How Businesses Have Shifted to Persevere in the Current Times of Crisis

Agility and Resilience – Core Strengths

• PepsiCo: Integral to the business strategy, these core strengths are described in the letter to shareholders as follows:  “In virtually every sector, the pace of change is accelerating, creating new opportunities, new challenges and new uncertainties…In such an economy, we will need to become more nimble and more adept — and we will need to redouble our commitment to Performance with Purpose. This means building on our progress to date to achieve even greater results in the years ahead, focused on further transforming our products, protecting the planet, and enriching the lives of people around the world. These priorities are more important now than ever, and this year we will be sharing an ambitious sustainability agenda for the coming decade. As we continue on this journey, we will also need to become comfortable continuously re-evaluating and reimagining every aspect of our business —  “living in beta,” as some call it —  pushing ourselves to out-innovate our competitors today so we can out-perform them tomorrow. We will need to embrace a new kind of agility, moving swiftly without creating instability in our business. And we will need to empower everyone to meet his and her own individual responsibilities while also embracing a collective responsibility for the success or failure of our company as a whole. This sort of dexterity is what will separate the winners from the losers in this economy, and I am confident PepsiCo will be a winner.”

• Abbott Laboratories: “Abbott’s response to those economic forces underscores the strength of our business, the unusual flexibility provided by our broad and well-balanced business diversity, and our proven ability to navigate challenging waters,” stated Miles D. White, Chairman of the Board and CEO, in the letter to shareholders.  The company has continually reshaped its business and product offerings to advance science, build on emerging trends (in technology, society, demography, or economic) and navigate risk, as well as to focus on growth opportunities, building, managing, and balancing income streams while remaining closely aligned with market needs.   The company now derives half of its revenue from more developed economies and a half from emerging markets, helping to enable stability.  The customer base is evenly divided between traditional healthcare payors and consumers, providing access to a greater number of growth opportunities while reducing the risk associated with single-market fluctuations.  Credit is also given to the focus given to efficiency during the past three years which has helped the company to reduce its cost structure and strengthen execution.
• PPG completed several strategic growth initiatives, including the successful integration of Comex, the leading paint supplier in Mexico, acquired in late 2014, and opened a new PPG-Comex concessionaire store location approximately every two days, surpassing the milestone of 4,000 store locations in Mexico.  In 2015, PPG invested approximately $475 million in capital spending, including several key growth projects, as well as investing $400 million on six acquisitions that are expected to further strengthen the product, technology, and distribution offerings to customers. Initiatives to build sustainability include focuses on safety, resulting in reductions of 11% in the injury and illness rate.  Reductions in energy use (8 percent), waste (7 percent), and overall GHG emissions (7 percent) contributed to both cost reductions and environmental sustainability.  In the area of operational excellence, employees developed and completed almost 250 sustainability projects, and environmental and ergonomic-related improvement projects saved more than $14 million.

