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• Curricula: Reengineering for Relevance
• A Year of Excitement and Change - 2007
• “Obscene” CEO compensation: A Remedy
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• “Shift Happens”
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Don’t worry! This isn’t yet another article about finding jobs. It’s about helping the Rochester economy prosper through networks of invention, resources and markets.
Rochester has always had a resilient economy. In its early years the “Flour” City transported grain that fed the urban populations of New York and the East Coast. Later, Rochester prospered with Kodak, Xerox and Bausch & Lomb, and the region developed as a center for quality printing, document processing and optics. Today these companies have been joined by others such as Paychex, Wegmans, Paetec, Sutherland Global and Constellation Brands.
As the service economy matures, these businesses will continue to flourish by tapping into Rochester’s extensive skills base. Rochester consistently ranks among the top 10 of 125 urban areas in the world knowledge competitiveness index. Why? Contributing factors include the creativity of the population (2.33 patents per thousand workers compared to a US average of 0.4) and the education level of the workforce, raised by 19 colleges in Greater Rochester and 58 within an hour’s drive. Arguably this is one of the densest concentrations of educational institutions in the world.
But continued prosperity will depend on institutions in Rochester building access to networks that will encourage the growth of new businesses. Most local entrepreneurs recognize the need for tapping into finance networks. Thus, early-stage companies look for angel investors. As these companies grow they seek out venture capital and equity financing. Building connections to these networks, here and beyond the Western New York region, is clearly important. Less recognized, however, is the need for three other networks: invention, resources and markets.
The invention network – For years Kodak found inventors at the leading edge of technology right here in Rochester. But over time the needed skills became more geographically dispersed. Kodak followed, building a global invention network that started in Japan. Similarly, years back Xerox extended its invention network from Webster to Silicon Valley. Today, its R&D facilities span the globe. Newer ventures tap into the networks established by educational institutions. Engineers trained by faculty at Rochester Institute of Technology (RIT) provided the imaging technology at the heart of Pictometry. Those faculty are a part of a globe-spanning imaging technology fraternity,
The resource network – Constellation Brands knew its success depends on building a global network of recognized brands, so they expanded beyond New York to build a global network of producers. JBL Optical for years leveraged the technical production skills of the Rochester area. But over time, JBL recognized the need for networking with Korea and India to supplement its production capabilities. In addition to skills, the resource network includes materials and components. For example, Peter Parts Electronics built a successful venture by cultivating an extensive network of suppliers in the Far East.
The marketing network – A key element of building a marketing network is understanding the customer. Wegmans develops a deep understanding of its customers by analyzing their buying habits. This works for small companies as well. Gorbel has successfully survived the downturns in its business by listening to its sales-force for insights about its customers. As its competition reduced their sales force and developed a web presence, Gorbel understood the customer needed a high-touch approach to customizing. It maintained its sales force and today is one of the dominant players in its niche.
George Eastman’s Kodak helped businesses grow during the early part of the twentieth century. A hundred years later a new generation of institutions need to do the same. The help Kodak provided was easy to identify - financing and a ready market. Today, growing companies need more sophisticated help - access to networks.

It’s no secret that the package printing industry has become increasingly competitive over the last two decades. Yet, in the last decade, one Rochester company grew their sales year over year by double digits. Today, they have $ 100 million in sales and 400 employees. For this feat, James E. Hammer, President and CEO of Hammer Packaging, was awarded the Vanden Brul Award by RIT’s E. Philip Saunders School of Business. Each year this award goes to a local business entrepreneur who made a significant impact on the Rochester business economy.

Since taking over as president and CEO Jim Hammer has fostered a culture centered on the inevitability of change. “Expect it, accept it, thrive on it,” says Hammer. New Hammer associates hear this message when hired and continually throughout their careers. “Our markets have gotten progressively more competitive, and the driving challenge is to maintain one’s competitive advantage. To us that equates to innovation,” says Hammer.

