January - June 2014

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January - June 2014
Exceptional
Germany, Switzerland and Austria
Entrepreneurship + Innovation = Growth
January-June 2014
The Carlyle Group’s CEO
David Rubenstein takes
a cerebral approach
to fundraising
The Jelly Bean Factory’s
Peter and Richard Cullen
are on a sugar high
Dr. Victor Allis puts
puzzle solving at the
core of Quintiq
New lease of life
AfB CEO Paul Cvilak discusses the value in unwanted
IT hardware and a diverse workforce
© 2014 EYGM Limited. All Rights Reserved. ED 1015.
Exceptional is an awardwinning magazine for and
about entrepreneurs and
fast-growth companies.
“Entrepreneurs operate within a
wider ecosystem, which can either
help or hinder their success.”
Exceptional
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No entrepreneur is an island. Individual leaders may
drive rapid growth in their business, but they also have to
operate within a wider ecosystem, which can either help
or hinder their success. We find out how all entrepreneurs,
at any stage of the business life cycle, can affect, or be
affected by, that ecosystem.
We often talk of entrepreneurs giving back to society,
but more rare are entrepreneurs who launch their
business as a social enterprise from the outset.
Paul Cvilak, CEO of AfB in Germany, and our cover star, defied expectations when
he employed people with disabilities to recycle IT hardware. In one fell swoop
he established a rapidly growing enterprise that provided employment for a
disadvantaged workforce while reducing waste.
In the realm of high finance, David Rubenstein, Co-founder of The Carlyle Group,
caused waves in the private equity sector by revolutionizing the way his company
went to market. While private equity firms had traditionally offered one fund, he
took the bold move to offer multiple funds of different types on a global basis. More
than 25 years later, the breadth and depth of these funds demonstrate the value and
impact of the innovative strategy he helped bring to market.
Another essential component of a fertile entrepreneurial culture is resilience. It’s
a theme exemplified by The Jelly Bean Factory’s joint managing directors, Peter and
Richard Cullen, whose successful confectionery business was built using lessons
learned from working in a business that had to close down.
On a macro level, find out how the G20 countries and their governments fared with
their entrepreneurial ecosystems in the “Engines of growth” feature on page 25.
Elsewhere in this issue, we shine a spotlight on the increasingly exciting role family
offices are playing in preserving wealth, while our “Doing business in Russia” feature
explores the prospects for growth in the world’s largest country.
It’s an action-packed edition, so we hope you enjoy reading about these
inspiring market leaders.
Don’t forget, if you want to read any of these insightful stories on the go, the
EY_Exceptional app is available for iPad, iPhone and Android.
Peter Englisch
Lead Partner, Global Family Business Center of Excellence, EY
Exceptional January-June 2014
1
Contents
40
98%
The percentage of products OMS Lighting
exports, thanks to a thriving market overseas
(page 04)
“It became my dream to build
an IT company that was not
only competitive but also
pursued social goals.”
Paul Cvilak, CEO of AfB
“Being able to manage
the things you dream
up is very important.”
Dr. Victor Allis, CEO, Quintiq (page 20)
Profiles
Analysis
04 Light-years ahead
12 Wealth preservation
06 Force for good
25 G20 performance
Thanks to its pioneering spirit and
market knowledge, OMS Lighting
is blazing a trail across its sector.
Find out how family
offices can help you
manage your wealth.
The Carlyle Group’s David
Rubenstein is using his wealth
and power to make a difference.
A recent EY study
ranks countries’
efforts to foster the
healthiest ecosystems
for entrepreneurs.
14 Bean machine
Peter and Richard Cullen explain
how fun, failure and flavors have
shaped The Jelly Bean Factory.
Regulars
32 Words of wisdom
20 Chain reaction
“We’re constantly striving
to do things that haven’t
been done before.”
By creating a killer app for
supply chains, Dr. Victor Allis
has translated puzzle solving
into business success.
28 Fit for business
A global ambition to promote
healthy living, combined with a
love of design and sport, inspired
Nerio Alessandri’s Technogym.
14
Richard Cullen, Joint Managing
Director of The Jelly Bean Factory
44 Power players
06
2
20
Superior Energy’s CEO David Dunlap
and EY’s Global Oil and Gas Leader
Dale Nijoka discuss new trends and
opportunities in the energy sector.
