Business Growth Strategies: Panel Discussion at McCombs

It sounds a little dismal, but America has a powerful history of re-creation.”

Texas Executive Education at the McCombs School of Business sponsored two panel discussions on September 17, 2009. Over 250 participants registered for the event. The venue at the AT&T Executive Education and Conference Center at UT appeared about 2/3 full.

The topic was business growth and how to build brand share overseas, and the audience was made up of corporate officers, small business owners and professionals hoping for some glimmer of hope and direction in a dire economy.

Panel one featuring three corporate executives was pleasant and interesting, and John Berra with Emerson Process Management gave particularly cogent recommendations about communicating with employees during tough economic times. But the provocative meter rose several notches during the second panel, as three very popular professors from the school outlined the challenges of expansion for U.S. business in the coming decades, and the impact of rapidly growing markets in China, India, Brazil and elsewhere.

Any discussion that includes the phrase, “we should pay everyone to go home and have sex” is bound to stimulate both thought and action. But this isn’t primarily a light-hearted topic. As one audience member asked the panel, “What will happen to this country that my children will inherit?”

I. Industry Panel

John Berra, Chairman, Emerson Process Management
Tiffany Dávila-Dunne, Executive Vice President, Corporate Communications and Corporate Responsibility, BBVA Compass
John Hanks, Vice President, Industrial Embedded Marketing, National Instruments
Moderator: Jim Fredrickson, Ph.D., Professor of Management at McCombs School of Business

(Waiting for the session to begin professor Jim Nolan passed by my seat to ask what I thought of the Start Up Meet Up entrepreneurship event last week at the UT Alumni Center. He is very encouraged by support of that event and envisions it doubling in size next year. A good first step for a volunteer conference run by students.)

Gaylen Paulson gave opening remarks, reminding the audience that this was a chance to step back and ask the big questions. “On campus we have the luxury of opportunity to exchange ideas, be strategic and think about where we are going.” Panel facilitator was management professor Jim Fredrickson who leads the teaching excellence initiative at McCombs.

This is a summary of comments by panel members.

John Hanks began by recalling that National Instruments is actually an offshoot of The University of Texas research labs back in 1976. The company has seen a lot of different environments over the years and he credits their survival to patience and a very long-term view.

Hanks credits that long-term view with giving the company the financial stability to survive the latest downturn. “Traditionally we’ve had a lot of cash on hand, and were criticized by some on Wall Street for doing that,” he said. “I can tell you that cash has been very helpful now.”

He also spoke of the need for corporate humility. “We’ve had 32 years of double-digit growth,” he said, “and there is some hubris that develops. Then conditions change and you have to learn to be humble. We now have the relativity score, ‘How are we doing relative to others?'”

As examples of the company’s social relevance, Hanks referred to the Green Engineering Grant and Medical Device Grant, two programs allowing innovators to get assistance from National Instruments with technology products and services.

He credited social engineering tools with enabling engineers and others to share ideas and solutions and break down barriers of communication. “Social media is enabling us to collaborate with our market more effectively. The scope of your success as a team member and leader may depend on the scope of your network.”

Tiffany Davila-Dunne began by reminding the audience that communicating for a bank hasn’t been a bed of roses lately. “There has been a lot of bank bashing.” But she went on to say that BBVA Compass has done well, not by luck but through a positive corporate culture.

“We have a ‘Glocal’ approach, which is consistency of global best practices combined with local know-how,” she said. “As an organization we always look first at growing the talent within. People swap roles, not like the silos here in the U.S. banking. People with the right skills, we try to get them into different areas across the BBVA group.”

John Berra addressed his company’s efforts over decades to establish a global footprint, following customers all over the world. That has required infrastructure investments in these markets. “I went to China in 1978 to start our investment in that market,” he said. “It was a long time before we made our first dollars, but now it is $600 million in sales.” Emerson Process Management (currently 94 on the Fortune 500) has made $600-million of strategic acquisitions since 2004.

Berra gave advice on how to manage growth in a down economy. “Feed the pipeline with interns and new hires, even in tough times. Identify the leaders of tomorrow, you can’t put that on idle just because times are tough.”

He went on to encourage attention to open communication with employees. “They will fill their imagination with their worst fears, so you have to communicate constantly. Be strong, upbeat and always tell the truth. Even if what you are saying is the same as what you said two weeks ago, say it again anyway. You cannot over-communicate in tough times.”

Berra was asked by an audience member whether anti-American sentiment abroad had impacted his business. He said, “We try to look like a Chinese company in China. It is all Chinese. We’ve made an investment there, not just pumping in our products as exports. Our competitors are American, German and Japanese, so we’re all operating globally.”

II. Faculty Panel

Gaylen Paulson, Ph.D., Associate Dean and Director of the Texas Executive Education Program at McCombs School of Business

Professors:

John Doggett, Ph.D., Senior Lecturer, Management

Raji Srinivasan, Ph.D., Associate Professor, Marketing

Jim Nolen, Ph.D., Distinguished Sr. Lecturer, Finance

Gaylen Paulson launched the discussion by asking the panel, “What are some of the barriers to growth? And what are the strategies for overcoming those barriers?”

Jim Nolan responded, “If I was with a big company right now sitting with a ton of cash, I would be looking at going out and buying companies. The competition is very low, private equity is out of the market, and venture firms are at the end of their runway. Venture firms are constipated. They made a lot of investments ten years ago and now there are no exits, so there is nowhere for them to go.”

