Directors & Boards: Reader Profile

Home |

Subscriptions |

Articles Archive |

Current Issue |

Back Issues |

Shopping

Advertising |

List Rental |

Editorial Calendar |

Background |

Reader Profile

David Kollat
Founder and President
22 Inc.

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

As a long-time serving board member on NYSE and NASDAQ companies, what do you see as the greatest challenge to directors and board members over the next 3-5 years?

To make certain that the company on whose board you are serving has a reasonable strategy, and the right strategic capabilities, capital structure, and people resources to deal with the future that it faces. This is likely to be unusually challenging given the uncertain economic conditions, a complex set of domestic issues, and potentially explosive geo-political scenarios.

Has board service becomes less attractive and more risky on an individual/personal basis over the last 10 years?

Board service has become more interesting and challenging as the rate of change has accelerated and things have become more complex. The level of expectations regarding boards has risen, which has resulted in increased risk relative to the past. However, if a board member, and the board collectively, are doing their job with the appropriate degree of comprehensiveness, rigor, thoughtfulness, and prudence, the degree of risk is tolerable. Overall, this is the most exciting time to be on boards that I have experienced over the last 30 years.

Are you concerned that “the next generation” of board members is prepared strategically and tactically to assist companies in their growth and expansion?

Research indicates that the longer our students are in school, the lower they rank internationally on various generally accepted test metrics. This would appear to be a critical long-term problem. Currently, however, board candidates that I am exposed to are more intelligent and competent than ever before.

I believe that board succession planning is almost as important as CEO succession planning. It is the responsibility of existing boards to make certain that they are prepared for the future by having a long-term view of the ‘board skill sets’ that will be required to deal with the problems and opportunities that the company will face on the one hand, and a likely board retirement schedule on the other. New board members with the needed competences need to be recruited and assimilated into the board culture in advance of these retirements so that they are prepared strategically and tactically to add value quickly.

What are the attributes of an outstanding director?

The most important attributes are personal…character, honesty, integrity…because without those nothing else really matters. Second most important, in my view, are a set of behavioral attributes, the most important being willingness to listen intensely all of the time, particularly to contrary perspectives; the willingness to ask the difficult questions, in a diplomatic manner, if there are significant issues; and then the willingness and ability to help resolve difficult issues. The third set of attributes includes having the skill set that makes an important and needed contribution to the collective skill set of the board relative to the problems, opportunities, and other issues that the company faces, or will face in the future. Collectively, these attributes allow a director to add value reasonably quickly providing the company has an effective on boarding process.

What role does strategy play in the growth of the business?

Strategy and execution are the twin determinants of business success. Both are equally important. A great strategy will not produce exciting results if the execution is poor. Alternatively, great execution will generally not produce great results over an extended time period if the strategy is weak. Achieving and maintaining excellence in both strategy and execution is extraordinarily difficult, and shortfalls are the rule, not the exception. Strategy generally defines the limits of potential success in terms of EPS growth and return-on-investment.

How can a director or board member direct cogent discussion of strategy as its role in defining market entry and exit?

Strategy should not be a one-time act or decision. Rather, both business and corporate strategy should be a continuous, dynamic process of anticipation, adjustments, and refinements, in response to changing market, environmental, and competitive developments, on the one hand, and the company’s actual results on the other. To achieve this, directors need to:

•    Insist that sufficient time is spent in board meetings to discuss the issues involved
•    Ask the difficult questions
•    Insist that there are appropriate initiatives in place to deal with strategic short-falls
•    Monitor performance against these initiatives
•    Insist on results and take appropriate action if they do not occur

What are some of the most innovative and successful practices in developing high-yield strategies?

Most businesses that achieve above-average EPS growth and return-on-investment have several, if not most, of the following characteristics:

•    They have a mission, vision and values that are insightful economically, and simultaneously enabling, inspirational and uplifting to their associates.
•    They are in segments of industries (old or new) that are fast growing and/or highly profitable and/or characterized by limited or “manageable competition.”
•    They define their market target creatively and profitably, and “delight” their customers…every time they interact.
•    They have a compelling value proposition.
•    They have a business model that delivers their value proposition in a way that is coordinated and integrated, differentiated from, and superior to, competitors.
•    They have outstanding people, they know how to attract and develop more outstanding people, and they have motivating organizational strategies and programs.
•    They are generally conservatively financed with strong balance sheets that can withstand economic downturns and other events that are disruptive or dislocative.
•    They have a profitable competitive advantage that is sustainable over a reasonable period of time.

Some examples of innovative business strategies would have to include Apple, Federal Express, Starbucks, Google, Southwest Airlines, Polo, Amazon, Under Armour, Dell, Whole Foods, McDonalds, and Victoria’s Secret.

Some examples of innovative corporate strategies would include Cisco, Caterpillar, General Electric, PepsiCo, Proctor & Gamble, Wal-Mart, Colgate Palmolive, and Toyota.

You’ve recently published a new book titled simply Strategy. In a sentence or two, what is the key takeaway readers should embrace from this volume?

The book presents best practices and leading-edge thinking about how to develop, revise, and evaluate business and corporate strategies. It is designed to be valuable to board members in helping them evaluate the strategies and plans of the companies they are associated with.

David Kollat is founder and President of 22 Inc., a company specializing in research and consulting for retailers and consumer goods manufacturers. He also serves on seven boards of directors including publicly-held Limited Brands, Big Lots, Select Comfort, and Wolverine World Wide.

Kollat spent eleven years at Limited Brands where he was an Executive Vice President with various responsibilities over the years including strategic planning, marketing, human resources, and President of Victoria’s Secret Catalogue. Over this 11 year period, Limited achieved a compound annual growth in earnings-per-share of 43 percent, and averaged a 45 percent return on equity.

Prior to Limited Brands, Kollat spent five years as Executive Vice President and Director of Research at Management Horizons (now Retail Forward) where he co-founded the Retail Intelligence System and consulted with companies, primarily in the areas of business and marketing strategy. The first seven years of his career were spent as a Professor of Marketing at The Ohio State University.

Kollat received a Doctor of Business Administration degree from Indiana University following his MBA and BBA degrees from Western Michigan University.

Dr. Kollat has co-authored six books on consumer behavior and marketing strategy. His seventh book, Strategy, presents best practices and leading edge thinking on how to develop high-yield business and corporate strategies.. Copies are available only from http://www.AtlasBooks.com or 1.800.266.5564. Kollat can be reached at: david@22inc.com.