But, innovation does not simply happen. At Hammer Packaging, an Innovation Department looks to leverage emerging technologies. This commitment to leading-edge technology has been recognized by the industry: The company is ranked among the top five printers in North America when it comes to reinvesting back into the business. A recent example is a new press technology that uses electron beam inks and coatings which have unique properties, as well as provides for a more eco-friendly alternative to traditional printing methods. This investment was quickly followed with a 10-color press, expanding Hammer packaging’s capabilities in the pressure sensitive markets.

Innovation is also driven by the company’s quality system. It aims to respond to customer concerns. The company had five facilities and needed to improve communications to provide customers with better quality service. So, early this year Hammer Packaging installed a new ERP system. “We feel it is critical to provide our employees with the tools to get their jobs done as effectively and efficiently as possible,” said Hammer.

Innovation has also influenced policies for its people. Last year Hammer packaging was honored with the Rochester Business Ethics Award. In addition, the company continues to receive a Best Workplace in America award from the printing industry. “Both of these honors are a tribute to the associates at Hammer Packaging. We focus a lot of time on hiring the right people,” says Hammer.

And it is those people, along with shared ideas and resources that have allowed Hammer Packaging to stay ahead of the curve on print technology and innovation.

In 1998, Hammer faced a difficult choice: stay in Rochester or move the majority of the operations to North Carolina. A discussion with RIT’s then president, Al Simone, helped influence the final decision. Hammer acquired space from RIT at their Business Technology Park. Close relationships with RIT and their School of Print Media contributed to innovation at Hammer Packaging. And, in 2006 they invested almost $ 6 million to expand their operations in Henrietta.

In 2007, competing against 5200 entries from firms around the world, Hammer Packaging received four Premier Print Awards. With a view to reducing its carbon footprint, Hammer Packaging consolidated five facilities in to three increasing their presence in Tech Park almost by a factor of four. Hammer Packaging is a great local success story and one of the most widely respected companies in the region and in their industry. Innovation has driven the company to find creative ways to stay ahead of the competition, to develop its people and – happily – to stay in Rochester.

Unlike most disciplines, business education continually strives for relevance. In a narrow sense it deals with elements of everyday commerce. But, as Rakesh Khurana argues in his recent book “From Higher Aims to Hired Hands” (Princeton University Press, 2007) the purpose of a business education has evolved to the development of professionals. He argues that business schools need to rededicate themselves to the idea of managers as professionals who are “the primary link between the narrower concerns of business and the broader ones of society.”

Khurana is not the first to complain about the direction of management education. And his views and those of others strike a chord with most educators in business schools. In recent years, Stanford, MIT, and Harvard–arguably the best business schools–have all made significant changes to their curricula. Further, to generate a more general response from a broader array of schools to criticisms of lack of relevance, the AACSB International Board of Directors created a Management Education Task Force. Their white paper “Management Education at Risk,” published in 2002, emphasized that broad content and fundamental analytical skills remain important. But, they suggested, in order to stay relevant, business schools must take several steps, notably: continually experiment with changing technologies; employ action-learning and technology-enhanced pedagogy; achieve diversity in composition of students and faculty; develop interpersonal, leadership and communication skills; institute outward-facing curricula and experiential education with significant input from faculty members familiar with business, focus less on the researcher as teacher staffing model; and blur boundaries between departments

