1 RE-IMAGINE! EXCELLENCE/2017 Seoul/07 December 2016 Tom Peters’(This presentation/10+ years of presentation slides at tompeters.com; also see our annotated 17-part Master/THE WORKS at excellencenow.com) 1 1

2 BUSINESS’S MORAL IMPERATIVE2 2

3 “Almost half of U.S. jobs are at high risk of computerization over the next 20 years, according to Oxford academics Carl Benedikt Frey and Michael A. Osborne.” —Harriet Taylor/CNBC/9 March 2016

4 “The median worker is losing the race against the machine.” *—Erik Brynjolfsson and Andrew McAfee, Race AGAINST the Machine (*“Occupations intensive in tasks that can easily be computerized are usually in the middle class.”/MIT’s David Autor) “If you think being a ‘professional’ makes your job safe, think again.” —Robert Reich

5 Foxconn/1,000,000 Robots in Next Three Years: “Since 1996, manufacturing employment in China itself has actually fallen by an estimated 25 percent. That’s over 30,000,000 fewer Chinese workers in that sector, even while output soared by 70 percent. It’s not that American workers are being replaced by Chinese workers. It’s that both American and Chinese workers are being made more efficient [replaced] by automation.” —Erik Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

6 CORPORATE MANDATE #1 2016: Your principal moral obligation as a leader is to develop the skillset, “soft” and “hard,” of every one of the people in your charge (temporary as well as semi-permanent) to the maximum extent of your abilities. The bonus: This is also the #1 mid- to long-term … profit maximization strategy! 6 6

7 1/4,096: excellencenow.com “Business has to give people enriching, rewarding lives … or it's simply not worth doing.” —Richard Branson 7 7

8 LONGTERM VITALITY THROUGHBE THE BEST: LONGTERM VITALITY THROUGH SME POWER 8 8

9 SME Power: “Research shows that new, small companies create almost all the new private sector jobs—and are disproportionately innovative.” Source: Superstar fund manager Gervais Williams, The Future Is Small: Why AIM [Alternative Investment Market] Will Be the World’s Best Market Beyond the Credit Boom.

10 AND THE WINNERS AREN’T/ARE10 10

11 “I don’t believe in economies of scale“I don’t believe in economies of scale. You don’t get better by being bigger. You get worse.” —Dick Kovacevich, former CEO, Wells Fargo “Mr. Foster and his McKinsey colleagues collected detailed performance data stretching back 40 years for 1,000 U.S. companies. They found that NONE of the long-term survivors managed to outperform the market. Worse, the longer companies had been in the database, the worse they did.” —Financial Times 11 11

12 AND THE WINNERS AREN’T/ARE12 12

13 Retail Superstars: Inside the 25 Best Independent Stores in America —by George Whalin13 13

14 and 1,400 varieties of hot sauce—not to mention 12,000 wines pricedJUNGLE JIM’S INTERNATIONAL MARKET, FAIRFIELD, OHIO: “An adventure in ‘shoppertainment’ [shopping + entertainment] begins in the parking lot and goes on to 1,600 cheeses and 1,400 varieties of hot sauce—not to mention 12,000 wines priced from $8-$8,000 /bottle; all this is brought to you by 4,000 vendors. Customers from every corner of the globe.” Award: “AMERICA’S BEST RESTROOM.” Source: George Whalin, Retail Superstars: Inside the 25 Best Independent Stores in America

15 COMMERCE BANK/METRO BANK: Get ’Em Away From the ATM and Into the Branches: 7 days/week 7:30A-8:00P (Fri/Midnight) 7:30AM = 7:15AM 8:00PM = 8:15PM Source: Vernon Hill, Fans, Not Customers, How to Create Growth Companies in a No Growth World 15

16 (Tom, Vernon Hill, and Sir Duffield/“Duffy”)2,000,000+ dog biscuits/yr (Tom, Vernon Hill, and Sir Duffield/“Duffy”)

