Category Archives: International Speaker Series

How Making a Positive Difference in Society Can Grow a Business and a Big Brand Like McDonald’s

One of the world’s most recognizable brands, McDonald’s is not just a multinational corporation: it’s an eleven-figure global entity with over 34,500 restaurants worldwide in 120 countries. Bob Langert, retired Vice President of Corporate Social Responsibility and Sustainability at McDonald’s, spent 32 years within this brand and has learned just what sustainability means in the face of such a global colossus like McDonald’s. On April 9, 2015 Mr. Langert presented on the challenges, opportunities, and risks inherent in Corporate Social Responsibility (CSR) and Sustainability, including providing insight into how large corporations can form partnerships with non-governmental organization (NGO) activists to make progress in its sustainability.

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This journey began with McDonald’s trying to figure out to to have a “sustainable” hamburger, a feat not easily achieved as McDonald’s had no prior experience in such a venture and is highly decentralized with over 80% of its restaurants being franchised. “We were willing to take a chance at figuring out how we can make a difference with beef and how we can be influential towards changing the industry to be more sustainable,” said Langert. However, this was a necessary step for McDonald’s as the sheer size of its operations — with 1.8 million employees serving over 70 million people around the world every day — affects so much of the world’s population on a daily basis that it warrants real corporate social responsibility.

Langert’s experience at McDonald’s with sustainability started in 1990 with a much-criticized collaboration between the premier environmental entity of the time, the Environmental Defense Fund (EDF), and McDonald’s (which was going through its own PR setbacks) to phase out the company’s use of polystyrene Styrofoam hamburger containers; McDonald’s saw a cost-free packaging waste reduction of 70-90% and 30% reductions in its restaurants. Moreover, the initiative led to the recycling of over 100 million tons of corrugated boxes. Langert reflected, “More than anything, I learned a lesson that applied to everything I’ve done since then. You can come up with practical solutions, that are economical for the business, on tough societal issues if you: get smart people together, work with a partner [like the EDF], work with a company that wants to do something, work with your suppliers, you base your work on science (which is not easy to do), and you allow yourself time.” Since 1990, McDonald’s has embarked on 30 more sustainability partnerships.

Besides reducing packing waste, McDonald’s has, in conjunction with animal welfare specialist Dr. Temple Grandin, pioneered the globalized transformation of animal welfare into animal agriculture. “Most businesses don’t have a supply chain structure like McDonald’s… We’re very long-term with our suppliers. A lot of our competitors are day-to-day and they price shop, but we pick suppliers out for the long-term… Our culture is one of relationships, trust, and openness,” said Langert. He approached McDonald’s’ suppliers in 1997 about mutually agreeing on an animal welfare program, and because of the relationship McDonald’s has with its suppliers, they agreed and the animal welfare program was established. Through it, McDonald’s helped implement solutions to such issues as electrical cattle prodding, which McDonald’s did away with, and now cattle are guided by strategically-directed gates and flags.

In addition to animal welfare, criticisms by the NGO Greenpeace of McDonald’s’ European branches (specifically British) using soya in their suppliers’ chicken feed that is cultivated in the Amazon rainforest in Brazil. Langert did research into this environmental issue and turned to such organizations as the World Wildlife Fund for information.  He came to the conclusion that although their placing the blame solely on McDonald’s was disproportionate, their accusations were true. Langert worked with Greenpeace on getting to the root of the problem: getting those who are involved in the soy production and sales to agree with them and collectively work together on finding a solution. Within three months, they were able to successfully announce in 2006 that Brazil’s soy traders, Greenpeace, and retailers that there would be a moratorium on any further soy farming that would harm the Amazon; this agreement has been renewed every year since with increased tracking to make sure it is being enforced.

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A few years ago, the new McDonald’s CEO saw the work Langert and his department were doing and was equally as enthusiastic, but saw that it was unorganized and unclear to those both inside and outside the company. He therefore saw the need for McDonald’s to place CSR and sustainability more prominently and strategically within McDonald’s management. They then created the CSR and Sustainability framework which has the goal of “Growing our Business by Making a Positive Difference in Society.” The five pillars of this framework are: Food, Sourcing, People, Community, and Planet. This framework effectively finds the “middle ground” between business values and social values to created a shared value model that is used by McDonald’s.

