Wednesday, 21 March 2007
Hear it from the BOSS - Creativity + Innovation = Profit (Sydney)
Transcript
This is an edited transcript of the Hear it From the BOSS forum in Sydney on March 21, 2007.
The panellists were TERRY DAVIS, chief executive, Coca-Cola; Naomi Milgrom, CEO Sussan Group; Brett Godfrey, CEO Virgin Blue; Kate Vale, Australasian Head of Sales and Operations for Google; Paul Gilding, CEO, Ecos Corporation. ABC 702’s Adam Spencer moderated the event.
ADAM SPENCER: Ladies and gentlemen, good evening and welcome to our first AFR BOSS forum of 2007. Tonight we dedicate ourselves and our musings to that most elusive and slippery of concepts, creativity, and in particular can creativity and innovative thought go beyond putting smiles on workers' dials and actually generate profit for organisations.
You might agree with Einstein, who said, "If at first the idea is not absurd, then there is no hope for it, or the more forceful words of one of the fathers of modern computing, Howard Aiken, who warned, "Don't worry about people stealing your ideas. If your ideas are any good you will have to ram them down people's throats." Maybe you will end up agreeing with the inventor extraordinaire Charles Kettering who said, "If you have always done it that way, that is almost certainly the wrong way."
Regardless, I am confident that tonight we will all profit from the words of our esteemed panel. So please welcome to the stage, first of all, a man unofficially known as the hero behind Coke Zero, the Managing Director of Coca Cola, Terry Davis.
Our next expert this evening counts as one of her many career highlights receiving the Centenary Medal for outstanding service to the fashion industry - I'm assuming mine got lost in the mail - the Executive Chair and CEO of the Sussan Group, Naomi Milgrom.
Now a man who works for a company so committed to encouraging communication and accessibility he is not known around the corridors of work as the CEO and managing director, so it is my pleasure to introduce the big cheese of Virgin Blue, Brett Godfrey.
Australasian Head of Sales and Operations for Google, Kate Vale.
And rounding off our panel, a very busy man who is CEO not just of the international environmental consultancy, the Ecos Group, but also the recently formed carbon trading company, Easy Being Green. I note that in 1992 the World Economic Forum appointed him as a leader for tomorrow, but 15 years on he is still very much now Mr Paul Gilding.
Ladies and gentlemen, to deliver our first key note address for the evening, Terry Davis.
TERRY DAVIS: Have you ever pondered about why all great ideas don't necessarily make their creators millionaires and yet why some of the most successful innovations look so simple that you scratch your head and say, "Gee, why didn't I think of that already?" Well, probably somebody did but they didn't have the skill or the capital or the persistence or often the timing to turn the idea into real profit. And that's what tonight's about. It's when the rubber hits the road and the material difference between a great innovation and a great execution of innovation.
So are we confused about what innovation really is? We often think of innovation as that cartoon of a guy with the light bulb over his head, that eureka moment of a great new idea. It seldom is. To me innovation is not simply about new products or new packages, it's rarely about some life changing invention, but more often than not break through innovation comes about when there are paradigm shifts, either in social trends or the way business is done. These shifts help create the window, the window of opportunity for innovation. Think of those trends from the sexual revolution of the 60s, to what I call the yoga set of today that go and do yoga in the morning but go and indulge themselves significantly in the evening, to how business has changed, just like what private equity is doing in the equity markets, to what mail order did, then telemarketing and of course what the internet is now doing. I'm sure Kate here will agree just how the world has become so much smaller and better due to what Google has done for us all.
These paradigm shifts generally create tectonic changes in the business environment, in systems, in processes and then strategy. This then creates that window of opportunity for the innovators. Those that see the market window and respond, whether it be to the social trends or the technology shifts are those that get ahead of the game, and it is still true that those first in, the first in rule still prevails.
I have found coming from both sides, both from an entrepreneurial private business to a corporate business, that whilst the style of innovation may be quite different between corporates and entrepreneurs, in both cases it's about getting that right balance between the intuitive field, the hard consumer research, the analytics and the right risk rule equation.
Leaders of innovation create an environment in organisations where it is okay to fail, so people feel confident about backing their own judgment. But the most important point to me, and often overlooked, is execution. You still have to be able to execute a great idea into the market, and an average idea well executed will still do better than an innovation poorly executed.
In my own world, in my own Coke world, CCA has undertaken its own innovation revolution, from being a laggard five years ago to now being a world leading innovator within the Coke system and, as Adam said, a practical example of that is Coke Zero. It came about because of our deep understanding of the Australian consumer.
We knew that men aged 20 to 29 or 20 to 39 were reducing their consumption of full sugar, mainly because they were worried about their waistline, perhaps because their exercise level had reduced. We also knew that Australian men generally don't like talking about diet products, let alone eating or drinking them, seeing it as too female oriented. So hence the Coke Zero positioning as the bloke Coke. The same great taste of Coke but without the sugar. The packaging, the black, the marketing, the taste of Coke Zero were all Australian innovations, and hence here is the rub - these were all very different to how the product had been launched in the USA and by all relevant measures as a result we have been two to three times more successful, and to give you some idea of that scale, Coke Zero has created its own segment in the cola market.
It became the third largest non-alcoholic beverage in Australia in just ten weeks and in fifteen months we have sold some 260 million bottles of Coke Zero in Australia with a retail value of over $400 million. Next year it will become the second largest brand. 260 million bottles is 13 bottles on average for every person in Australia. It was judged by AC Nielsen as the most successful new product launch for any beverage, confectionary or personal care product in the past ten years.
So why was it successful? Well, firstly, the intuition. It was a great product concept that dovetailed into that social shift towards health and wellbeing. Our research knowledge of the market said to make this work we had to adapt to new technologies to get our message across to our target audience, through internet, through SMS and through cut-through marketing. Then, finally, that rare ingredient, the passion and delivery of that painstaking detail of the execution by our people was outstanding and that reminded me that ultimately how important self belief is in turning innovation into real profit.