 Emphasis on Developing and Aligning Their People and the Company Culture

• US Steel:  The company’s business strategy is guided by their infusion of The Carnegie Way, a long-term initiative the shapes and influences all aspects of work throughout the organization.  Over 8,000 employees participated in Carnegie Way training, recreating and strengthening the company culture and aligning people throughout the company with the strategy, resulting in their identification of thousands of projects and implementation of tools to drive and sustain improvement through innovation and change.
• Altria Group:  Diversity and valuing differences is a foundational strategy that is credited with building stronger connections among employees, suppliers, and customers.  To date, 56 percent of managers and 32 percent of salaried employees have participated in inclusion training, with plans for additional training events in 2016.  This strategy of valuing differences is mirrored in the establishment of Employee Resource Groups (ERGs), which bring together diverse groups of employees whose insights are applied internally and externally.
• International Paper:  The company’s Leadership Institute offers 15 programs that address all aspects of leading teams and providing interactive learning and growth opportunities for employees. Since 2005, more than 2,900 employees have participated. International Paper Leadership II, designed for more experienced leaders, started in 2014.  This is an eight-month program combining on-the-job learning with formal leadership training. In addition, diversity education, a variety of forums, and Mentoring Boards provide additional developmental support and guidance to employees.
• PepsiCo:  The company’s Global Development Council sets priorities for global classroom and online curriculum needs. The company’s internal, global learning resource is PepsiCo University, which consists of nine colleges (Finance College, Global Procurement College, Sales College, Global R&D College (including colleges in Packaging, Nutrition, Food Safety and Regulatory, Ingredient Application Science, Human Research and Science, Experience Design, Product Development, and Process Engineering), HR College, Strategy College, Supply Chain College, BIS College, and Marketing College.  In 2014, over 65 percent of associates in the target audiences completed courses through one or more of these colleges. Also in 2014, PepsiCo added accelerated leadership courses around the world. In 2015, PepsiCo launched a new, global portal for PepsiCo University designed to help employees learn based on their unique needs and interests, and promote a culture of continuous learning and development. Employees are also encouraged to increase their skillsets through assignments providing critical experiences, which may include pioneering a new product or moving to a different country while tackling new roles and challenges over a relatively short period.

Innovation – Products, Services, Processes and Technologies

• Alcoa has continued to pioneer the industry, making potentially breakthrough advances in developing performance materials for its automotive and aerospace customers as well as applying disruptive technologies to transform their manufacturing capabilities.
• US Steel:  Using an innovation road map to guide investments in research and technology, US Steel developed new steel grades and steel-intensive applications to address customer needs, and began to explore alternative materials and advanced manufacturing. This includes working closely with customers, industry associations, universities and the U.S. Department of Energy. They introduced advanced high-strength steels and other innovations in 2015 that effectively position the company to succeed in targeted markets.
• PepsiCo Continuing to grow and shape their product portfolio in a way that not only meets the strict guidelines set by the world’s public health organizations but also keeps pace with evolving ways consumers define nutrition, PepsiCo launched helped Americans cut over 6 trillion calories from their diets. Some of the new products highlighted in the annual report include Doritos Loaded, which launched the company’s entrance to the frozen food aisle, 7-Up, Limonada, ready-to-drink teas, Izze organic sparkling water, and Mountain Dew Kickstart.
• Abbott Laboratories: In 2015 the annual report highlights include 38 new nutrition products, 5 new medical devices, and 1 new diagnostic product.  The company made progress with its new group, Abbott Ventures, formed to make targeted investments and strategic acquisitions, in building a new-product pipeline in the diagnostics space.
• Whirlpool introduced 100 new innovative products in 2015!  In Laundry products, the Whirlpool Supreme Care features smart technology, allowing consumers to operate the machine remotely.  The Cabrio laundry pair of top-loading machines are designed with fabric protections to better remove stains and prevent over-drying as well as to keep operational noises “inside the machine and out of the laundry room”. In cooking products, the Pour Over Coffee Brewer, the Siphon Coffee Brewer, the Burr Grinder, or the Precision Press Coffee Maker each provide barista techniques, flavors, and consistency today’s customers want.

Execution – Strategically Oriented with a Focus on Operational Excellence and Efficiency