Looking towards the future, McDonald’s, like other successful MNCs, has created a set of sustainability goals. For 2020 McDonald’s’ goals are: set global criteria for sustainable beef production and begin purchasing verified sustainable beef; verify 100% of its coffee, palm oil and fish as being sustainably produced; and creating fiber-based packaging made from 100% certified or recycled sources.

If you missed this exciting International Speaker Series presentation or would like to to watch it again click here.  All International Speaker Series videos are available in our video gallery.

Patagonia: Why Business is Good for the Planet

What began as founder Yvon Chouinard’s desire to create stronger and more durable gear for his own recreational hiking in 1957 in Southern California has now morphed into a multimillion-dollar global corporation that is actively involved in environmental conservation and protection efforts while still being able to admit to past corporate environmental downfalls.

Rachel Cantu, Vice President of Global Supply Chain for Patagonia, spoke on March 26, 2015 on “Why Business is Good for the Planet.” She began by discussing Patagonia’s products, which are available on almost every continent. The company creates clothing and equipment for everything from climbing to surfing to skiing, as well as clothing for everyday casual wear. On creating a great quality product for their customers, Cantu says, “It will continue to be job #1 at Patagonia. It’s not the best product at a price point, it’s not the best product in its class: it’s the best product for what it’s intended to be used for, and that’s core to what we do everyday.” Their clothing contributes to their environmental goals: one of their best-selling pullovers is largely made from recycled polyester while still performing its function of keeping people warm and protected from the elements, and their best-selling Wayfarer board shorts were one of the first ever created from recycled nylon. In additional recycling steps, the company accepts used Patagonia products from customers, which are then categorized and then sorted to be either re-purposed or recycled; this saves products from going to landfills that greatly harm the environment. They also invest in innovations and research for new recycled fabrics that they use as much of as possible in their clothing to maintain its performance ability.

Patagonia region in Argentina, where much of wool used in base layer products is produced. (photo courtesy of Patagonia.com)

Patagonia region in Argentina, where much of wool used in base layer products is produced (photo courtesy of Patagonia.com)

In addition, the company works to not only eliminate unnecessary environmental harm from their production but also to eliminate all unnecessary social harm to their workers, including ensuring that all of their employees are paid fair wages and are working in comfortable and safe conditions. In 1988 Patagonia faced a moral dilemma when unknown chemicals in some of the Patagonia cotton apparel caused various minor health problems in its employees in a Boston store. After doing a study that led to the discovery that formaldehyde (commonly used to keep cotton from wrinkling) off-gassing and pesticide use in some of the cotton apparel was what caused the symptoms, the company began the transition to using organic cotton; in 1996, Patagonia finished the transition and has only uses organic cotton in its cotton products ever since. “We decided to take back responsibility for understanding what was going on throughout our supply chain that we had delegated to other people at that point and time, and we made a commitment to know what was going on in our supply chain,” Cantu said. Patagonia uses a four-fold approach in its supply chain management: business capabilities, quality, environment, and social.

Photo courtesy of Patagonia.com

Patagonia factory (photo courtesy of Patagonia.com)

Another management aspect of the company is a commitment to transparency: on their online store, each of their products’ pages includes information about that product, including the factory it was made in, the mill that made its fabric, the organic cotton farms, etc. As of 2004, their down fabric is also 100% traceable and certified, meaning that none of their down comes from geese that are live-plucked and/or forced fed. Their wool is not left out of their efforts: through a conservancy organization, they have a partnership with sheep ranchers in the Patagonia region in Argentina that helps them restore and heal their grasslands, producing a high-quality wool that is used in many of the company’s base-layer products.

Besides using recycled and organic fabrics, Patagonia’s main form of being environmentally conscious is building their products to be extremely long-lasting. Cantu comments, “One of the most important things that we can do as a company is to make high-quality product that lasts years and years and can be repaired so that you don’t have to buy as much of it. That is probably the single-most important factor in environmental impact and foot printing for a product: its overall lifetime durability.”

Photo courtesy of Patagonia.com

Reclaimed wool to be used in Patagonia products (photo courtesy of Patagonia.com)

Outside of their products, Patagonia is committed to investing in grassroots environmental efforts that disrupt current harmful social and business norms in diverse types of sectors ranging from unnecessary dams to unnaturally-produced foods. Add in a venture capital fund focused on investing in environmentally like-minded companies, formal certifications binding the company to these values, and a formal alliance with various other outdoor apparel companies, and Patagonia has consistently worked to not only pursue environmental efforts but to spread that mindset around the world.