ADAM SPENCER: Thank you very much.
NAOMI MILGROM: Yes, absolutely, and it always interests me to listen to someone who is bringing a product from the northern hemisphere across to the southern hemisphere and the adaptations that they have to make, because if I look around my industry, in the fashion there isn't a northern hemisphere retailer or fashion that has been been successful in this country.
ADAM SPENCER: There has been a northern hemisphere retailer or fashion that has been successful in Australia?
NAOMI MILGROM: There is one that is still limping across - hopefully the MD isn't sitting here - called Esprit, which is out of Hong Kong, but it is a northern hemisphere retailer, but they are just limping along at the moment, but there has been no other. Some have tried obviously, Bennetton and various other companies, but there has never been a translation of northern hemisphere fashion over here.
ADAM SPENCER: Why is that? Is it something to do with the nature of fashion?
NAOMI MILGROM: I think it's a little bit like what Terry was saying, that the innovation that you need in the Australian market is critical to being able to get the Australian consumer to accept your product and I don't think that northern hemisphere retailers who are successful in the northern hemisphere understand the ideosyncratic nature of Australian retailing.
ADAM SPENCER: So is it fair to say, Terry, that whilst Naomi has an incredible challenge, she's trying to reinvent fashion, come up with new ideas, you can't just transport the old model, you're basically taking something that's very successful in America and changing the colour of the can?
TERRY DAVIS: It's very easy when you've got the world's most valuable brand to extend it into another area. I think Coke is so universal, that it's pretty unique. It's like Nike, it's like those brands that have transcended, that they're not American, they're not seen as American any more, they're seen as a global brand and it doesn't really matter.
ADAM SPENCER: Brett Godfrey, did you feel you were importing a UK brand or a world brand when Virgin Blue began in Australia or were you creating something completely new?
BRETT GODFREY: No, I think we rode on the shirt tails of the Virgin brand for a long time. It was synonymous with success, quality and whatnot, and I think when you realise that another airline started at exactly the same time as us, called Impulse, they had to spend a considerable amount, somewhere around $80 million, to get known in the market place. We took advantage of the fact that the brand in fact in the early days was a shield for us. So it was pretty important I think in our early days survival.
ADAM SPENCER: Where would you put yourself on that spectrum, Kate, with Google? Obviously - an international phenomenon. Have you had to ‘Aussie up’ Google to appeal to the Australian market?
KATE VALE: Well, it was pretty simple actually of just putting a radio button "search by Australian results only", so that's pretty simple.
ADAM SPENCER: Was that your idea?
KATE VALE: Yes, yes.
ADAM SPENCER: Excellent.
KATE VALE: But more specifically for the region, I guess mobile usage is higher around Asia, so it has been important for us to make sure that we are reaching users on mobile phones and not just on the web. So it's a little bit different to the US market.
ADAM SPENCER: And Paul,when we are talking ideas because in your environmental consultancy, you often work with people who are having ideas? What principles apply there when you are talking about an Australian versus an overseas market, et cetera?
PAUL GILDING: I think there are quite a few differences. I think that the culture we work in, in the US will work in Europe, will work in Australia, so you have a sense of western countries and differences between them and I think there is a lot more - there is quite a few differences about attitudes which are quite important. So, for example, in the Netherlands where I have lived and worked, people expect the government to fix environmental problems. In Australia people are used to recycling, therefore they are more prepared to take it on personally and fix it. In the US they think it is more of a business responsibility. So there's quite big difference there. So knowing the culture in which you are working and the context in which you are working I think can be quite important to developing a kind of model that would work.
ADAM SPENCER: I think everyone would agree when Terry says you have to have an environment where people are encouraged that if you fail it's not going to be the end of the world. You have to be in an environment where you dare to maybe occasionally get things wrong. Are Australians particularly accepting of that sort of culture compared to people around the world? Can you make generalisations?
PAUL GILDING: I think you can make generalisations. I think that people - you know, venture capital is a good place to look, and I think in the US you are more likely to get funding if you failed once before, right. In Australia that's the opposite. So Australia is more inclined towards it but Europe is less inclined towards it. So I think my experience is generally European companies are more conservative at developing new ideas I think. Americans tend to be more open to it and Australia is sort of somewhere in between in a whole bunch of ways.
NAOMI MILGROM: But I wonder how that works within the public company environment, like Terry works in, versus the private company environment that I work in, because it seems to me that the public company environment is much more focussed on a short-term bias, rather than a long-term bias. So I wonder how that affects what he is doing.
ADAM SPENCER: Is that fair to say, Terry, when you're looking over your shoulder every three months with your reports, with your figures, how the share market is going to react, does that sometimes stifle creativity or make people more concerned about short-term success than really risking it all?
TERRY DAVIS: Well, there's no doubt if you get in front of the game and you're successful already - success breeds success. I think that's a very important criteria. It is so much easier when you're a market leader and you're making good profits that you can take bigger risks and it's a bit like if you have that balance of knowing what your long-term goal has to be but also satisfying the public markets for your short terms. It is a balancing point. You have got to make sure you've got enough long-term projects and there's not debt for farm projects. It is again what I said earlier about getting that balance between the risk and the reward and having your short-term projects and then making sure you have got some good long-term as well.
KATE VALE: I found that when we floated we said that we're not a conventional company and we never will be and in that letter they said that if there's something innovative, it might lead to profits going down in the short-term but in the long-term the focus was that revenue would increase, we would do it regardless of the effects on that quarterly result and we have done that several times since we floated.