17 The Commerce Bank*/Metro Bank Model “Are you going to COST CUT your way to prosperity?” (“Cost-cutting is a death spiral.”) Or … “Are you going to SPEND your way to prosperity?” Source: Vernon Hill, Fans! Not customers. How to Create Growth companies in a No Growth World (*Commerce Bank sold to TD Bank for $8.5B)

18 The Commerce Bank/Metro Bank Model “OVER-INVEST IN OUR PEOPLE, OVER-INVEST IN OUR FACILITIES.” Source: Source: Vernon Hill, Fans! Not customers. How to Create Growth companies in a No Growth World

19 MITTELSTAND* *“agile creatures darting betweenthe legs of the multinational monsters” (Bloomberg BusinessWeek) 19

20 Hidden Champions* of the 21st Century: Success Secrets of Unknown World Market Leaders/ Hermann Simon (*1, 2, or 3 in world market; <$4B; low public awareness) Baader (Iceland/80% fish-processing systems) Gallagher (NZ/electric fences) W.E.T. (heated car seat tech) Gerriets (theater curtains and stage equipment) Electro-Nite (sensors for the steel industry) Essel Propack (India/tooth paste tubes) SGS (product auditing and certification) DELO (specialty adhesives) Amorim (Portugal/cork products) EOS (laser sintering) Beluga (heavy-lift shipping) Omicron (tunnel-grid microscopy) Universo (wristwatch hands) Dickson Constant (technical textiles) O.C. Tanner (employee recognition/$400M) Hoeganaes (powder metallurgy supplies)

21 They manage for VALUE—not for EPS. Michael Raynor and Mumtaz Ahmed: THE THREE RULES: How Exceptional Companies Think*: 1. BETTER before cheaper. 2. REVENUE before cost. 3. There are no other rules. (*From a database of over 25,000 companies from hundreds of industries covering 45 years, they uncovered 344 companies that qualified as statistically “exceptional”—then a final 27) Jeff Colvin, Fortune: “The Economy Is Scary … But Smart Companies Can Dominate”: They manage for VALUE—not for EPS. They get radically CUSTOMER-CENTRIC. They keep DEVELOPING HUMAN CAPITAL.

22 “BE THE BEST. IT’S THE ONLY MARKET THAT’S NOT CROWDED.”From: Retail Superstars: Inside the 25 Best Independent Stores in America, George Whalin 22 22

23 “Wicked problems”

24 THREE VALUE-ADDED TACTICS24 24

25 10 August 2011!

26 Design RULES! APPLE market cap > Exxon Mobil* *10 August 201126 26

27 “We don’t have a good language to talk about this kind of thing“We don’t have a good language to talk about this kind of thing. In most people’s vocabularies, design means veneer. … But to me, nothing could be further from the meaning of design. DESIGN IS THE FUNDAMENTAL SOUL OF A MAN-MADE CREATION.” —Steve Jobs 27

28 Hypothesis: Men cannot design for women’s needs!!??

29 Women BUY (Everything) !29

30 Source: Cover, Economist“Forget CHINA, INDIA and the INTERNET: Economic Growth Is Driven by WOMEN.” Source: Cover, Economist 30 30

31 W > 2X (C + I)* *“Women now drive the global economy. Globally, they control about $20 trillion in consumer spending, and that figure could climb as high as $28 TRILLION in the next five years. Their $13 trillion in total yearly earnings could reach $18 trillion in the same period. In aggregate, women represent a growth market bigger than China and India combined—more than twice as big in fact. Given those numbers, it would be foolish to ignore or underestimate the female consumer. And yet many companies do just that—even ones that are confidant that they have a winning strategy when it comes to women. Consider Dell’s …” Source: Michael Silverstein and Kate Sayre, “The Female Economy,” HBR 31 31

32 “Women are THE majority market” —Fara Warner/The Power of the Purse What needs to change to take advantage of this? EVERYTHING: Product design, distribution, marketing, culture (Take the “squint test.”) 32 32