Patagonia’s mission statement is: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Cantu’s presentation of Patagonia shows that the company has used its mistakes and struggles as learning experiences, and it has continually worked to improve their environmental efforts, minimize future mistakes, and help other businesses to do the same.

If you missed this exciting International Speakers Series presentation or would like to to watch it again click here.

Reverse Innovation – Why Would a Rich Man Want a Poor Man’s Product?

Corporations need to “change the very definition of innovation from the ‘value for money’ to the ‘value for many,’ and the ‘value for many’ is about doing more with less. – Dr. Vijay Govindarajan

Dr. Vijay Govindarajan, Coxe Distinguished Professor at the Tuck School of Business Dartmouth, New York Times and Wall Street Journal Best-Selling Author presented on the concept of “Reverse Innovation” (below, his book co-written with Chris Trimble) on October 16, 2014. This theory demonstrates that innovations are increasingly originating from developing nations and being transported (sold) into developed nations, in contrast of the traditional opposite flow of innovation.

“I can tell reverse innovation is going to fundamentally change every industry in the next several decades,” Dr. Govindarajan said. “It perhaps represents the single greatest growth opportunity for corporations. It’s going to impact manufacturing, consumer goods, healthcare, education, transportation, energy… you name it.”

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Taken from http://www.amazon.com/Reverse-Innovation-Create-From-Everywhere/dp/1422157644

Dr. Govindarajan began by discussing the common question surrounding why reverse innovation can work, which he describes as: “Why would a rich man want a poor man’s product?” He then spent the rest of his presentation discussing various examples where reverse innovation has successfully occurred.

The first example he uses is healthcare, an area of interest for both developed and developing countries alike. General Electric (GE), known for its medical imaging equipment, produces an electrocardiogram (ECG) machine, which is used in preventing heart attacks. Its retail value in the United States is $20,000, with a usage price of about $200 per scan. Dr. Govindarajan noted that in India, only the most wealthy people and hospitals can afford those costs, as most of rural India only receives $2 per day in income and has little or no access to hospitals and trained physicians. However, as he mentions, “non-consumers still have the same necessities as consumers,” and thus both the wealthy and the non-wealthy are at risk for heart attacks and are in need of ECG machines. From a business standpoint, Dr. Govindarajan says, in relation to consumers and non-consumers, “The single-biggest growth opportunity of corporations today is to turn non-consumers into consumers.”

General Electric shares similar viewpoints as Dr. Govindarajan, as they developed an ECG machine whose retail price is $500 and each scan costs 10¢. The machine is small and lightweight, allowing for easy mobility, as well as works on battery (as opposed to the $20,000 model, which only uses electricity) and its operating system is much simpler to use. Therefore, people in places such as rural India will have the income, mobility, and training needed to transport and effectively operate the machine so many more people will be ECG consumers than before. This new model is currently sold in India as well as 194 other countries, and through whose sales is generating financial growth for General Electric in the United States.

His other examples included other healthcare-related markets, such as surgeries and artificial limbs, all with the same outcomes of “pushing the price performance paradigm” (doing more with less) that Dr. Govindarajan says is fundamental is reverse innovation. He further demonstrated that the reason American companies are so hesitant to approach innovation with this model is because they are “poorly positioned to capture this opportunity,” meaning they have excellent capabilities but they approach international innovation with American models and logic rather than those of the cultures in which they are innovating. Using examples relating to Kelloggs and ESPN innovation efforts in India, Dr. Govindarajan explained how corporate cultural relativism can increase profits and spur real innovative progress.

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Dr. Govindarajan concluded with remarks on the need to change the types of fundamental questions and definitions of innovation from “transporting” global strategy from one country to another to identifying and assessing the problems of the specific non-consumers of the targeted region.

His research supports the notion that corporations need to “change the very definition of innovation from the ‘value for money’ to the ‘value for many,’ and the ‘value for many’ is about doing more with less. It’s about doing a lot more with a lot less for a lot of people, and that requires that frugal thinking, that frugal innovation… Poor people have the same needs as the rich, desires as the rich, [and] ambition as the rich, why can’t they have the same access to opportunity? That’s the essence of reverse innovation.”

If you missed this exciting International Speakers Series presentation or would like to to watch it again click here.