ADAM SPENCER: What about you, Brett? Compared to Terry where they've got 77 percent of the worldwide cola market, 50 percent of the beverage market, Virgin Blue coming on the scene had zero percent of the Australian market. This is back when there were two quite decent sized Australian airlines. You must have had to take a different approach?
BRETT GODFREY: I think you do and I think the one thing - I had lived overseas for about ten years before coming back to Australia and I think the one thing that really grabbed me was that Australians were still - we're more afraid of making a mistake than being successful and I think Americans are a bit different, I think they're not afraid to make mistakes, and I think one of the things that we have tried to impress upon our people is that, you know, put your hand up, we all make mistakes, go out and have a go and if you do make a mistake, as long as you learn from it, because I've found in general since coming back that that is a thing that holds us back, that we would rather have a clean slate than actually be successful but have a few mistakes.
Coming back to the point with venture capital, I think that's absolutely right. In this country, once you've failed you're cast adrift, and I think that's so wrong because we do obviously learn by our mistakes and I think people become better for it and that's what we try and infuse at Virgin Blue.
ADAM SPENCER: Well, let's talk about a workforce that is successfully harnessing creativity within it. Who is providing that creativity within the workforce? Is it everyone's responsibility? Is it shared evenly amongst the 20 year industry veteran and the crazy wide-eyed young punk who just mainlines, thinking outside of the square? Can sometimes a place just be too damn creative? What do you think?
NAOMI MILGROM: I think you have to assume that creativity is not some primitive force to start off with, that people are going to run riot with. There seems to be some tension about whether creativity is actually able to be harnessed and when you work in a creative environment it does come all the way from the leader, so from my point of view that leadership has got to give vision and creativity within the context of where you want to go with the business, and that's one of the things that we did when we bought Sportsgirl.
It was a company that had obviously gone into administration and it had severe problems under foreign ownership over the prior five years, and at that point in time, for our economic model to work, we actually had to choose the 65 people out of 124 that we had in front of us and out of the 65 people I'd say about 63 of them had worked for Sportsgirl before and had all had long-term careers with Sportsgirl but had just not been allowed to be creativity and to be innovative, and those 65 people went from being losers on day 1 to winners on day 2 under new leadership with creative vision.
ADAM SPENCER: Paul have you seen places that have tried to be too creative?
PAUL GILDING: I think you can. It is a classic dilemma in business between focus and creativity. If you get too broad and too creative you lose focus and don't achieve anything. If you get too focussed there needs to be change coming. So I think that's the constant tension.
I have certainly seen examples in the sustainability space where individuals have got so passionate about the issues they lost sight of their actual job, right, and that hasn't been their job to be like that. So I think you do have to recognise it does need control in the business context and control is the enemy of creativity, and that's a tension. That's just a paradox you are going to have to live with. So I think you have to guide that.
I think also though where it comes from is a really important question. I worked with Greenpeace for a long time and it was interesting after a long time at Greenpeace the most creative people often were the oldest ones, and the newcomers, the young very enthusiastic people took the culture and the ideology of Greenpeace far too seriously, whereas the old guard actually were able to break out of the box. That's a really interesting dilemma for me because I would have thought the old ones would not get the creativity, the young ones would, but it was quite the opposite.
ADAM SPENCER: Was that out of the confidence of knowing enough and being familiar enough with the organisation that they could back their intuition and back their ability?
PAUL GILDING: I think there was a bit of that and I think there was a bit of knowing what doesn't work, that you know, we've tried everything. Greenpeace is a good example because it is a whatever it takes organisation with a very clear focus, and likewise our business now is driven by the social changes posed by the business success, which generates business success in the end but that idea of focussing on a social purpose I think is very powerful. That gives the narrowness, that gives the focus the business needs but allows the creativity, whatever it takes to get towards that goal.
TERRY DAVIS: I wouldn't a hundred percent agree with Paul. I don't think at the top end of the funnel that you can ever be too creative in business. I think he's right in the respect that you've got to control it, but as soon as you seek to control it, you're doing exactly what you don't want to do, you're putting boundaries onto people of how they think and how you want them to respond.
The secret in a consumer goods environment is to say to people it's about continuous improvement. That's why I think a lot of this creativity can be a bit of a cliche, what actually it is. Well, it is really about continuous improvement and then you say from that you have a funnel that starts here and then you have to narrow it down, and it is the process by which you narrow it down is where you take the difference from being a great idea to being a great concept to the market.
ADAM SPENCER: What's it like walking around the corridors of Google, Kate? Is every room just a small room you open up, there's some geeky little guy tapping away, fuelled just on probably Coke Zero and pizza, just coming up with these bizarre incredible ideas in 17 dimensions that we mere mortals can't even understand, in a pair of tracksuit pants?
KATE VALE: Yes, it's exactly like that. No, our engineers, actually it's quite an interesting story and every person when they get hired as an engineer they are told that 20 percent of their time needs to be used for creativity and innovation. It doesn't have to be related to their job. It can be anything that they want and Google supports them to do that.
We've launched some really interesting products because of it - Google News, Orkut, which is a social networking site. They're not really our core business. One engineer really didn't fancy coming in every day from San Francisco in a car to the office. It was an hour commute and he was stuck in traffic and he couldn't make the most of his time. So he went and sourced out how much it would cost to get a Google shuttle every day, and plenty of them come in from San Francisco, air conditioned, with food and wireless internet, put a costing together, put it to our founders and it was approved that day.
So it's all about giving them the time to think and that definitely leads to creativity.
ADAM SPENCER: I've also read at Google there is a nutritionist who advises on what is being dished out in the canteen to make sure it's healthy food, there are massage services available to staff, et cetera. So there's a sort of a range of an innovative staff suites there, aren't there?
KATE VALE: Isn't that what every company does? No, we do. It is quite amazing and university graduates who are coming into your organisation, I think if they don't realise how lucky they've got it, they must go off to other companies and think, "Oh my God". So we do. We have on site massage every week. We have breakfast and lunch provided every day and a nutritionist is advising our chef on what's good for us. We get gym memberships, full health benefits.
