areas?

Kleisterlee: On the other side of the portfolio, you have volatile, low-margin businesses, such as the high-volume electronics businesses. The consumer electronics division is an element of that. We were fully integrated vertically with a components division where we made  cathode ray tubes, liquid crystal displays and optical drives. The components division was getting squeezed in the middle, so we dissolved it and divested a number of operations. We de-verticalized our consumer electronics business. We said, €˜We have to emulate the Dell model. This is an industry that's going to work like the computer industry, which means you focus on designing your product, sourcing it in Asia, then leveraging your brand and your clout in your distribution channels.' We've done that successfully in the U.S. and elsewhere, and turned more than 10 years of loss-making operations into a profitable and fast-growing market position.

Q: So China and other manufacturing countries are commoditizing some areas of your business and you need to get repositioned in a hurry?

Kleisterlee: Yes, we've done that well ahead of most of our competitors. We use the strong presence that we have in China to optimize our sourcing. Most of our electronics comes out of China.

Q: But your real emphasis is on the higher value pieces of your portfolio?

Kleisterlee: Yes, we've made significant investments, particularly in the U.S., to strengthen our medical business. We acquired five companies in the U.S. by 1998 and took some time to consolidate. Most recently, we've acquired a medical information technology company in Brisbane, Calif., called Stentor. We've strengthened our lighting division by acquiring Lumileds, which had been a joint venture with Agilent Technologies.

Q: Lighting seems like it would be a commodity sector.

Kleisterlee: Not at all. That's a huge misconception. When you talk about lighting, most people think about buying lamps in Wal-Mart. But most of the lighting we do is office lighting and public lighting, and we have a number of OEM activities such as automotive lighting. We are aimed at the professional segment, not the consumer.

Q: Give me some numbers that show the overall magnitude of what you're trying to do.

Kleisterlee: Six years ago, medical systems represented 9 percent of our activity in the U.S. That's now 41 percent. Other activities such as the component division represented 23 percent of our business. That's now down to 4 percent. Most of that is gone. It's been replaced by health care. Globally, medical systems used to be 9 percent of our portfolio and now it's 21 percent.

Q: Why does medical seem more  predictable?

Kleisterlee: There is no seasonality in people getting ill. Demographics also point toward health care being a growth industry everywhere around the world. Spending on health care globally is growing faster than GNP. People are getting older and they'd like to be healthier. They demand more and better care-and technology can provide that.

Q: Which of your technologies are most promising in the medical sector?

Ad Huijser, chief technology officer: We have long been very strong in X-rays and X-ray applications. We also have introduced a broad spectrum of new technologies, including in magnetic resonance and ultrasound. But it's not only the technology that counts; it's the way that doctors use these technologies in their hospitals. The ease of use, the simplicity and the economics are very important. 

Kleisterlee: If you take an MRI or a high-speed CT, you get a  terabyte of data.

Huijser: Yes, and we can do that in real time, which makes it possible to have real-time imaging and observe what happens when organs act, when a heart beats. We call that 4D, with the fourth dimension being time.

Q: The American health care system in some ways is very primitive. Other sectors of this economy are much more computerized.

Huijser: It's not just the American health care system. That's all over the place. It has to do with the fact that doctors, once they have their education, don't want to change the procedures they have learned. There are only a few who innovate, particularly in the academic hospitals. We're in those clinics with our researchers.

Q: Is the American system going to embrace some of these newer technologies by perhaps allowing patient records to be automated or allow X-rays to move across networks better?

Huijser: That's going to happen everywhere, at a rapid pace, because of the efficiency. The health care bill is rising everywhere.

Kleisterlee: There are big opportunities in health care IT. It's going to be rolled out. While you say that the health care system is primitive in the U.S., it's more primitive elsewhere. Most of the health care IT spending globally is done in the U.S. If you look at the leading health care IT  companies and the split of their revenues, a majority of it is in the U.S. But what has held it back from being even bigger is the lack of standardization of data and standardization of processes.

Q: This direction will take you into more direct competition against Siemens and General Electric, right?

Kleisterlee: No, it will not take us into more direct competition-we are already in direct competition. In the good old days of X-rays, those companies were our leading competitors and that hasn't changed.

Q: Do you have an advantage or technological edge?

Kleisterlee: Yes, in certain areas, at times, because this is an industry where all players at the end of the day pursue similar technologies and similar solutions.

