Good morning everybody.
My topic is to really pick up on what my colleagues have referenced here
and have us think collectively about going from the lab into the market place
and just to give you kind of a road map of where I am going to go.
I’m gonna reference six factors here.
So, keep track and we’ll have a small exam afterwards.
Leadership, teamwork, ownership, governance, employees and patience.
So, with that I’m gonna start on the leadership piece,
Kirsten is already got us thinking about that.
On leadership, I’m gonna draw an academic evidence here
case and point right in front of us.
Leadership, academic research does repeatedly confirm m
ost critical when organizations whether university or a company
are looking at very difficult times.
Margaret Whitman here at Ebay face a difficult time on 911.
She happened to be out of the office. Thank goodness she had a team.
This comes now to the teamwork piece that could get Ebay through that difficult period.
Speaking of teams, academic evidence when it comes to research innovation
says, this is the top team for Lenovo.
The more diverse the team in terms of background, experience, type of customers,
the more likely simply put a given company is prone to innovate.
How much difference has leadership make?
Try this one out here just to overstate the case.
Mark Herd went from NCR over to Hewlett Packard,
the next couple trading days the HP market cap went up by 6 billion dollars.
How much is leadership worth? Well, in five trading days about 6 billion dollars?
That’s maybe an over statement.
Equity markets are not always rational.
My finance colleagues tell me so we’ll look at it a bit differently.
Take companies where you had a chief executive appointed.
If it didn’t work out, replace a few months later by what I call CEO #2.
Internal measures of performance, the right versus the wrong person
is much as a 20—15 to 20, 30% difference.
Owners investors. Here’s a kind of a good news picture
over the last 50 years a revolution in US,
quiet revolution in US equity holdings
increasing the companies are indeed helped by...
at least the stock is actively managed by professional institutional investors.
The good news there is, usually, investors do press companies
everything else needs to be equal to be more research engaged.
However, investors also so much short term.
This graft here says if you don’t perform well,
investors have a habit of pushing you out whether you’re in Germany, Japan or US.
If your company stock falls by 50% in one year,
this is maybe back more on the good news side
because of the investor structure to ownership.
The presence of institutional holders. The red line reveals that over the last 20 years,
manufacturing firms compensation is more long term.
That is what the red piece is.
So, there’s a good news and that research innovation is a long term play,
but the first cousins of institutional investors, the equity analyst,
this is now the bad news.
I’ve got 83 active in the US at the moment for biotech firms,
almost 70 for pharmaceuticals.
They tend to look indeed at the short term
and particular academic evidence says they tend to encourage companies
to stay within the area that they are already established.
So, in that sense innovation tends to be within the field that you’re in
and they tend to discourage, they’ll drop your stock price
if you go too far the field without going into that point
for this diagram does map that out.
What I have just described is a US picture so far,
but institutional holdings in investment markets increasing internationally.
This is the Tokyo Stock Exchange
increasingly, the number says over time international investors
have plunged into the Russian market, the Brazilian market
and this case the Japanese market.
Therefore, wherever you are all these forces
like just describe the ownership side more impactful.
The board of directors, this is the board for GE.
We’re about to see it for Johnson and Johnson.
One of the great quiet revolutions for the last 10 years
is for boards to become more of a partner just to monitor up top management.
With that, boards, here’s the J and J board.
This is a board that has gone from 13 down to 10 more able
therefore, as a board to work actively with top management to think about innovation.
There is a statement though the problems with the research,
academic evidence and that goes as follows.
Boards engaged indeed academically we know our effect
of a pushing companies to be more innovated,
but watch out boards have become too involved
actually diminished companies capacity to innovate. We’re almost done.
This is all about employees now.
Final two points, employees and patience customers.
When innovation comes from the top, last picture this one
a little bit to meant to say this. Innovation in companies,
academic evidence again says part of the role of leadership
is to get people excited about it.
It is a head game. It is a hard game. Got to work with both.
Medtronic couple photographs here from the January report
has a habit of bringing patience into the picture.
In fact, Medtronic historically is often...
those who benefit let’s say from the pace maker to stand at the annual general meeting
and tell investors and employees.
Look, I’m alive because of the product you have delivered to me.
I’m gonna end with this particular photograph
because it really tells the whole story.
These are people suffering from river blindness, wide spread in West Africa.
20 million people did carry the disease.
They boys that we saw a second ago are still seeing,
but by time they turn age 40 like their fathers there,
they will be blind except for the fact that at Merck a midlevel employee said.
Look, we got to do something about that. The top executives said, yes we do.
So, employees, top leadership. The board came in behind that.
Investors having the impact to what Merck can do
to develop something that could save 20 million people from blindness, supported.
So, investors, leadership, the board was with it.
Employees backed it and today, Merck with the support of the Wold Bank
many contributing agencies has an innovation in the market
which is prevented 20 million people from going blind.
So, there it is Francis. We’re open.