ADAM SPENCER: Is that partly because at Google you do have more money than you know what to do with? And I've heard that even the guys who are employed to go around and just pick up the loose cash and put it in buckets are on 150,000 bucks a year. But on a serious point, is it conveivable that if things got a bit sharper at Google and it got a lot tougher and wasn't going as gang buster successfully, that the nutritionist and that sort of stuff might be the first things to go?
KATE VALE: No, and that's a commitment from our founders. That will never change. And we've even got one of those electric guitars on PS3 in the office and there were two engineers the other day just sitting around talking about something that they wanted to do. So when they're having fun and they're together and in a fun environment, I really do think that leads to creativity.
NAOMI MILGROM: I'm moving to Google.
ADAM SPENCER: Yeah, okay, advising their staff if they're well enough dressed.
NAOMI MILGROM: On fashion, I want to advise them on fashion.
KATE VALE: Are you saying something?
NAOMI MILGROM: No, you're perfect, Kate.
ADAM SPENCER: Let's take another key note address to give us something to think about from a man who is permanently on the go and bursting with ideas. He feels that his brand embodies freshness and creativity, but to be honest we just invited him because as head of an airline, you should see how many macadamia chocolates he can nick for the after party. He has done business everywhere in the world, except he stresses at high altitude with Ralph Fiennes. Ladies and gentlemen, please welcome Brett Godfrey to say a few words.
BRETT GODFREY: Fine introduction, thank you. I was asked to talk along the lines of a similar topic, which was clearly creativity and innovation equalling profit.
The reason we say that innovation and creativity is exceptionally important is if you look at what has gone before us, if you look at some of the airlines that have come into this market before - Compass, Impuls. Eight and a half out of ten airlines throughout the world fail within the first 12 months. It's not a very good strike rate. In fact, it is probably the reason why, when I cast my mind back to 1993 when I was touting a 20 page business plan around the world to banks and airlines, everyone else, they thought I had rocks in my head, and the reason was - they did remind me of Compass, they did remind me that there were two big goliaths or gorillas, as we later referred to, in Qantas and Ansett.
So what we said was we'd start off with a clean sheet of paper with our airline and our product and what we did was we employed people that had never ever worked in the industry before, pilots excepted of course, thankfully. I'd never run a business before, let alone an airline. No-one in the senior management team had ever, and I purposely picked people that had never actually been in those roles. Sure there was some industry experience but
I've often believed that experience can be overrated, particularly if you are picking out or picking the eyes out of people that you don't necessarily aspire to as mentors or look up to, and for us I didn't believe that the Australian economy and the Australian people were benefiting from the incumbents or the duopoly which was quite cozy at the time.
So we took it upon ourselves to be as un-airline like as we possibly could. That was going to be our innovation.
Well, we did just that by breaking down every single authoritative or hierarchical symbol in our company. As I said, I'm not the creator of Virgin Blue, I'm merely the conductor. As was being conveyed, I'm not the CEO internally, I'm just the big cheese or the big cahuna. We have the head of people, the head of nuts and beans. We try and demystify and break down the hierarchical structures for a very good reason. It opens doors. In fact, we do better than opening doors.
We take the door to a different station, a different airport every three or four months and we set up our headquarters there. And the idea behind that is that the senior people - and I actually stole this from someone else, a guy called Bob Ansett, who you'll all recall, who was a terribly successful guy with Budget Rent a Car for a while, grew very quickly, but he had a policy of putting his people behind the desk one day a month, his senior executives to actually see what it was like.
Well, we go a step better. We clean the planes, I clean the planes and I will always do it when I get off. It's a great chance to talk to our people. I also get out there and we chuck bags and the objective is - we have things called town councils where you can say what you want to me and anyone else on the senior management team, as long as it is relatively respectful. If you want to have a go, you're welcome to do that but we shut the door on that one. And then that happens as well because the idea is it allows the real ideas to come through.
We have got 4000 - it would be criminal not to try for those ideas. Let me give you four or five things that we've done. We are the first airline in the southern hemisphere to introduce something called live TV. I'm not doing a commercial here. I just want to tell you this because they are quite important. We were the first airline in Australia to offer $99 fares. If only we could get that now. That was a long time ago. We were the first airline in Australia to offer something called home or web check-in and we were the first airline in the world to launch something called kerbside check-in and we were the first airline in the world to bloody get rid of it because it was lousy, the point being not everything is a gem. I only created one of these or offered up one of these ideas - it wasn't the last one - but the point being these other ideas came from those 4000, not just the senior management team. So as I said, if you want to exclude your people that, the idea train, then you go ahead by just deciding that you're going to set up a strategy division or a group of people to be totally responsible for the direction of your airline.
So we broke down this authority and we also introduced a couple of other concepts.
No fear of failure. As an example our cabin crew, and I address every new group of cabin crew that come through the door, and the thing I preach time and time again is: Please, please, please leave your baggage at home; please come to work with ideas; please don't be robotic. We all know that standards, expectations, fashions change fairly quickly. Unfortunately, rule books never do. Rule books are very rigid and so outside of safety, and I always get a lambasting from the trainers on this, I say, "Outside of safety do what you bloody want. Have some fun. Engage. So what, if you make a mistake, I make plenty of them, just get on with the job and fix it up and don't do it again."
No-one gets fired at Virgin Blue for making a mistake. The idea is that you can learn from it. If they spill a drink on someone, and fortunately they don't do it too often, they can give away a ticket or a dry cleaning coupon. The whole idea of first names, first effects, empowers them to be better people and more innovative and come up with ideas that frankly, because I'm not there and I can't be micro managing a business of 4000 people, makes it easier to run and manage.