But a differentiator that gets fed back to us from our customers is that we are leading in customer service and that we are more patient-oriented than some of our competitors.

Q: How can you be more patient-oriented?

Kleisterlee: A revolutionary example is at Lutheran Children's Hospital in Chicago. There,  we built a room for a patient-oriented CT system. Even we as adults are sometimes uncomfortable going through such a procedure. You can imagine that children can be traumatized. We have tried to use the skills we have in lighting and consumer electronics to make it easier. We use images. We use our wireless technology. When the child is being prepared for the procedure, the nurse talks with the child about a number of environments and shows him cartoon characters or whatever. The child can choose the environment he likes. The doctor gets a smart card and sees who the patient is and what environment he likes. The patient is put at ease.

Q: Does it work?

Kleisterlee: We got an email from a doctor after he had done his first real procedure there. It looked like the child might have to be sedated, and the mother was panicking about the child being sedated. But with this technology, the child was at ease and there was no sedation.

Q: How is your research and development playing a role in this competitive battle?

Huijser: In the medical domain, we spend 9 to 10 percent of sales on R&D.

Q: You're among the world's top patent receivers, are you not?

Huijser: Absolutely. In Europe, we rank No. 1 and in the U.S., now we are No. 15. We have an average of 3,000 patent filings a year.

Q: How have you shifted your R&D strategy in view of your new business thrust?

Huijser: Our R&D used to be spread all over the place from emerging to mature businesses, but now we've shifted it away from the mature businesses to the early stages of the life cycle of products. At the end of the life cycle, we turn to others to make the products. We source 90 percent of those mature products, built to our specifications, but we don't spend money on R&D for those products.

Kleisterlee: The mature businesses spent a chunk of our R&D trying to make a better light bulb or the next CRT television. The big change now is that the money is going to emerging and growing applications. That's a huge change.

Q: So how much time do you have to complete your transformation? Haven't your sales been flat?

Kleisterlee: The answer is yes, on balance. There are always parts of the portfolio that grow, but then you shed some other businesses. Yes, sales have been flat for a long time. The big challenge is to consistently get growth. Lighting is a division that had been growing at 1 or 2 percent a year. It's now turning out 4 or 5 percent, and it can do better. Medical will do 5 or 6 percent or more this year. The small appliance area is where we still have some work. So getting the whole company to grow at 5 or 6 percent is still the challenge we face. We're in a critical phase.

Q: Why is now a critical moment?

Kleisterlee: We have been transforming the company and re-engineering the portfolio, downsizing, rightsizing, whatever you want to call it, for a number of years. Most of that is behind us. We now have a very focused set of divisions. We have a company where already for many quarters, every division turns in a profit, which historically was not the case. But it still isn't growing at the pace we need to see.

Q: What went wrong at Philips?

Kleisterlee: An old company loses its focus over time. If you look at Philips in the 1980s, it was in any kind of business you could imagine that even remotely had something to do with electronics. We made fertilizers and vitamin pills. In the U.S., we had Carolina Coach, we had Selmer Instruments, we made furniture, we made trumpets. It was a sprawling conglomerate and you lose track at the top. Once you're in a downward spiral, that is difficult to reverse. For many years, you're basically cleaning up your portfolio. It's only in recent years that we have a focus on the businesses that we understand. Now we need to get the growth.

Q: How are you changing the culture?

Kleisterlee: There is a big cultural change. If you have a history like we have, you're bound to get into a phase of internal bureaucracy, slow decision-making and being more internally focused than market-oriented. In the last four or five years, we changed by trying to drive innovation and by making the company outward-oriented by bringing the marketing and customer focus in. We've strengthened the whole marketing operation. We've repositioned the brand. We came up with the €˜Sense of Simplicity' campaign, rather than the €˜Let's Make Things Better' campaign that we had had.

We've stepped up the marketing as a profession but also as a mind-set. When we come up with new ideas, it starts with the customer. What is the benefit to the customer' What are the unique insights we're using' Then we work back. For a long time, we were a €˜technology out' company.  We said, €˜This is the way we do things at Philips. We have a brilliant invention. Why don't customers buy it'?

Q: When will this transformation process be completed?

Kleisterlee: Never. We may complete projects and programs, but you can never afford to stand still and think that you're done. But the direction is clear. In a couple of years, you'll see that we have built up the health care part of our portfolio. We must be able to show that we can grow top line and bottom line, and that Philips is a more valuable company.

