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G100 Network Notebook | December 2014

G100 at Apple

Next year, G100 and Next Generation Leadership members will spend a half day at Apple headquarters speaking with senior management, including CEO Tim Cook, named Person of the Year recently by the Financial Times. Their glowing profile reveals how Cook distinguished himself despite scrutiny.

With a growing need for someone to block and tackle Apple’s raiders and (given its tax investigation in Europe) regulators, Mr. Cook’s focus on people, strategy and execution – rather than products – finally started to look like an advantage.

The Chief External Officer

The regulatory or legislative affairs function may be “inadequate” for multinational firms to manage the mounting pressure from external constituents who demand quicker, more nuanced responses from business, according to a new study in Strategy+Business. Instead, researchers suggest that companies create a C-suite office to align the “typically…disjointed” efforts of external affairs.

[The Chief External Officer would] oversee a company’s corporate responsibility efforts, liaise with external agencies and governments, and heighten competitive advantage by responding strategically to periods of sociopolitical uncertainty.

Rethinking CEO Succession

More CEO succession plans should include a “counterintuitive” candidate – CHROs. This recommendation comes from University of Michigan professor Dave Ulrich, whose analysis of executive leadership traits reveals striking similarities between CEOs and CHROs.

In the modern economy, attracting the right talent, creating the right organizational structure, and building the right culture are essential for driving strategy – and experience as a CHRO makes a leader more likely to succeed at those tasks.

Boards abdicating CEO selection to incumbents should think twice, cautions a new Stanford University paper coauthored by Stephen Miles. An excerpt:

Among a sample of clearly identifiable handpicked successors at Fortune 250 companies between 2000 and 2011, almost 80% underperformed the S&P 500 Index during their tenure. The average amount of underperformance was 24 percentage points.

What Issue Should Dominate In 2015?

Foreign policy, argues economist Tyler Cowen in a Cato Institute piece that explains why geopolitical instability remains the biggest threat to US growth.

Steven Pinker suggests that the world is becoming ever more peaceful, but in reality we have had the world’s two worst wars in the last one hundred years. … In expected value terms we should see war as our number one worry for a long time to come.

Equally sobering are these Bloomberg infographics that distills global conflict and potential hot spots for 2015.

New Threats To Cybersecurity

Researchers last month exposed Regin, nation-state sponsored malware that hacks governments, academics, telecoms, banks, and hotels abroad. Eye-opening details from Wired show why this is “the most sophisticated espionage machine uncovered to date.”

Perhaps the most significant aspect of Regin is its ability to target GSM base stations of cellular networks. … Armed with these credentials, the attackers…manipulate the systems or even install malicious code to monitor cellular traffic.

Another threat on the horizon targets M&A deal information held by executives, board members, lawyers, and consultants, says a CNBC interview with FireEye COO Kevin Mandia.

The attackers are gaining access by emailing employees and tricking them into disclosing their credentials. The campaign has been effective in part because the emails – called spear phish – are written in perfect English.

What Demographics Teach About Growth

A convincing article in The Economist says secular stagnation may result from global population aging and its cumulative impact on labor supply, innovation, and savings.

Growth of the capital stock slowed from 3.1% a year in 1994-2003 to 1.6% in the subsequent decade. … Businesses are buying less machinery because they have fewer workers to operate it and fewer technological breakthroughs to exploit.

Sustainable economic growth requires aggressive action to address the needs of the aging population. A good place to start, says AgeWave CEO Ken Dychtwald, is investing more to research Alzheimer’s disease, which now ranks as “the scariest disabling condition in later life.” Dychtwald adds:

If we could simply postpone the onset of Alzheimer’s disease by five years, one half of all the nursing home beds in America would empty.

Why Most Digital Transformations Fail

A lack of leadership, not technical expertise, argues a new book by Andrew McAfee, Leading Digital: Turning Technology into Business Transformation. This useful preview by coauthor George Westerman, research scientist at the MIT Sloan School of Management Initiative on the Digital Economy, highlights actions leaders can take to orchestrate successful digital transformations.

Just saying you’ll adopt digital isn’t enough. You need to describe how the company will actually change: How will you engage differently with customers? How will you rethink your operations? What new business models are possible?

Culture and Transparency

Thought leaders from two world renowned companies – Apple University Dean Joel Podolny and Bridgewater Associates CEO Ray Dalio – will speak with members and their heads of HR about creating and promoting strong company cultures. All Bridgewater employees, for example, receive a leadership guide written by Dalio that stresses “radical transparency.” This summary from Business Insider serves as a good primer for our discussion.

All meetings and interviews [at Bridgewater] are recorded and archived, and any level of employee is encouraged to criticize another if necessary.