So I guess in summing up, Virgin Blue is now seven years old. It seems like just yesterday but it is seven years old. We operate 50 aeroplanes, 53. We just made a couple of big announcements today. We are now in the top 100 companies in Australia by market cap and as a result of what is going to happen over the next few months when we report our final numbers, we would like to think that most of this success has been because of these two points here in terms of trying to be creative, trying to be different, not trying to follow the leader.
And if I could just leave you with one thought and it is I think a fairly pertinent one: Don't ever ever enter a market unless you can do so with some sort of competitive advantage. Unless you can eke out that little niche, you're going to struggle.
But if you believe and genuinely have done your homework and think that you can find that niche in any new market, then don't let any banker or any private equity person, who probably doesn't have a creative or innovative bone in their body quite frankly, tell you not to do it. The same thing happened to me ten years ago and I would like to think that there are so many great ideas and so many great opportunities out there that get hamstrung at the last moment because they are dependent on some people, who if they actually thought about your idea and spent the time, they'd probably share your vision and probably want to own it themselves. So don't be discouraged, get out there and have a go and push whenever you think you've got the right idea. Thank you.
ADAM SPENCER: Brett Godfrey there with some illumination of the Virgin experience - less hierarchy, rotating head offices, senior staff cleaning planes, egalitarianism, first line first response. Any observations, Naomi? Next time I go into Sportsgirl to grab that fetching little midriff top, any chance I'm going to see you behind the counter?
NAOMI MILGROM: Absolutely. You would have seen me this morning in Pitt Street Mall.
ADAM SPENCER: So you endorse some of the stuff Brett was saying there?
NAOMI MILGROM: I totally agree with him. I'm not sure about having the drink spilt on me on a Virgin flight but other than that absolutely. I mean we do have 4000 people, the same amount as Brett, and I'm talking to them every day. I'm out there every day. I visit stores at least once a day.
ADAM SPENCER: Are there official channels within the organisation for ideas to flow through? Is there a culture that makes it clear, "Send them up, send them across"? What happens if people burst through with an idea in the Sussan Group?
NAOMI MILGROM: The biggest issue we have is about how a head office environment communicates, and we don't like to call it head office. As Brett tries, we try and find different language because I think language is one of the things that does create rules and I think you have to be very very careful with that, but we do have a vehicle in Sportsgirl called Girl Talk, we have a vehicle in Sussan called Clothes Line, and those are the vehicles that we are hoping that our staff will talk to us through.
ADAM SPENCER: Kate, what are the sort of mechanisms for solving issues at work, problems at work, management type things within Google?
KATE VALE: One way which we reward creativity is through what we call our founders' awards. So each quarter our founders celebrate successes with the whole organisation and it is broadcasted right across the globe in every office and they're rewarded with a significant amount of bonus, or money, and we found that that works really well and it does encourage innovation.
NAOMI MILGROM: Too much money again, too much money again.
ADAM SPENCER: Paul, Terry was talking about tectonic shifts in industries. Airlines are an example of an organisation, an industry that is now facing up to global warming as an issue. As a lot of different organisations try and position themselves and respond to that, will you see tectonic shifts and areas for people to, as Terry was saying, jump on an issue early and try and advance themselves?
PAUL GILDING: Yes, a lot of this could be really excellent because a lot of people Exxon won't do it and will go broke, which will be really good. So I think climate change is a really classic example of this kind of stuff. We worked as a consultancy to large companies like Ford over a long period of time and now I have a small company called Easy Being Green which grew last year from six to 200 people. So it's got very different kind of cultures. One is a serious consultancy and one is a young, dynamic Google type, not quite that size, but that sort of business, and I think that's really interesting because I think in climate change the prize will go to the first movers and the adaptive players and we are now looking at and seeing, and a classic in the auto industry for big companies is Toyota and Honda versus Ford and VM, right, so you are really seeing these big shifts and it's Virgin versus Qantas. It's the ones that really get the opportunity early and then move out with that and have that level of creativity. But the really exciting stuff I think is going to happen I think is going to happen from the new players. Google wouldn't exist ten years ago, seven years ago.
KATE VALE: Eight.
PAUL GILDING: Eight years ago? Extraordinary. So there will be Googles in the climate change space that we haven't heard of yet, don't exist yet, but will be around and be that size in five or ten years time, because there is something fundamental, right, about the large corporation, and particularly I think American corporations in my experience, that simply don't get the opportunities and don't move fast enough and there's something really challenging to them about that because they will - Ford I think will go broke, I think it won't exist as a company within five years as it currently exists, because of that inability to shift.
ADAM SPENCER: You think Ford will go broke as an organisation in the next five years?
PAUL GILDING: Yes.
ADAM SPENCER: Just tease that out a bit more. Why?
PAUL GILDING: Look, it is why climate change is such a fascinating issue because for many industries, utilities, toll companies, car companies included even, they haven't got the ability to change quickly, right. So they have a product development cycle of five years to eight years. The Prius, the current hot new car, right, came out eight years ago, developed 15 years ago. It takes a long time to develop big new ideas in that industry and I'm not sure it has to, but it does in their lexicon and the way they think.
Likewise, if you are investing in a coal plant, you're investing for 30 or 40 years. Therefore you need a level of stability and climate change is going to drive incredible instability into the economy and therefore I think in that discontinuous change, which we need to have by the way as a society, we are going to see a discontinuous flow as the players who can really disrupt their industry succeed quickly and most likely some will not respond.
Now, as a businessman advising large companies that I help to get around this, as a businessman in a small company, I say you beauty, right. As an activist I say farewell Exxon, good riddance. And I think there is that sense where you are going to see significant change and it's a healthy thing. Now, it's only healthy for the system though. Right, so if you're a company inside that system and you're facing discontinuous change, then its very scary.