Q: In the U.S., how far will you go in the medical area? What is your objective in terms of a percentage of your U.S. sales?

Kleisterlee: If it goes in the direction of 50 percent, that's fine with me, as long as the other businesses also show healthy growth.

Philips' Management:

Gerard Kleisterlee Dutch, is president/ CEO and chairman of the Board of Management. He began his career with Philips in 1974 in the medical systems division and became CEO in 2001.

Ad Huijser Dutch, is executive vice president and chief technology officer. He joined Philips in 1970 in its research laboratories.

Gottfrid Dutine German, is executive vice president. All geographies and business units report to him. He worked for Rockwell-Collins, Motorola, Robert Bosch and Alcatel before joining Philips in 2002.

Pierre-Jean Sivignon French, is chief financial officer. He worked for Peat Marwick Mitchell, the Schlumberger Group and Faurecia, a supplier of automotive equipment, prior to joining Philips in 2005.

Source: Royal Philips Electronics

Learning About Innovation

The word "innovation" is everywhere these days, just like "quality" used to be. You'd think there would be a clear, well-defined set of best practices for chief executives.

 

But innovation is a vast subject, filled with mystery, as I've discovered in deep dives at Corning, FedEx, IBM and Medtronic over the years. And I continue to learn, both at this magazine's roundtable on the CEO's role in innovation, co-sponsored by IBM (see page 50), and in other recent conversations.

 

First of all, there's confusion about the word "innovation" itself, so you have to define what kind of innovation you're talking about-product, business model or business process. Then you have to define whether you're talking about incremental innovation, such as a brand extension of toothpaste, or more radical, breakthrough ideas. Those processes have to be managed very differently, and companies need to have both underway at the same time. There are also different sources of innovation-from internal R&D, a partner or outside company, or a center of research like a university. It's almost as if we need to invent a whole new vocabulary.

 

There also don't seem to be hard and fast rules that CEOs can follow. Sometimes you need to call the direction for your troops; other times, you need to respond to what a customer wants or what an inspired employee recommends. Sometimes you need to nurture the innovators with funds and high praise; other times, you need to cut short projects that just aren't going to make it. One of the only things that's clear is this: Just like we learned that quality has to be built into every process and every product, we know now that innovation has to permeate all corners of an enterprise. It can't be

segregated.

 

In managing all this, it may be that a CEO's softer skills are more important than formal processes. Getting innovation right seems to require genuine wisdom and a knack for understanding which people have what it takes to see their ideas through to fruition. I'm indebted for this insight to Hamsa Thota, head of the Product Development and Management Association, which tries to spur best practices. What's the key to innovation? "It's the people, stupid," Thota says. He notes that the standard process of winnowing out the best ideas and having them survive various tests, or "gates," of profitability or market acceptance may work for a company at a certain point of time. But within five years, the markets will have changed, people will have changed, and that old process is now more of a hindrance than an asset. He notes that Motorola was able to rush out its winning Razr cell phone precisely because it was developed outside of the company's traditional innovation processes.

 

The lesson: Value people more than you value processes. Ultimately, the reason no one can define "innovation" in a textbook is that it depends on complex human interactions. I think we all have to keep learning about this fascinating subject. I'd be interested in your views.  

The Top 10 Cars for CEOs

What to buy when you're shopping for the best driving experience, at work or for play.
- Advertisement -

CEO1000

CEO1000 Tracker

From the schools they went to to the types of companies they run, CEO1000 is tracking the trends among the CEOs of the 1,000 largest U.S. companies.

CEO CONFIDENCE INDEX

CEO Confidence Plunges In August Amid Growing Trade Worries And Slowdown Fears

CEO confidence in future business conditions fell 6% in August from July, according to Chief Executive’s most recent polling. At 6.2 out of 10 on our 1-10 scale, confidence is at its lowest level since October 2016.
- Advertisement -

BEST & WORST STATES FOR BUSINESS

Best and Worst States For Business

Are you looking to relocate or expand? Evaluate each state's strengths with Chief Executive's 2019 Best & Worst States for Business.

CEO OF THE YEAR

CEO of the Year

Once a year, we celebrate the achievements of a CEO, honored for his or her success in and dedication to business, shareholders and customers.

SUBSCRIBE TO CHIEF EXECUTIVE

Sign Up to Receive Chief Executive’s Magazine and e-Newsletters

Chief Executive’s publications are designed to help CEOs do their jobs better and run their businesses more effectively. Subscribe here.