33 Value-Added on Steroids: The (ENORMOUS) (UBIQUITOUS) “Services Added” Opportunity

34 “Rolls-Royce now earns MORE from tasks such as managing clients’ overall procurement strategies and maintaining aerospace engines it sells than it does from making them.” —Economist

35 UPS to UPS: UPS = United Problem Solvers* **(*Trademark/**Parcels to Services/Turnkey supply-chain management)

36 Social Business/ Customer Engagement/Customer Control/

37 “IT TAKES 20 YEARS TO BUILD A REPUTATION AND 5 MINUTES TO RUIN IT.”Welcome to the Age of Social Media “The customer is in complete control of communication.” “What used to be “word of mouth” is now “word of mouse.” You are either creating brand ambassadors or brand terrorists doing brand assassination.” “IT TAKES 20 YEARS TO BUILD A REPUTATION AND 5 MINUTES TO RUIN IT.” Source: John DiJulius, The Customer Service Revolution

38 one, is far more valuable—not to mention far cheaper!. …“I would rather engage in a Twitter conversation with a single customer than see our company attempt to attract the attention of millions in a coveted Super Bowl commercial. Why? Because having people discuss your brand directly with you, actually connecting one-to- one, is far more valuable—not to mention far cheaper!. … “Consumers want to discuss what they like, the companies they support, and the organizations and leaders they resent. They want a community. They want to be heard. “[I]f we engage employees, customers, and prospective customers in meaningful dialogue about their lives, challenges, interests, and concerns, we can build a community of trust, loyalty, and—possibly over time—help them become advocates and champions for the brand.” —Peter Aceto, CEO, Tangerine (from the Foreword to A World Gone Social, by Ted Coine & Mark Babbit) (FYI: Also see Peter Aceto’s book Weology.)

39 (BIG) Data = (BIG) $$$!

40 Property Management to Data Management“Caesars Entertainment have bet their future on harvesting personal data rather than developing the fanciest properties.” —Adam Tanner, “What Stays in Vegas: The World of Personal Data—Lifeblood of Big Business—and the End of Privacy as We Know it

41 Internet of EverythingIoE/ Internet of Everything 41

42 2016: GE goes to Boston!

43 INNOVATION 43 43

44 INNOVATION/Lesson50: WTTMTW44 44

45 WHOEVER TRIES THE MOST THINGS WINS 45

46 “FAIL. FORWARD. FAST. ” —High Tech CEO, Pennsylvania “FAIL FASTER“FAIL. FORWARD. FAST.” —High Tech CEO, Pennsylvania “FAIL FASTER. SUCCEED SOONER.” —David Kelley/IDEO “MOVE FAST. BREAK THINGS.” —Facebook “REWARD EXCELLENT FAILURES. PUNISH MEDIOCRE SUCCESSES.” —Phil Daniels, Sydney exec “IF THINGS SEEM UNDER CONTROL, YOU’RE JUST NOT GOING FAST ENOUGH.” —Mario Andretti, race driver “I’M NOT COMFORTABLE UNLESS I’M UNCOMFORTABLE.” —Jay Chiat “IF IT WORKS, IT’S OBSOLETE.” —Marshall McLuhan

47 WTTMTAMTMMTFW 47

48 WHOEVER TRIES THE MOST THINGS AND MAKES MISTAKES FASTEST WINS 48

49 THAT DON’T EMBRACE FAILURE — eventually get in“What really matters is that companies that don’t continue to experiment— COMPANIES THAT DON’T EMBRACE FAILURE — eventually get in a desperate position, where the only thing they can do is make a ‘Hail Mary’ bet at the end.” —Jeff Bezos