ADAM SPENCER: Okay. Are there some companies in the world, are there particular fields in the world that are struggling with creativity as an issue at the moment? Are there some that are on top of it more?
PAUL GILDING: I think it varies by country. I think the US and Australia to a lesser extent have been really ill served by the ideological obsession with opposing action on climate change, so therefore the business community here has not become ready for it, has not been psyched into it, whereas they have much more in Europe. So I think it does vary by country, and that's a leadership question, about the business leadership and the corporate leadership and government leadership.
I think there is also a sense where certain industries by virtue of their structure, which I don't think is necessary by the way, I don't think you have to be not creative if you're a big heavy industry sort of company, like a miner, it can be creative but it is very often not and it is driven I think to a significant degree by the assumptions you make about the history of the company. I think Google is not in a different industry, it's actually just more creative and I think it's the creativity that drives people, not the actual industry they're in.
ADAM SPENCER: Okay.
PAUL GILDING: But Toyota does well, Honda does better, Ford does badly and does worse, right. Now, they're in the same industry, but very different cultures and there is a bit of a national difference but it's not just the national difference.
ADAM SPENCER: Okay, so what's the specific role of the boss in all of this? In organisations where hopefully there is creativity - it may well be boosting your profits, it may well be working for the organisation - what's the role of people further up the chain at the very top level? Is it a role of fostering? Is it a role of making sure it doesn't get too out of hand? Is it a role of getting down there and amongst them yourself? What would you say Terry?
TERRY DAVIS: Well, in our place I've got 20,000 people that work for us. So you just can't be the font of all knowledge. So therefore ultimately you have to be able to disseminate the process of innovation, of being able to mentor people to look at things in different ways, to open their minds, to open their views about whether it be the social shift or technology change. I think it is very much a mentoring and challenge, a mentor and challenge.
PAUL GILDING: I think it's primarily about focus. I think that the companies that have clear values and clear direction of the bigger picture and a clear objective. Like Google's first "do no evil" is a good one and I think that idea that you know what you are trying to achieve and therefore you want creativity towards it.
For us it's very simple. It's about cutting CO2 emissions. So our purpose is to cut CO2 emissions. That's the reason we're in business. So we want ideas of how we can do that profitably and therefore we have real clarity around that and around the values and I think that I'd struggle in the airline or a Coke sort of company because I couldn't get a purpose. That's a personal, not a moral judgment. It's just about where I come from.
So I think that being motivated to want to achieve the outcome, right, is actually really important, and I think increasingly important for people is having meaning in their work. So having a clear purpose I think actually builds creativity. We have an extraordinarily creative culture in Easy Being Green because they're really clear about their purpose and people are very passionate about it and want to find a way to make it happen because they believe in it.
ADAM SPENCER: Is it fair to say, Terry, there are some people that just aren't destined to be passionate about selling Coca Cola?
TERRY DAVIS: Well, I think you've got to be realistic and know that you're not going to have the same degree of motivation for every person that works for you. I think it's naive to think that everybody will have the same degree of passion. What you hope to do is to develop the passion in people to get them to think about one thing that's important to them. I think Paul is absolutely right. That clarity of purpose, even if it's a guy that's got the most rote job in the world but he's got some really clear targets and KPIs, it gives people that sense of purpose and hopefully enables them to be creative as well.
ADAM SPENCER: Naomi, what's a specific issue that you are facing in terms of creativity in your industry and what is a specific issue for you as a boss as a result?
NAOMI MILGROM: I think one of the most important issues that we're facing at the moment in terms of the clarity and consistency is the workforce that we're trying to employ at the moment. With full employment it's very very difficult at the moment to keep that clarity of purpose and keep that challenge going and keeping people passionate about what they're doing, because there's an enormous amount of shift in the retail industry, and if I look at what Brett has been able to do, a lot of the people who have left our industry, and my business in particular, have gone to Virgin - I just want to kill him - because he's looking for people who know how to talk to consumers all the time and that's what we're training our people to do. So that is one of my biggest challenges in terms of keeping our people motivated and creative all the time, because there's a lot of shift in the expectation of other industries.
I mean before banks never said that they actually wanted to talk to consumers. They don't even like consumers, banks. But in the last three or four years we've had a lot of people come to us and say, "We're leaving to go to the banking industry because they actually want to know how to talk to their consumers", not that it shows really.
ADAM SPENCER: So, apart from apologising to Naomi, Brett, what would you like to say on that point?
BRETT GODFREY: Even ourselves we are finding it a little bit harder. Passion doesn't pay the bills unfortunately and because of the current market wage push is certainly an issue that we all have to deal with. We are fortunate that people are very passionate usually about what they're doing at the airline and that serves a few purposes, not just creativity and innovation, probably more from a marketing perspective, because your people end up being the most important sales people for your organisation. So yes, I think we have - and that comes back to the point of not trying to take people who have done it before. So, you know, retail and--
NAOMI MILGROM: But you have been taking them from me.
BRETT GODFREY: --retail and hotels have been a great breeding ground for our people, for our staff, but it is even now for us pretty tough.
QUESTIONS FROM THE AUDIENCE:
AUDIENCE QUESTION: I would like to ask the panelists how they reward and recognise creativity and innovation in the business. Obviously we've heard how Google has large cash incentives, but perhaps from the other businesses as well please.
ADAM SPENCER: Excellent – apart from just giant buckets of cash that you can reward - not saying that you don't do other things as well and you may well at Google - ways of rewarding creativity. It is obviously an important point.
NAOMI MILGROM: We provide lunch. Does that help?
QUESTION: Only if you're creative?
NAOMI MILGROM: Only for the creative people, yes.
PAUL GILDING: I think it's about really acknowledging people and saying to the rest of the organisation, "Look at what this extraordinary person from the front line did that changed our whole business", and telling that story over and over again and making them feel really excited about it. I think passion doesn't pay the bills completely but it actually helps in terms of coming to work and I think that making that clear to people is really a very very powerful motivator, a much bigger motivator than money.