Explore the latest EY
intelligence, events,
research and programs.
Find out why growth
in Russia is gathering
pace and attracting
global investors.
Akram Khreis’ talent for spotting
an opportunity has made
International Beverage Consultancy
a market leader.
Paul Cvilak proved the banks
wrong by building a profitable IT
business that harnesses the talent
of disabled people.
38 Did you know?
46 Doing business in …
34 Thirsty work
40 Wired for success
Read exclusive insights
and advice from our
CEOs on lessons they’ve
learned in business.
48 Beyond profit
28
34
How to turn
disadvantaged
youth into budding
entrepreneurs.
EY | Assurance | Tax | Transactions | Advisory
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© 2014 EYGM Limited. All Rights Reserved. EYG no CY0674. ED0614
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The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.
Exceptional January-June 2014
3
30 seconds with Vladimir Levársky
Leading
light
change for us, and now we aim to produce more high-end,
technologically advanced products.
For example, high technology includes producing lighting
with no visible parts. We’re also using nanotechnology to
create new and varied styles of lighting, and 3-D printing has
helped us develop prototypes quickly and easily. Crucially,
we can also create very small runs of products — perhaps just
50 — if clients need them.
Research and development (R&D) is therefore very much
the driver of our business. The size of our R&D department
is what makes us unique, and it’s how we’ll maintain our
competitive advantage.
Vladimir Levársky is a
luminary in lighting technology
and innovation.
What is the scope for growth in your business today?
Making lighting more environmentally sustainable is
a big opportunity. In Europe, lighting accounts for
23% of energy usage. Street lighting and LED lighting
can help here.
People also expect so much more from lighting these
days, so our challenge is to ensure we are constantly
listening to our customers’ needs. There are obviously
more new markets to conquer as well. So having the right
technological equipment and skills to allow scalability and
innovation is critical to facing the challenge of meeting
changing demands.
words Simon Brooke_ photography Jakob Polacsek
V
ladimir Levársky is CEO and Founder of
Slovakian business OMS Lighting, which is
at the cutting edge of central and eastern
Europe’s lighting industry. Having launched
several examples of revolutionary technology onto the
market, Levársky aims to position himself as world leader
in the field. He is the EY Entrepreneur Of The Year™ 2012
Slovakia Award winner and is also owner of his local football
team, FK Senica, in the Slovak Super Liga.
What prompted you to start your own business?
Prior to the fall of communism in 1989, I spent some time
as a math and geography teacher, but after that everything
changed. I realized that school was not the place for me.
Everyone was looking for new jobs. I started working in
construction — mainly plastering and installing suspended
ceilings — but I wanted to do my own thing. I was used
to dealing with lighting, and as there were no lighting
manufacturers in Slovakia, there was a gap in the market,
so I saw an opportunity to make my mark.
I could see the potential for growth. Lighting affects
people every day. In retail, for example, everything from
baked goods to jewelry needs the right type of lighting.
How did you manage to set up a business during such
a transformative time in Slovakia?
I poured all my savings and funds borrowed from my
parents into setting up OMS — there was no way that you
could borrow money from the banks back then. When I
set up the company in 1995, we had six employees. We
originally got the parts from various small suppliers and then
assembled and packaged them working in my garage. Step
by step we moved to have our own office and then to our
current factory.
My first trade show was in Russia. There were just eight
companies there, and we only had around 10 products.
4
Luckily for us, the Russians were less experienced in
business at that time, but they were very keen to buy.
The business we did here and through other exports helped
us to buy greater volumes of components and to start to
expand our workshop.
How did you grow the company?
We started purely in production, but we now offer clients
a more diverse range — development, installation and
servicing — the complete lighting solution. We also developed
the Lighting Quality Standard, which has been a major step.
It has more than 20 objectively quantifiable criteria such
as ergonomics, emotion and ecology, which we can use to
evaluate complete lighting solutions for different spaces and
individual client needs.
We also don’t borrow; our growth is self-funded. In 2012,
turnover was over €70m, and it has increased by 7% this
year. We’ve recruited people almost every year since we
started, and today we have a workforce of nearly 1,000
people. I know at least three-quarters of the people here
personally. Many CEOs don’t bother to get to know their staff
on the factory floor, but it’s important for me to talk to them
because I need to know what is happening in the company at
every level and in every department.
