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SSA Notebook | July 2013

Five Ideas that Made Us Think

An SSA Discussion with Former Motorola CEO Chris Galvin: Creating a New Private Equity Business Model with Lean Six Sigma

In a recent conversation I had with Former Motorola CEO Chris Galvin, Galvin shared how he has applied Lean Six Sigma in a non-traditional space: the real estate investing market for a new private equity fund. In some ways, Galvin’s entire career was based on innovation. His father Bob was the legendary CEO of Motorola, and Chris was at the helm of the business when it developed the breakthrough Razr product. As a pioneer across multiple industries, Motorola served as a business incubator – investing in a number of disruptive technology companies. Chris pushed this legacy of innovation into his new private equity venture, Harrison Street Partners. Developing a new business model that was also sustainable was the challenge – and today, with more than $4.75 billion AUM, Harrison Street has clearly hit upon the solution. How have they done it? This discussion summary explains.

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Bringing the Valley to Wall Street: How IT is Redefining the Investment Bank Model

Investment banks continue to spend on technology by moving to electronic trading systems, automating middle/back office functions to cut staffing costs, and overhauling risk management systems. However, according to this Business Insider article, the most recent stream of technology hiring aims “to grow revenues by developing tailor-made products and mobile applications based on clients’ trading patterns.” To do this, they must attract top talent. Therefore, rather than a suit and tie from a skyscraper, some employees work in “shorts and a tee-shirt from Palo Alto, California.” Injecting this new talent will certainly require a culture shift for banks. As firms look to technology to cut operating costs and drive revenue, they will also need to redesign their organizational structure to accommodate the new paradigm. For example, what new skills/services will be required to accommodate a digital operating model?

The Importance of Business Execution: A lesson from AOL Co-Founder Steve Case

This New York Times interview with Steve Case (a founder of AOL) provides an interesting example of what can go wrong without solid business execution. Case quotes Thomas Edison in saying: “vision without execution is hallucination.” He then explains how the AOL-Time Warner merger didn’t turn out as planned because of “poor execution of what I thought was a good idea.” Case advises that as companies get larger, they need to ensure clarity around vision, set priorities to align with that vision, and assemble the right team in place to execute against those priorities. Otherwise, similar to AOL-Time Warner, they might shift from being “attackers to defenders,” while more nimble, creative, and flexible companies innovate and disrupt the status quo.

Companies Should Rethink their Budgets as the Economy Turns a Corner

In this HBR post, Ram Charan, SSA & Company Senior Advisor (and acclaimed business advisor, speaker, and best-selling author) speaks to the ample evidence to support that the economy has turned the corner. However, Charan notes that most companies set their 2013 budgets in 2012, when a grimmer economic outlook prevailed. Charan reminds businesses that “the marketplace doesn’t run on a fiscal calendar,” and cautions that “those who play too defensive because they fail to recognize that the economic situation has turned will leave top-line organic growth opportunities on the table.” Charan provides great ideas on steps companies should take to build for growth in 2014-2015 – from getting ahead of the competition by exploring new market segments and increasing R&D spend – to (re)investing in training to upgrade skills and capabilities needed to succeed in the new emerging landscape.

How CVS Uses Big Data to Design Stores, Products and Offers for its Best Customers

CVS has used big data to identify its highest-value customer: those who frequently visit the pharmacy. The chain then analyzed what else these shoppers bought when they came in to fill prescriptions. As this New York Times article explains, their preference depended on location. In urban stores, these shoppers also wanted general store items (e.g., grocery and household items), so CVS expanded these categories in cities. Whereas in suburban areas, a CVS may “share strip-mall space with a Walmart, a Safeway and a Home Depot,” so people pick up “health & beauty products alongside their prescriptions.” That’s why CVS is redesigning suburban stores to highlight those areas. Merchants also use this data to figure out what products to keep. For example, “the stores will even keep slow selling items if high value customers want them.”

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