NAOMI MILGROM: Yes. It's probably a little bit different in my business because there's rarely one person who comes up with that light bulb or that eureka. It is much more about the team effort and how everybody contributes to that result, because every day we go into the office and we find out what our customers hate, just like Brett does. They can tell you straight away. You'll know if a garment has sold the day before or not. So it is really about the team problem solving to be able to get that creative result to make that work.
AUDIENCE QUESTION: My interest is in ethics…It's where you feel that ethics is fitting into this. Is there room for ethics in creativity and innovation?
ADAM SPENCER: Who wants a go at that? Terry?
TERRY DAVIS: You've got to be careful about saving the consumer from themselves. Ultimately good companies educate their consumers. There's no doubt about that, that good companies, you know, it is rare that you see non-ethical companies prosper and survive. If people want - you know, this whole thing about health and wellbeing is a classic, where today having a McDonalds and a water is healthy, having a hamburger and water is healthier and having salad and the Coke is healthy. You've just got to be really careful about treating the consumer like a moron, because they're not, they're very smart and what they want is they want to have choice, they want to have an understanding of what those choices are and feel that they are within control of those choices, and I think that's the role of ethical companies, to provide those choices and make sure that they are well informed, whether it is on the label, whether it's the packaging. It's all those things.
What I disagree with most of all, when you see these ads for food, it says 90 percent fat free. Well, is that good or bad? I don't know, and that's the whole thing, it's about education.
PAUL GILDING: Just a question about that, Terry: Where do you draw the line on consumer choice because it can be true and it's a complex issue but it can also be self-serving if you're not careful? So is the tobacco industry giving consumers choice or should they not promote themselves? There must be some limits to giving consumers choice. I agree with your basic premise which is that ethics is not as simple as that in terms of giving choice but--
TERRY DAVIS: You can go forever about should we have - for every step forward there is a step back. Otherwise let's stop mining uranium because they could make an atomic bomb from it. Let's stop sugar farming because if you eat sugar you get fat. Well, you don't. If you don't exercise you get fat. So you say hey where - I agree where do you draw the line.
PAUL GILDING: That's the question, where you draw the line.
TERRY DAVIS: That is and ultimately society draws the line for you.
ADAM SPENCER: Naomi, are there a lot of ethical issues that circulate around the fashion industry that have to be taken into account?
NAOMI MILGROM: There absolutely are, particularly the one the gentleman mentioned before. At the Melbourne fashion festival we had a lot of issues to deal with in terms of skinny models and in fact we went through a process of screening our models with a base fat index to make sure they were over a certain--
ADAM SPENCER: I would have nailed that.
NAOMI MILGROM: So particularly on that matter we are very concerned and very tough on the issues and certainly working very hard, and I think the issue is that you have to start somewhere and for good companies with good values and good ethics, working with great people, we want to start somewhere with everything that we do. Like our plastic bags, we want to make sure that they are not plastic bags in five years time. So we are starting to work on all of these issues at the same time. We've been working on them for a long time but you have to start somewhere and you are responding to the needs of your consumer, as Paul said, all of the time, and they're teaching us what they want from us as well.
ADAM SPENCER: Is it fair to say that the process of actually coming up with good ideas and changing the way an organisation thinks or works is more a lot of hard work than just a moment of breakthrough?
KATE VALE: Absolutely. I think there's something missing in that equation there. It's creativity, innovation, plus hard work equals profit. And I think also something interesting is good ideas usually don't come out between nine and five at your desk. So you need to encourage people to be able to work from home or work in an environment that creates the ability to innovate and be creative.
PAUL GILDING: Can I just challenge the idea, not at its essence, but it's the focus on it being too strong, that we have to become more innovative, we have to become more creative. I actually think the biggest issue is not new ideas. The biggest issue is making the best of the new ideas happen. I think Brett's point about, "Look, we've got 4000 people. It would be dumb not to listen to them", but you know they don't have any more ideas. What they're doing is they're having the ideas taken into action.
So in my space, in my mental space for example, all the ideas of what to do, I've been in the ideas space in activism for 30 years, right. Now we're doing something, which is very exciting, but the ideas aren't new. Doing something with the ideas is what's new. The big ideas in cutting CO2 emissions are installing light bulbs and solar hot water. Now, they're 30 year old ideas, but we're doing them now.
So the process of getting the ideas out, celebrating the ideas, giving rewards for the ideas, saying, "It's important to me that we have your ideas", and then implementing them really well I think is actually more important than generating new ideas, otherwise you just generate frustration.
ADAM SPENCER: In fact, in that field, to achieve a lot of the breakthroughs in CO2 emissions, to reduce them quite significantly, you would just be trying to convince people to implement the best ideas that have already been had, with quite ready made and easy to implement technologies to bring about a massive change.
PAUL GILDING: Correct, and yet most of the energy in the environmental space and climate change, because it is a topical issue, is focussed on new ideas. Where's the breakthrough technology, where's the magic answer, the silver bullet, the clean new clear power - another oxymoron, like creative accountants. There's that opportunity. It is about doing the basic stuff that we know.
Now, for us the innovation comes in the business model. Like we installed three million light bulbs last year because we had the idea of taking the carbon price - only place in the world - taking the carbon price of the CO2 saved in applying of the light bulb, so we could give it away, right, installing it. So it wasn't actually a new idea about the product. It was about the process, but again, that wasn't a new idea. We just made it happen. And I just think there's far too much obsessive focus in consultancies that whoever wants to be creative, oh we'll have a creativity consultant come in, and most of it's about just good management frankly.
ADAM SPENCER: I just want to tease out across the rest of the panel: How strong is this link? How direct is this link? profitable. How strong do we draw the link on the panel? Fundamental?