The Man, the Country, the Brand: Juan Valdez Café

According to Mr. Méndez Juan Valdez Café’s value proposition is to “create well-being, emotions, and satisfaction around the best coffee in the world”. The brand’s vision is “to be the premium Colombian coffee brand preferred globally by its quality and the well-being that generates around it.”

Hernán Méndez (below), CEO of Procafecol S.A., agreed to fly to San Diego from Colombia on September 23, 2014 exclusively to present to the USD community on the story of how Juan Valdez Café centered its branding strategy on quality and its ethics on the small Colombian coffee growers producing it. This presentation is part of the Ahlers Center 20th Anniversary International Speakers Series, which is highlighting the positive impact of businesses on society.

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Mr. Méndez began his presentation by speaking of the grassroots organization of the Colombian coffee-making machine: the coffee growers. Because of Colombia’s diverse Andean terrain, the country is able to grow mild-washed, Arabica coffee year-round. Coffee production has become a “socially-stable income source” throughout the entire country, with over 500,000 small Colombian families growing coffee. Mr. Mendez, then, broke down the evolution of the Juan Valdez brand into four sections: the creation of the National Federation of Coffee Growers of Colombia in 1927; the differentiation strategy of the 1960´s of creating the Juan Valdez character for marketing and advertising in the United States; the 1982 ingredient brand strategy and logo creation; and the 2002 inclusive business and international projection.

In 1927, Colombia’s coffee producers founded the National Federation of Coffee Growers of Colombia (FNC), which is a non-profit organization that actively represents the interests of the small coffee producers of Colombia. Its tasks include: guaranteeing open-market floor prices based on international markets and the dollar-peso exchange rate, scientific research and strategies to adapt to climate change, technical assistance to growers, quality control checks for all exported coffee, and promotional and advertising efforts.

The late 1950’s saw the international price inflation of Colombian coffee, low country-of-origin knowledge by customers, and other factors impeding the growth and success of Colombian coffee sales abroad. To combat this, the FNC, and Colombian growers in general, created a differentiation strategy to show how Colombian coffee is a better quality of product than other mass-producing countries, such as Brazil, who had an advantage of lower costs of production due to various geographical differences. The brainchild of this strategy was the creation of the Juan Valdez character in 1960 to put a face to the quality-first, hard-working and family-oriented brand Colombian coffee growers were portraying their product to be. The United States, where a large portion of Colombian coffee has always been sold, saw a strong influx of modern marketing and advertising campaigns with this character through all media outlets to promote “100% Colombian coffee” brands and the notion that “only with hard work makes the best coffee.”

Denise Dimon, Director of Ahlers Center for International Business with Mr. Hernán Mendez

Denise Dimon, Director of Ahlers Center for International Business with Mr. Hernán Mendez

In the 1980’s, the trend in customer preferences became geared towards the ingredients of their purchased products, and so the FNC and Colombian coffee growers shifted the focus of their marketing from the Juan Valdez character to how the quality of Colombian coffee warranted a higher cost than competing brands. This culminated in a successful “push-pull” strategy and the creation of a universal “Café de Colombia” logo (featuring the face of Juan Valdez). This also including a monstrous advertising campaign costing upwards of $600 million.

The new millennium brought both new challenges and new successes for Colombian coffee. With international popular culture suddenly so focused on expanding the facets of coffee-drinking, such as the emergence of multinational chain coffee shops and single-serve coffee brands, Colombian coffee growers had to once again evolve their strategies. In 2001, the FNC recommended Procafecolto to move their coffee in the value chain by taking advantage of the available brand equity and opening coffee shops around the world. This would, in turn, create profits that would be distributed by the FNC to improve the standard of living for its growers. Thus, the overall goals were: share profits (with growers), increase international demand with a better price and increase the visibility of Colombian coffee as a brand.

Juan Valdez Café came about because, in order to increase brand visibility, the FNC had to forgo the Café de Colombia logo in favor of a unitarily-structured single brand. This resulted in a licensing agreement between the FNC and Procafecol with the National Coffee Fund and Juan Valdez Café. Thus, the Juan Valdez Café is the product of a joint collaboration of public and private management, with most of the legal ownership going to the FNC, but with good portion going to the International Finance Corporation (a World Bank group), and over 18,600 shareholders being actual Colombian coffee growers.

Hernán Méndez said that Juan Valdez Café’s value proposition is to “create well-being, emotions, and satisfaction around the best coffee in the world” and that the brand’s vision is “to be the premium Colombian coffee brand preferred globally by its quality and the well-being that generates around it.”