50 “The Silicon Valley of today is built less atop the spires of earlier triumphs than upon the RUBBLE OF EARLIER DEBACLES.” —Paul Saffo “The secret of fast progress is INEFFICIENCY, FAST AND FURIOUS AND NUMEROUS FAILURES.” —Kevin Kelly “The essence of capitalism is ENCOURAGING FAILURE, not rewarding success.” —Nassim Nicholas Taleb 50

51 REQUISITE: A “TRY IT” “CULTURE”

52 “EXPERIMENT FEARLESSLY” Source: BusinessWeek, “Type A Organization Strategies: How to Hit a Moving Target”—TACTIC #1 “RELENTLESS TRIAL AND ERROR” Source: Wall Street Journal, cornerstone of effective approach to “rebalancing” company portfolios in the face of changing and uncertain global economic conditions 52 52

53 “You can’t be a serious innovator unless and until you are ready, willing and able to seriously play. ‘Serious play’ is not an oxymoron; it is the essence of innovation.” —Michael Schrage, Serious Play SORRY … I LOVE THIS. “SERIOUS PLAY” … OR … FUHGEDDABOUDIT!!!!!!!!!!!!!!!! No bull: I’m 57 … and I believe that this is … THE Truth. NO SHIT. 53

54 Dominic Barton, Managing Director, McKinsey & Co.: “Culture.”WSJ/ : “What matters most to a company over time? Strategy or culture? Dominic Barton, Managing Director, McKinsey & Co.: “Culture.”

55 Case Study #1: Scaled Composites Burt Rutan55 55

56 “What are Rutan’s management rules. He insists he doesn’t have any“What are Rutan’s management rules? He insists he doesn’t have any. ‘I don’t like rules,’ he says. ‘Things are so easy to change if you don’t write them down.’ Rutan feels good management works in much the same way good aircraft design does: Instead of trying to figure out the best way to do something and sticking to it, just try out an approach and keep fixing it.” —Eric Abrahamson & David Freedman, A Perfect Mess: The Hidden Benefits of Disorder “Scaled Composites has rolled out 26 new types of aircraft in 30 years, at a time when giant aerospace companies struggle to get a single new aircraft out in a decade.”

57 Bert Rutan’s No Rules “Rules”Bert Rutan’s No Rules “Rules” *Get going, now; fix it after you’ve gotten started. *Forget “best,” forget rules—just run like mad and adjust fast. *People with passion and breadth—given freedom from Day #1 to try any-damn- thing. (Specialism secondary.) *Everyone questions everything (and everyone) all the time. *Applaud mistakes—AND the person who made them.

58 Case Study #2: Soichiro Honda Honda58 58

59 “Asked for the most important attribute that an ideal Honda applicant should have, [Soichiro Honda] noted that he preferred ‘people who had been in trouble.’ ” “Honda believed genius arose from idiosyncrasy, ‘Non-conformity is essential,’ he told his workers.’” Source: Jeffrey Rothfeder, Driving Honda: Inside the World’s Most Innovative Car Company

60 “ ‘I [Soichiro Irimajiri, head of Honda USA] will now imitate Toyota Man,’ at which point Irimajiri puts on blinders and then proceeds to walk straight into a wall and fall down, ‘very good on a straight line, no peripheral vision. … Now Honda Man is a guerilla fighter, Honda Man loves loves chaos. Toyota Man hates, hates chaos.’ ” Source: Jeffrey Rothfeder, Driving Honda: Inside the World’s Most Innovative Car Company

61 *Individual responsibility over corporate mandates The Honda Way *Individual responsibility over corporate mandates *A flat organization *Autonomous and ad hoc design, development and manufacturing teams that are nonetheless continuously accountable to one another *Perpetual change as working medium *Unyielding cynicism about what is believed to be truth Source: Jeffrey Rothfeder, Driving Honda: Inside the World’s Most Innovative Car Company

62 “Skunk Works” (Authorized Renegades)

63 “Skunk Works”/ Lockheed/ SR-71/125 vs. 5,0001%/“Play Money”/ Starbucks Internal Venture Grants/ Amex, Marriott, Etc. (SkunkWorks Inc./TP)