TERRY DAVIS: Fundamental.
ADAM SPENCER: Brett?
BRETT GODFREY: Yes, I think so. I think if you don't, you soon will be caught and passed and gone.
ADAM SPENCER: What is your question down the front, sir?
MICHAEL KELLY: Yes, mine is for Naomi. It is about inspiring leadership. My name is Michael Kelly. Can you give us two practical ways that you inspire your team? And the second question is this: What grade would you give Australian CEOs in how well they inspire their team?
NAOMI MILGROM: From my point of view, thank you, Michael, the thing that I try and do for inspiring my team is what I call management by conversation. While I do have an office, I'm never ever in it. I'm walking around my office every day, every minute, talking to people, finding out what their interests are, how they're doing in both their personal life and in their work life and trying to understand how I can help them in both aspects of their life. And we haven't got onto that at all in this conversation, but part of the issue about creativity and innovation, in my view, is actually the work/life balance, which I know is getting a lot of topics at the moment and a lot of press, but for me it is about really understanding, motivating and managing by conversation, talking to people every single minute of the day and finding out what they're doing both at home and at work. I couldn't comment on the quality of CEOs in Australia.
ADAM SPENCER: Would anyone like to comment on the quality of CEOs in Australia? Paul?
BRETT GODFREY: Bloody good, yeah.
PAUL GILDING: Bloody appalling.
ADAM SPENCER: Appalling?
PAUL GILDING: On this sort of topic I do think that - and obviously there's some great examples of some extraordinary CEOs in Australia, and we're here tonight.
NAOMI MILGROM: Yes, we're all sitting here.
PAUL GILDING: But outside that, no, seriously, there are some great examples of it but I do think by and large Australia has been ill served until about five years a
AUDIENCE QUESTION:
QUESTION: In terms of getting the maximum creative return from your staff, do you think that creative thinking, the ability to generate a creative idea is a natural process and style that can be brought out and nurtured in a certain type of person or do you think that it could actually be taught to anybody?
ADAM SPENCER: Are you born with the magic or can it be taught to you and brought out at a time? Terry?
TERRY DAVIS: I'm a born optimist. I think that everybody has got a creative instinct but there are people who are dead but they just don't know it yet. So you've got to be careful in understanding what you're dealing with but if you've got people that have knowledge, and that really is the key, if they have knowledge, then I think yes, you can get the best out of them. They are not going to be rocket scientists, they may not necessarily come up with things that are going to you to NASA but they may come up with one idea that helps them or helps us. I'm an optimist.
BRETT GODFREY: I think environment is the key element there. I mean you put people in the right environment, whether it's Google or anything, it can be a mining company. It's the trust, it's the no fear of failure, it's the fact that you're not going to be laughed at. Everyone has ideas and in fact the people at the grass roots will have better ideas about their day-to-day than you'll ever have as a manager but to tease that out you've got to have a good environment.
QUESTION: My question relates to money, profit. What out of the companies that are up on stage, what measurement do you make of creativity? Do you have a revenue measurement or a profit measurement?
NAOMI MILGROM: For us it is just a straight EBIT number. I mean in the fashion business we believe that we are creative in every single aspect of our business and every one in the team contributes to that all the time. So for us it is a straight EBIT number.
BRETT GODFREY: Yes, I'm 100 percent behind that.
PAUL GILDING: For us, for the companies that I have consulted to, including the IBMs, the 3Ms and Duponts and stuff, they have a measure of new products in a time period. So how often do we create - are 25 percent of our products less than three years old, for example? They actually do measure the result, not the creativity but you measure the result, not by profit but by innovation.
ADAM SPENCER: Okay, excellent. I would like our panelists in wrapping up to give us anything up to your top three tips for creativity and turning it into profit. I say anything up to your top three, so if further down the line you've only got one, then you can say, look, Terry nicked a couple of mine or something like that. So we'll start with you, Terry. Anything else you want to throw into the discussion bowl?
TERRY DAVIS: I'd spend enormous amounts of time with your customer and if they're not you, the consumer, spending enormous amounts of time with the consumer, because they're the people. Finding ways of having a direct relationship with the consumer, even if you have to go through intermediaries is just such an important part of the process to understand what that window of opportunity is.
NAOMI MILGROM: Really from me the single biggest issue is flexibility. I think that if you can offer a flexible environment to a flexible workforce and be flexible in your thinking and be flexible in everything you are trying to achieve, you provide people with the arena for being creative and innovative. So I think flexibility is really the most important thing.
BRETT GODFREY: I just add I think trust and integrity in your organisation. I think trusting people and letting them know, again this issue of not being afraid to make a mistake is the biggest thing that we could possibly do to draw out creative genius.
KATE VALE: Give them the forum for their ideas, so they know their ideas are being listened to and don't shoot down any of their ideas.
PAUL GILDING: I think purpose, like being really clear on what your purpose is, which includes ethics and values. They give people a framework in which to be creative, so that they know what they're trying to achieve. I think that's really important. I think love your people. No, I think really respect and show that you care about and listen to and celebrate and believe in your people, so that it is worthwhile their making an effort. And I think customers are overrated and everyone's obsessed by them and it's not that I'm being provocative to try and make the point. Obviously listen to your customers, but really listen to the people who aren't your customers, listen to people who influence your customers, listen to people who are outside your circle, outside their circle, but try and get the really creative ideas from people who aren't in your industry, and I think Brett's got great examples there of actually employing people from outside your industry as part of that process. So I just think customers are overrated.
ADAM SPENCER: We've been inside squares, outside squares, inside circles, outside circles. You've got to get moving so that that guy can come and discuss a world breaking idea with you, Kate. He could be the next Serge Brin for all we know.
Can you please thank our panel for their efforts tonight
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