• Alcoa achieved significant savings in 2015, including $532 million of productivity improvements in their Upstream business along with savings of $616 million achieved in their Value-add businesses in productivity improvements and from synergies with recent acquisitions.
• US Steel:  In 2015 the company realized $815 million in benefits from changes driven through their adoption of The Carnegie Way, representing sustainable improvements resulting from change, not temporary cost reductions.
• Colgate-Palmolive:  Embedded throughout Colgate is the strategy of generating savings to invest in business growth. Savings have been realized through efficiency initiatives and through the 2012 Restructuring Program, a Global Growth and Efficiency Program, which focuses on improving organizational capabilities and the cost structure. Cost savings projects, both large and small, across all aspects of the business. One such project was the establishment of 12 new commercial hubs across all operating divisions that clustered single-country subsidiaries into more efficient regional hubs, a move that has resulted in smarter and faster decision-making. Another initiative extended Colgate’s business service centers, successfully streamlining global functions spanning 83 countries. Another cost-saving was made through a project that drove the simplification and standardization of high-impact, point-of-purchase displays for the six countries in the Central America hub. This has reduced development time by two months and generated more than 30 percent in savings.
• International Paper:  The ingrained principle of Manufacturing Excellence, supported by trained employees using established, systematic approaches and tools, drives company-wide continuous improvement and sustained year-over-year success.  For example, a team partnered with a customer to investigate, analyze and solve an ink-smearing issue at one mill. The result included solutions that significantly improved communication between International Paper and the customer, increased customer satisfaction, and saved International Paper $150,000 per year.  Another project, aimed at cost savings at a containerboard mill, revealed that high truck turnaround time added $775,000 to the mill’s annual wood cost. The fiber supply and mill teams partnered to reduce waste. Using minimal capital, the team was able to identify and address bottlenecks, which resulted in a 30 percent reduction in turnaround time. Other mills are replicating the process improvements in an effort to generate similar time and cost savings.  In another cross-functional project at a corrugated box plant, teams from replenishment planning and improvement organizations worked with the plant manager and manufacturing manager to reduce holding rail cars, known as rail demurrage. With a goal of a 50 percent reduction in costs, the team implemented solutions that led to a 64 percent reduction in the first year, a savings of more than $150,000.

We believe the Honorable 57 have found their own recipes for success, while at the same time, using some similar strategic approaches.  Our research included reviewing annual reports, letters to shareholders, corporate responsibility and sustainability reports, videos from Fortune Magazine and YouTube, and more.  We are not economists or analysts. We are business people, readers who are passionate about business performance.  Our experience tells us there is something very important we can all learn from the Honorable 57.  The purpose of this article is to provide a simplified summary with insights and observations of their stories.

Has your organization made its own transformation(s) in the past? What are the chances of future transformation? Are you actively building your business’ agility, its capacity for rapid change? Is transformation in your industry, or in your business, imminent? Or is leadership comfortable that the status-quo will successfully drive survival and prosperity into the future?

Conclusion

As we review moves that businesses, large and small have made to survive and thrive and prosper when threatened by adverse events, we can see there is a common theme. Whether the threat is due to crises or disruption: organizations who have the foresight, agility, and courage to drive change are the ones who survive and are positioned to leverage change that can ensure they prosper and thrive.

A critical organization-wide skillset, it appears, is agility, the ability to move quickly to make an insight-based change in any and all aspects of the business. This requires leadership throughout an organization to be propelled by a strategic mindset, a way of thinking that plans ahead several steps in any direction, so that people will be open to and prepared to change key elements in the business, such as:

• Competitive strategy
• Targeted markets
• Value stream
• Supply chain
• Leadership practices/company culture
• Operating processes
• Social, community, and/or environmental priorities
• Product/Service mix
• Sales channels
• Technology investments

So, it takes investment and strategic capability to become effectively agile. Many organizations are far more practiced in thinking day to day and quarter to quarter, and not well enough positioned to be quick, nimble, clever, and responsive. Many businesses have few staff with competence to think both short and long term, to see the big picture as well as the details, to sustain a culture of continuous improvement, or to make learning and beneficial change a cornerstone of the culture. In addition, leaders must have the courage to take calculated risks early enough, often-times before the benefits of the change can be certain. Whether a solution to a crisis is making shifts or driving systemic, organization-wide change, these competencies are strategically critical.

This article stated in its first few lines that as leaders move forward in an economy that is evolving to a new state of “normalcy,” we seek learning from crises. Now it’s time to ask you this question: Has this article generated insights that will help you to think about your organization’s next steps? How might your leadership re-shape your company’s business practices, leadership strategies, competitive landscape, and future strengths?

To wrap up this article on persevering in times of crises…it is our wish that the information this article provides will be a valuable takeaway for you. We thank these amazing companies for their leadership and their example.