What has been OMS Lighting’s critical success factor?
Success in business and winning against the competition
is not necessarily about being big; it’s about being fast.
Being a relatively small company means that we have good
communication, can be flexible and can make decisions
quickly. We can identify customers’ needs and create a
product for them very rapidly.
How important is innovation to OMS Lighting?
Right from the start, we’ve always invested in innovation.
In 2006, we started using LEDs, which was a big technical
Where are your key markets?
We focus very much on exports because that offers
greater opportunities than the domestic market — 98%
of our products are exported. We originally sold to Europe
only, but now we export to more than 120 countries.
Our next focus is Latin America, which is a new and
growing market for us fueled by its expanding
construction industry.
“Success in
business and
winning against
the competition
is not necessarily
about being big.”
What are your passions outside work?
I had a good education, and I’ve used it — now I want
other people to do the same. We’re starting a series of
management courses, and we want to offer them to people
outside the company who live in this region.
I used to play football, and I even got into the national
youth team. I’d like to develop FK Senica, which I bought
in 2009, and recruit more players from the national side. I
love football, but it’s also a great opportunity to help young
people and their families from the area.
What does it take to be an entrepreneur?
I think a good entrepreneur is someone who can master
the principles of maximum customization, multilevel
segmentation, massive diversification and total innovation.
All of this has to be supported by operational and strategic
flexibility, as well as personal courage. If you also have a way
of thinking that anticipates the future, if you are able to read
the trends and the market, then you are ready.
Exceptional January–June 2014
5
Profile: The Carlyle Group
The underestimated
overachiever
The Carlyle Group is one of the world’s most successful alternative
asset management firms. Co-founder David Rubenstein reflects on
his tenure with the firm and his decision to give away more than
half of his personal wealth.
words Patricia Olsen_ photography Jonathan Hanson
W
hen David Rubenstein was starting
The Carlyle Group with his partners
in Washington, DC, in 1987, he was
thinking small. “When I negotiated the
original lease, I said I didn’t want any expansion space
and didn’t ever want to expand beyond 10 people,” he
remembers. “That was obviously not great foresight.”
Indeed, 27-year-old Carlyle is now one of the largest
alternative investment firms in the world, with more
offices in emerging markets than any other buyout firm.
In 2012, the company went public, invested US$8b and
returned approximately US$37b to investors.
6
Luck played a role from the start, Rubenstein says,
with a modesty not always seen in corner offices. He
certainly had a few things to figure out at the beginning.
His Co-founders, Daniel D’Aniello and William Conway, Jr.,
had investment skills, while his background was law and
public service. Unsure where he might fit, Rubenstein did
what he now advises others to do: he made himself useful.
“Find something that isn’t being done, make yourself an
expert on it, and you will accrue more and more authority
as you expand your area of expertise,” he says. In doing
so, he stumbled on to something that, in his words,
“actually became a goldmine.”
Exceptional January–June 2014
7
Profile: The Carlyle Group
$180b
“Find something that isn’t being done,
make yourself an expert on it, and you
will accrue more and more authority.”
Left to right: William Conway, Jr.,
Daniel D’Aniello and
David Rubenstein, founders
of The Carlyle Group
8
The value of the assets under
Carlyle’s management
it was already a major player before competitors realized
what Carlyle had actually done.
It was not the first time Rubenstein’s genius had gone
unnoticed. Years earlier, his Duke University classmates
had also underestimated him. “If they had a poll [for]
who would be the least likely person to become Chairman
of the Board of Duke University 40 years later, I would
probably have won,” he says. The title is only one of
several honors he’s achieved. He’s currently Chairman
of the John F. Kennedy Center for the Performing Arts,
a Regent of the Smithsonian Institution and Vice Chair
of the Brookings Institution.
Impressive statistics
Today, Carlyle has a breadth and depth most firms can
only dream of accomplishing. The company is invested
across corporate private equity, global market strategies,
real assets and global solutions (in North and South
America, Africa, Asia, Australia, Europe and the Middle
East). It has US$180b of assets under management,
118 funds and 81 fund of funds vehicles, and more than
1,400 employees in 34 offices around the world.