Raji Srinivasan reminded the audience that what happens in recession is that consumers are frozen. “One option is to pull back and wait for things to settle. My research and evidence shows this may not be the best strategy.” She said there are tectonic shifts during dramatic economic downturns, with companies moving both up and down.

“Recession can be a time of opportunity,” she said. “Think about growing brands, channels and markets. There are supply side efficiencies, costs go down, so it is a time to think about investing.”

John Doggett said, “I’ve told my students for years that the best time for investment is when markets are in chaos. But we are naval gazing in this country, not noticing the market tsunami that is happening already. Last year 25% of world economic growth came from China, India and Brazil. Chinese investors now own 25% of the Cleveland Cavaliers, so LeBron James needs to practice his Chinese.”

Doggett went on to say, “I think Mexico will go in the wrong direction for a while before it turns around, but it will turn around. Regardless of where it comes from you will be facing new competitors from overseas. It is happening, and it takes a while to accept that fact. In the next 20 years China will be the largest economy in the world. India will be neck-and-neck with the U.S. for number two economy.”

Talking of China’s investment strategy, he said, “China is decoupling with the U.S. so that they are not as vulnerable to us changing our strategy regarding them. They are making investments in other parts of the world, particularly Africa and Latin America. China will control half the world’s natural resources in 25 years.”

Paulson asked the panel, “So what do we do?”

Nolan responded that the market depends on three factors, “You have to have buyers, sellers and capital markets. And right now you don’t have capital markets. But if you have money or can get it, now is the time to acquire firms cheaply here, or go overseas and acquire.”

Srinivasan said “Other countries are snapping at our heels, and our population demographics are not helping. Both India and China have younger populations that are growing markets. American companies have to come up with products that appeal to those markets or risk going away. If we want to be in business for the long-term, we have to capture these new markets. China will control resources in Africa the way European countries used to control resources around the world.”

Doggett added that “China and India aren’t just controlling the resources, they want to turn those countries into markets for their products. If U.S. companies wait too long to invest they will find that by the time they are ready the prices will already be going up.”

Audience questions:

Our net growth is higher than China. There is corruption, environmental issues, court systems are behind. How does that affect their growth?

Doggett responded, “Your observations are accurate, but you are looking at the past not the future. China’s model is Singapore, a benign dictatorship, and the changes are happening very fast. I’m not sure these problems can’t be overcome quickly. In some cases a democracy can move slower than a dictatorship. For example, Africa is the biggest treasure trove of natural resources anywhere, and China and India understand that. The Chinese are taking advantage of the failed states and poor infrastructure, while U.S. companies are shrinking back.”

About the long-term view. What will our country be for our children? What can we do now?

Nolan joked “In 20 years we’ll just Tweet each other and tell them where we are eating dinner.” (Laughter)

Srinivasan acknowledged,It sounds a little dismal, but America has a powerful history of re-creation. So I hope  there is a spirit of innovation in this country that cannot be matched elsewhere.” She pointed out there is a crisis in energy worldwide. “The other issue is demography. So let’s get busy. We need a younger generation!” she said, laughing.

Nolan chimed in, “China pays people not to have children, so let’s pay people to have children.”

Doggett added,We can pay people to go home and have sex.” Turning to a serious note, he reminded the audience that U.S. democracy is what people want. “We need to figure out how to ‘sell’ this system of free markets to people who want it,” he said. “We have one choice, we have to innovate our you-know-whats off, and keep it fresh. Will we be the largest economy in the world? No, that’s not sustainable. We don’t have to be the largest in the world to have a robust economy.”

Should we have a national industrial policy?

Nolan responded,I’m a free markets guy, so don’t ask me that question. I’m concerned about the loss of our manufacturing base, and the government should be concerned as well. But in general I always struggle to find any government institution that is efficient in anything. I’m not in favor of that.”

Doggett added, “I always love it when those of us who work for the State criticize government efficiency.”

Nolan shot back, “Hey, I didn’t say we were efficient!”

Doggett pointed out that China is trying very hard to stay out of the way of business. “Chinese who have studied and worked overseas are coming back, are being successful, and are changing the expectations of the Chinese government.”

“There are 15-to-25 million new cell phone users in China and India every month,” he said. “By 2013 there will be over a billion cell phone subscribers. And that will still be less than half the potential market. So if you are going to make cell phones and stay in business you have to go to China. It isn’t a question of whether you like it or not.”

What do we do with this information?

Srinivasan encouraged the audience to be optimist. “A lot of this becomes self-fulfilling prophecy. If we pull back investments now we will just go down that path. It is said employees in the U.S. have lost pride in what we do because we are no longer artisans. I do worry about skills being shipped overseas.”

Doggett agreed, saying, “I think it is ironic to have all this infrastructure investment and we don’t have any plumbers and masons and bridge workers. You can’t run an economy with everyone making iPhone applications. Nevertheless, I’m incredibly optimistic about our prospects. As the China and India economies grow they will begin to industrialize, their consumer buying power will grow and by the middle of the next decade the U.S. will not need farm subsidies because we will be selling food to the world.”

He added a final comment that summed up the panel discussion nicely. “If you haven’t traveled outside Oklahoma (laughter) then travel to India and China and I guarantee you will return impressed with the opportunities. Americans don’t travel, and we don’t know what is going on. When you travel you get off the plane and look around, and as a business person you start to see where you can make money.”

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