64 We Are What We Eat. We Are Who We Spend Time With.

65 be either a blessing or a curse.” —Billy Cox“You will become like the five people you associate with the most—this can be either a blessing or a curse.” —Billy Cox 65

66 The “We are what we eat”/ “We are who we hang out with” Axiom: At its core, every (!!!) relationship-partnership decision (employee, vendor, customer, etc., etc.) is a strategic decision about: “Innovate, ‘Yes’ or ‘No’ ” 66 66

67 “The Bottleneck is at the … “Where are you likely to find people with the least diversity of experience, the largest investment in the past, and the greatest reverence for industry dogma … Top of the Bottle” — Gary Hamel/Harvard Business Review 67

68 **ONE OR TWO ENTREPRENEURS—AND PERHAPS A VC. 10-Person Board of Directors Fit for the Age/2017 **AT LEAST TWO MEMBERS UNDER AGE 30. (Youth must be served/guide us at-the-top circa 2017—this is rare!!) **AT LEAST THREE WOMEN. (Boards with F-M balance lead to very high relative performance.) **ONE IT/DATA ANALYTICS SUPERSTAR. (Not an “IT representative,” but a Certified “Waterwalker” from, say, Google.) **ONE OR TWO ENTREPRENEURS—AND PERHAPS A VC. (The entrepreneurial bent must directly infiltrate the board.) **ONE PERSON OF STATURE WITH A “WEIRD” BACKGROUND—ARTIST, MUSICIAN, SHAMAN, ETC. (We need regular uncomfortable oddball challenges.) **A CERTIFIED “DESIGN GURU.” (Design presence at Board level is simply a must in my scheme of things.) **NO MORE THAN ONE-TWO OVER 60. (Too many Oldie Boards! Stop. NOW.) **NO MORE THAN THREE WITH MBAs. (Why? The necessity of moving beyond the emphases of the MBA-standard-predictable-linear-analytic-certified-vanilla model.) (Partial inspiration for this: Cybernetics pioneer W. Ross Ashby’s “Law of Requisite Variety.” The diversity of the Board should more or less match [be consistent with] the diversity [madness/2017] of the context/environment.)

69 **ONE OR TWO ENTREPRENEURS—AND PERHAPS A VC. 10-Person BOARD OF DIRECTORS/Fit for the 2017 **AT LEAST TWO MEMBERS UNDER AGE 30. (Youth must be served/guide us at-the-top circa 2017—this is rare!!) **AT LEAST THREE WOMEN. (Boards with F-M balance lead to very high relative performance.) **ONE IT/DATA ANALYTICS/SOCIAL MEDIA SUPERSTAR. (Not an “IT representative,” but a Certified “Waterwalker” from, say, Google.) **ONE OR TWO ENTREPRENEURS—AND PERHAPS A VC. (The entrepreneurial bent must directly infiltrate the board.) **ONE PERSON OF STATURE WITH A “WEIRD” BACKGROUND—ARTIST, MUSICIAN, SHAMAN, ETC. (We need regular uncomfortable oddball challenges.) **A CERTIFIED “DESIGN GURU.” (Design presence at Board level is simply a must in my scheme of things.) **NO MORE THAN ONE-TWO OVER 60. (Too many Oldie Boards! Stop. NOW.) **NO MORE THAN THREE WITH MBAs. (Why? The necessity of moving beyond the emphases of the MBA-standard-predictable-linear-analytic-certified-vanilla model.) (Partial inspiration for this: Cybernetics pioneer W. ROSS ASHBY’S “LAW OF REQUISITE VARIETY.” The diversity of the Board should more or less match [be consistent with] the diversity [madness/2017] of the context/environment.)