In 2012, The Carlyle Group went public, a move
Rubenstein describes as timely for several reasons. “First,
a lot of our peers were public and had
stock they could use to recruit and retain
employees. Second, I thought we would
want to grow the firm through acquisitions
that are often tax free if you use stock,
and that would be an advantage. Third,
I wanted to increase the amount of money
we had in the firm, our balance sheet
capital, and by going public we could
obtain some funding. Fourth, I thought
we would be a more transparent and
better-run company,” he explains.
Rubenstein’s experience in public
policy has informed much of his
decision-making. From 1977 to 1981, he
worked in the White House for President
Carter as Deputy Assistant to the
President for Domestic Policy. During that
period, inflation rose as high as 19%.
$37b
US
Approximate amount Carlyle returned
to investors when it went public in 2012
“If you can survive that, you can survive a lot of things,”
he says, with the humility that comes from recognizing
that not everything is going to work out perfectly. “But
I did get a sense of the whole country, the world, how
things fit together and how many different constituencies
you have to touch to get something done.”
Some might consider Rubenstein an atypical fundraiser.
Knowing that, he has taken what he calls “a cerebral
approach” when meeting people. “I talk about serious
subjects and try to give insights on what it was like to work
in the White House and what was going on in Washington,”
he says. “I’ve tried to provide information on topics that
A decade of good deeds
Just a few of the causes that
have benefited from Rubenstein’s
philanthropy:
74
The number of countries
in which Carlyle operates
might not be directly relevant to what I was fundraising for
but would get people interested in the idea that, if I was
intelligent enough to talk about these subjects, maybe
I was intelligent enough to have a good firm behind me.”
His fundraising abilities have extended from the
public to the private sector, from the US to the rest
of the world — including successful activities in the
Middle East, a feat he never thought he would achieve.
It was former Secretary of State James Baker who
encouraged Rubenstein to take Carlyle to the Middle
Eastern market when he joined the firm at the end of the first
Bush administration. Baker’s encouragement paid off:
Rubenstein at the John F. Kennedy Center
for the Performing Arts, where
he serves as Chairman
2002 Donates US$5m toward completion
of Duke University’s Rubenstein Hall
2004 Gives US$10m in unrestricted
funds to Kennedy School of
Government
2007 Buys the last privately owned copy
of the Magna Carta for US$21.3m,
which he puts on permanent loan
at the National Archives in
Washington, DC
Photography Astrid Riecken, Matt McClain/Getty
Rubenstein decided to become the firm’s fundraiser,
but when he approached investment bankers in New York,
he ran into the proverbial Catch-22 since he had no track
record of raising money. What Carlyle did have was a plan
that would disrupt the industry. Private equity firms had
always offered one fund. Rubenstein, however, decided to
offer multiple funds of different types on a global basis.
The beauty of that idea, he explains, is “when you’re
raising money for multiple funds simultaneously, you have
more options. If you go to an investor and say, ‘I’d like to
talk to you about investing in my buyout fund,’ and they
say, ‘I don’t want to be in a buyout fund, I need a venture
fund,’ I’d say, ‘OK, I have a venture fund.’” By having
multiple products, he was able to take advantage of
the contacts he made and build a large investor base.
Rubenstein is just getting warmed up on this topic; it’s
obviously an experience he considers instructive. “When
a company disrupts the existing players in a particular
space, other companies don’t always take the innovator
seriously,” he says. As a result, the financial community
underestimated Carlyle. “They often said: ‘These guys
don’t know you can’t do that, or how difficult that is, or
they don’t have the experience we have in New York.’”
Because the fundraisers didn’t take the DC firm seriously,
US
2011 Gives US$4.5m to the National
Zoo toward a panda reproduction
program
2012 Pledges US$10m to the Memorial
Sloan-Kettering Cancer Center
2013 Donates US$50m to the
John F. Kennedy Center for the
Performing Arts
Exceptional January–June 2014
2013
9
Profile: The Carlyle Group
“Anybody can be
a philanthropist
if you give away
your time, energy
and ideas.”
10
Left: Rubenstein stands beside
his rare handwritten copy of the
13th Amendment, which
abolished slavery and is signed
by Abraham Lincoln.