At the Saunders College we have embraced these suggestions. Here are some examples:
• Experimenting with changing technologies – professors are teaching classes using Second Life and social networking tools such as Ning.
• Action-learning and technology-enhanced pedagogy – more than a third of professors use interactive simulations. A simulation created at the Saunders College is being used by the Indian Institute of Technology – Khozikode in a student competition.
• Diversity in composition of students and faculty – more than thirty percent of students are from other countries and twenty-five percent of faculty come from outside the US. Overall, seventy percent have international experience.
• Interpersonal, leadership and communication skills – several classes involve teams working on projects. Results must be presented to clients.
• Outward-facing curricula and experiential education – projects deal with problems critical to organizations around Rochester. One example: Excellus, an insurance company in the Upstate New York region, saw an opportunity for introducing a limited-benefit health insurance plan. A student team collected data and suggested attractive product features, price points and so on. Excellus adopted many of their recommendations and had a highly successful product launch.
• Faculty members familiar with business – Twenty-five percent of the full-time faculty have earned their stripes in the business world as entrepreneurs and managers. Overall eighty-five percent have business experience they bring to the classroom.
• Blurring boundaries across departments – the business school eliminated the department structure. Recently faculty with backgrounds in MIS, Entrepreneurship and Marketing joined to define a new area – digital entrepreneurship. Today, two cross-disciplinary task forces are deep into revising the core curriculum.

Still, curricular change relies on the enthusiasm of a student-centered faculty. On one recent afternoon a visitor walking through the building would have seen an MIS and Management professor in deep conversation with a student team, a Finance faculty member holding an impromptu tutorial for three students, an Accounting professor visible through the open door to his office explaining a fine point to a student, and so on. Ultimately, it is this enthusiasm for student learning that drives the faculty to design and deliver a challenging and relevant curriculum.

The Saunders College of Business is changing dramatically in response to changes in students’ needs and aspirations as well as in response to changes in the global business environment. Our goal: to deliver the best educational programs for developing business innovators.

Some of the changes here are readily apparent. For example, just take a look at our physical facilities. The Lowenthal building has a facelift. Outside, a new patio welcomes students and visitors. Inside, concrete walls have taken on a warmer feel, with new oak panels and railings. Students and faculty now interact in glass-walled areas that bring the outside in – minus the wind chill! The new atmosphere helps to convey the attitude of the Saunders College of Business faculty and staff – accessible, warm, and inviting. Perhaps this transformation has contributed to a remarkable 50% drop in the Freshman attrition rate!!

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Do CEO’s make too much? Recently many observers have complained about “obscene” compensation levels for American CEOs. Forbes (May 3, 2007) noted that in 2006 the chief executive officers of America’s 500 biggest companies “got a collective pay raise of 38%”. Examples listed by Forbes included Steve Jobs of Apple who had $647 million in restricted stock; to the fifth on the list – Terry Semel, of Yahoo with $174 million.

In 1965 the average CEO earned 20 times as much as the average worker. By 2005, according to the Economic Policy Institute, the ratio was 262!!

What is happening here? The Business Roundtable argues that CEO pay is not exorbitant. Their analysis of the data shows that the average increase in CEO pay over a ten-year period is roughly the same as the average growth in corporate earnings. That begs the question: why didn’t workers’ wages increase at the same rate? Some observers place the blame on greedy CEOs who presumably set their own pay, aided and abetted by directors and compensation consultants who stand to benefit from a cozy relationship.

But people do not change dramatically over the years. I don’t believe that today’s CEOs are any more or less greedy than those of past years. They might be a bit more cautious, though; because of the recent high profile disasters at such companies as Enron, Tyco, and Worldcom, corporations are watched more closely nowadays, and corporate governance is more transparent than it was a decade ago.

I believe that a more likely explanation can be found in looking at the combined impacts of technology and globalization.

Over the last decade or so, companies’ investments in information technology for personal productivity and enterprise integration have significantly reduced the ranks of middle management (see for example Pinsennault and Kramer, Organizational Science 2002). It is from the ranks of middle managers that we draw the next CEOs. Yet, while these reductions mean that the pool of candidates eligible for senior management is shrinking, the number of corporations has been steadily increasing (approx. 10% over five years).

At the same time, globalization has resulted in extended supply chains that require new managerial skills. The traditional global supply chain involved building a product in one country, then moving it for sale to customers in another country. As the tasks involved become more finely divided, supply chains have become more extended, and managing these requires different skills. US corporations need to provide middle managers the time and opportunity to gain those skills, but the managers who survived the downsizings and corporate reorganizations are stretched pretty thin.