70 PEOPLE 70 70

71 Putting People (REALLY) First71 71

72 “PEOPLE BEFORE STRATEGY”—Lead article, Harvard Business Review. July-August 2015, by Ram Charan, Dominic Barton, and Dennis Carey 72 72

73 Liberating the Heroic Spirit of Business“In a world where customers wake up every morning asking, ‘What’s new, what’s different, what’s amazing?’ success depends on a company’s ability to unleash initiative, imagination and passion of employees at all levels —and this can only happen if all those folks are connected heart and soul to their work [their ‘calling’], their company and their mission.” —John Mackey and Raj Sisodia, Conscious Capitalism: Liberating the Heroic Spirit of Business

74 “You have to treat your employees like customers.”—Herb Kelleher, Southwest Airlines, upon being asked his “secret to success” “If you want staff to give great service, give great service to staff.” —Ari Weinzweig, Zingerman’s (Small Giants: Companies That Choose to Be Great Instead of Big) 74 74

75 Training = Investment #1!

76 In the Army, 3-STAR GENERALS worry about trainingIn the Army, 3-STAR GENERALS worry about training. In most businesses, it's a “ho-hum” mid-level staff function. 76

77 Strategic Asset #1! 1st-Line Leaders

78 If the regimental commander lost most of his 2nd lieutenants and 1st lieutenants and captains and majors, it would be a tragedy. IF HE LOST HIS SERGEANTS IT WOULD BE A CATASTROPHE. The Army and the Navy are fully aware that success on the battlefield is dependent to an extraordinary degree on its Sergeants and Chief Petty Officers. Does industry have the same awareness? 78

79 Women Rule! 79

80 For One (BIG) Thing … “McKinsey & Company found that the international companies with more women on their corporate boards far outperformed the average company in return on equity and other measures. Operating profit was … % higher.” Source: Nicholas Kristof, “Twitter, Women, and Power,” NYTimes,

81 LEADERSHIP: THREE TACTICS81 81

82 MBWA/25 82 82

83 Managing By Wandering Around (“Hard is soft. Soft is hard.”)83

84 “I’m always stopping by our stores— at least 25 a week“I’m always stopping by our stores— at least 25 a week. I’m also in other places: Home Depot, Whole Foods, Crate & Barrel. I try to be a sponge to pick up as much as I can.” —Howard Schultz Source: Fortune, “Secrets of Greatness” 84

85 1 Mouth, 2 Ears

86 Suggested Core Value #1: “We are Effective Listeners—we treat Listening EXCELLENCE as the Centerpiece of our Commitment to Respect and Engagement and Community and Growth.” 86 86

87 is notetaking—he has hundreds of notebooks.)Part ONE: LISTEN* (pp11-116, of 364) *“The key to every one of our [eight] leadership attributes was the vital importance of a leader’s ability to listen.” (One of Branson’s personal keys to listening is notetaking—he has hundreds of notebooks.) Source: Richard Branson, The Virgin Way: How to Listen, Learn, Laugh, and Lead

88 pick the #1 failing of CEOs, it’s that …“If I had to pick the #1 failing of CEOs, it’s that …

89 “If I had to pick one failing of CEOs, it’s that … they don’t read enough.”

90 AVOID MODERATION 90 90

91 RULE 2017: AVOID MODERATION

92 Kevin Roberts’ Credo 1. Ready. Fire. Aim. 2. If it ain’t brokeKevin Roberts’ Credo 1. Ready. Fire! Aim. 2. If it ain’t broke ... Break it! 3. Hire crazies. 4. Ask dumb questions. 5. Pursue failure. 6. Lead, follow ... or get out of the way! 7. Spread confusion. 8. Ditch your office. 9. Read odd stuff AVOID MODERATION! 92 92

93 THE SHOWER CURTAIN COMMANDMENT93 93

94 CONRAD SAYS …

95 CONRAD HILTON, at a gala celebrating his career, was called to the podium and asked, “What were the most important lessons you learned in your long and distinguished career?” His answer … 95 95 95

96 “Remember to tuck the shower curtain inside the bathtub.”96 96