The new frontier for Juan Valdez Café is their ever-expanding number of worldwide coffee stores, currently culminating in over 200 within Colombia and over 99 in 14 other countries. This expansion has been a process of trial-and-error, with some stores in the United States having to close due to being large flagship stores in areas with expensive retail spaces. However, with a Juan Valdez Café on almost every continent, the “authentic premium coffee experience” the brand offers has found success through a myriad of different concept stores that cater to the vast demands of its customers.

If you missed his presentation or would like to watch it again click here.

IMBA students with Mr. Hernan Mendez

IMBA students with Mr. Hernan Mendez

International Speakers Series: The Genesis of Potential Capital and Entry Ventures

As I am counting down the 26 days to graduation, I am trying to get in all my “last chance” events before my schedule becomes overloaded with post-MBA commitments. As such, I attended my final (as a student) Ahlers Center International Business Speaker Series event featuring USD International MBA alum Michael J. Slater, the CEO and Founder of Entry Ventures, a local potential capital company.

Michael shared with us how he developed Snapseed, a world class product that received Google’s iPad app of the year award (2011) and reached six million customers in the first six months of the product launch, as well as how he sold his company , Nik, to Google (2012).

Here are few key lessons learned based on Entry Ventures Potential Quadrants (EVPQ) model:

1)     Have Innovation: To realize potential you must innovate. Michael’s guiding principle is “world class.” When you innovate you must do it so well that no one questions it and you must do it so well that everyone wants to be a part of it.

2)     Need Strategy: Dream backwards because you need a strategy. Strategy comes from dreaming backwards. By focusing on the end of a story, you can develop a plan on how to get there.

3)     Release Investment: Look for a strategic partner to scale with you. When valuing a company, Michael uses the triangulation valuation method comprised of the absolute value of the target company, value of the target company to the purchasing company and the negative value if the purchasing company does not acquire the target.

4)     Enable Scalability: Traditional marketing emphasizes market segmentation and matching products with core customer groups. In industries/products that require early stage adoption, Michael suggests turning the traditional market segmentation pyramid upside down and blending consumers into a broader market. This strategy enables Michael to go after everyone regardless of their demographic.

A final piece of advice from Michael, “to reach your potential you have to do more than decide. You must fly away. Learn to recognize innovation in people, concepts, companies. I challenge you to dream backwards and understand that value releases investment. And finally, reach the word through world class products that everyone wants to be a part of.”

By Meghan Tracy | International MBA Candidate 2014

 

Entrepreneural Success in Investing Beyond the Border

Mr. Steve Williams met with USD students last month and told the story of meeting a young Mexican entrepreneur 25 years ago, and together building a company in Mexico named Vesta, an industrial real estate development company with a $1 billion market cap. Vesta currently owns 13 million square feet of real estate and is traded on the Bolsa (Mexican Stock Exchange).

Besides sharing the story of his prosperous real estate venture, Mr. Williams also shared with students what things in life led him to his success. He emphasized the importance of having a clear vision of what one would want written on his/her tombstone when he/she is no longer here.

Below are the 8 steps to success according to Mr. Williams:

  1. Own a problem
  2. Find a good mentor
  3. Invest in yourself
  4. Follow your dreams
  5. Share your dreams
  6. Test your vision
  7. Network and Sell your vision
  8. Don’t forget to enjoy the journey

Speaker Biography:
Steve Williams co-founded SENTRE Partners in 1989, and as a managing partner, focuses on new clients, new concepts and new ideas. He developed a relationship with GE Pension Trust, which together with SENTRE Partners has become a major stakeholder in downtown San Diego. Steve also co-founded Vesta with Lorenzo Berho. Incorporated in 1997, Vesta is a Mexican industrial real estate fund.
Steve is a co-founder of Bandwidth Now which transforms commercial buildings into “next gen” environments, treating bandwidth as a utility and Wi-Fi as an amenity using its patent pending Building Optical Network (BON). Bandwidth Now and SENTRE were nominated by Intel for the Computerworld Honors Program’s 21st Century Achievement Award. Steve graduated from UCLA in 1972 and received an MBA from USC in 1974. He is a licensed CPA and licensed real estate salesman. He is active in ULI and was a former national board member of NAIOP. He is active in the community and currently serves on the boards of the San Diego Regional Economic Development Corp. and CONNECT.