Growing demand for a dwindling pool of capable and experienced managers force corporations to pay exorbitantly high wages for the managers that may be good. And the evidence shows that many many managers can not make the jump to CEO and perform at expected levels.. Last year, the CEO turnover rates reached a peak of 16.2% in the US, according to a Booz, Allen and Hamilton study. Umesh Ramakrishnan, from head-hunters Christian & Timbers noted: “The current trend shows clearly that boards are laser-focused on performance, quality and results.” And in the Nov. 11, 2007 Sunday NY Times Nelson Schwartz notes, “Other experts insist the problem [is]… the skill of the individual chief executive and his or her top team.”

So what should US corporations do? They need to develop careful succession plans – a task that was less critical back when the pool of experienced middle managers was large. Today, that is no longer so. It is a case of supply and demand. Today’s CEO succession plans need to clearly specify skills gaps, particularly in relation to technology and globalization. Where gaps are identified, they need to be closed by ensuring that they work with business schools to develop executive training programs for middle managers and through Executive MBA programs such as offered by the Saunders College of Business.

Innovation: Making a Business of Inventions

Smart managers understand that there’s a big difference between clever invention and successful innovation. My recent reading list included a few books and articles that shed light on the important distinction between invention and innovation. Below I review the history of Xerox, a native Rochester company, to underscore the important role good business sense plays in developing successful innovations.

A recent book Charles Ellis (2006) described how Joe Wilson created and grew Xerox. It is a classic tale. Chester Carlson invented the concept of xerography in 1937 and received his first patent three years later, but it was Wilson’s managerial expertise that transformed that invention into the flagship product of one of the most successful companies of the Seventies. After failing to generate any interest among companies to develop a xerography product, in 1942 Carlson teamed up with Battelle, and together they tried to sell the new device to dozens of companies, with no success. Finally, in 1946 Joe Wilson became aware of the new technology, and he recognized its potential. Through the fifties Wilson organized the company that was to become Xerox. He learned about xerography and gained the respect of technologists. He arranged for financing, entered into alliances with other companies, negotiated contracts, worked out labor agreements, built factories. He sold the product to military and commercial enterprises. The company grew steadily but at a modest pace. Joe Wilson encouraged members of his fledgling organization to contribute their ideas and expertise. A significant breakthrough occurred when John Glavin, the VP of Sales, devised a new five cents-per-copy pricing scheme. Sales took off and the rest, as they say, is history.
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Here’s an interesting video about global competition and information technology that has been making the rounds recently. If you haven’t seen it, take a look. It’s about six minutes long. And–to borrow a phrase from President Destler–it’s a good “conversation starter” even though it is open to criticism for making some simplistic predictions. http://www.glumbert.com/media/shift

Some messages I took away from “Shift Happens”:

1. There are a lot of smart people in the world which increases the global talent pool and leads to increasing competition for our students.
2. Information technology (IT) makes it possible to gather and use tremendous amounts of information.
3. As a result, this year’s incoming freshmen will be “career changers,” and as alumni will work in several occupations some of which have yet to be defined.
4. These observations have significant implications for how and what we teach.

Fortunately, here in the United States and more specifically in Rochester, IT and global resources are being effectively deployed and managed by many organizations. Let me share some recent information: Read more

This academic year is my first to welcome students into their new extended family at the E. Philip Saunders College of Business. I plan to write a monthly dean’s blog commenting on current events within the Saunders College of Business and the business environment.

Last week during orientation and this week it is exciting to see students back on campus. Adding to the excitement are the many changes at RIT and the E. Philip Saunders College of Business. In July RIT’s new President, Dr. William Destler took over the leadership of the Institute from President Al Simone. Dr. Destler is eager to develop RIT as an Innovation University. Happily, the recently endorsed vision and mission statement for the Saunders College supports that vision for the University. This year we are beginning to review our core curricula for graduates and undergraduates with a view to ensuring four learning goals: Read more

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