Below: Rubenstein speaks with
fellow philanthropist Bill Gates.
it’s the drive and the willingness to work hard, rather
than the lust for money, that creates wealth.”
If his philanthropy is not his top concern today, it’s
a close second. Rubenstein has signed the Giving
Pledge, an initiative through which the world’s wealthiest
individuals agree to give away more than half their
wealth to charity or philanthropic causes. And time is on
his mind. At 64, he knows he’s lived more than half his
life, and he feels the pressure to do as much as he can in
the years of active life remaining. “I don’t know how long
the body or the mind will hold out — 5 years, 10 years,
15 years, 20. But I now have more money than I need to
spend or to give to my family, so I want to give it away
while I’m alive.”
After Bill Gates visited him and talked at length about the
Giving Pledge over a cheeseburger and fries, Rubenstein
became the first person from the private equity world
to sign. He is actively involved in giving away his money,
buying historic documents and donating them to the
National Archives, for example. He has been generous
to Duke University. In 2012, he donated US$7.5m to fix
the damage to the Washington Monument caused by an
earthquake in 2011, and in September 2013, continuing
his support of the Library of Congress, he donated an
additional US$5m to the National Book Festival.
“I think I’m doing good things,” he says, modestly, “but
others will have to judge.” He wants to be able to say he “did
a little bit here and there to make the world a better place.”
He’s also recruiting others to follow his lead. Recently,
he had dinner in Taiwan with one of Carlyle’s investors and
the Giving Pledge came up in conversation. “He thought
it sounded good, so I asked him to join in, and he agreed,”
Rubenstein says. He’d like to think there are other people
who have joined because he suggested it, too.
In Rubenstein’s words, he’s sprinting to the finish line
rather than ambling to retirement. To sit on a beach is fine
for some people, but he has many other plans.
Photography Mario Tama, Nicholas Kamm/Getty
Rubenstein’s Middle Eastern hosts welcomed him, and
since then, Carlyle has grown to include an office in Dubai.
Rubenstein turns droll when queried about why he’s
not retired and sitting on a beach when he easily could
be. “I don’t want to relax,” he says. “When people retire
early, their bodies sometimes fall apart. My theory is the
adrenaline I use to keep going is probably keeping me
healthier. I’ve never missed a day of work because
of illness, never been in a hospital.”
Recalling his modest beginnings, Rubenstein wonders
if he would be as driven if he had been very successful
when young. He often tells young people who win
Rhodes Scholarships, White House Fellowships or
Supreme Court clerkships: “Congratulations, you’ve
won the first third of life. The trick is winning the second
third and the third third.”
To Rubenstein, starting a company and seeing it
become successful is one of the great pleasures of
a professional life. However, in his case, it’s not about
creating wealth for wealth’s sake. “Virtually none of the
people who have built large companies, or who, by virtue
of luck and hard work, are in the Forbes 400 today, got
there because they said: ‘I want to make a lot of money,
and I’m going to go figure out a way to do it,’” he says.
“They got there because they had an idea, wanted to
prove that idea worked and were willing to work as hard
as possible. In some cases that idea worked and took off
because they had innovative products or services. But
Viewpoint
Advice for entrepreneurs
No great company in the world was built during nine to
five, five days a week, Rubenstein asserts. You’ve got to
work long hours, be willing to take no for an answer and
not be personally dejected over it, and believe your idea
and your skillset are better than somebody else’s.
It’s also important to excel at persuasion, he says.
You want people to buy your product or service, so
you need to communicate well, and he cites three ways.
First, by leading by example. Second, by writing well.
And third, by speaking well.
His final advice for entrepreneurs concerns
philanthropy. He wants them to know that you don’t have
to be a billionaire to be called a philanthropist. “Anybody
can be a philanthropist if you give away your time, energy
and ideas,” he insists. And if you listen to Rubenstein, you
understand that when you give to others, what you get
back is immeasurable.
How private equity
creates value
Jeffrey Bunder, Global Private Equity Leader, and Richard Jeanneret,
Americas Vice Chair, Transaction Advisory Services, EY
During the past few years,
private equity (PE) firms
have been standardizing and
systematizing their approach
to transforming the companies
they back. According to EY’s
recent How private equity
creates value series, their goal is to position themselves for
value-crystallizing exits. PE firms have sharpened their focus on
getting the thesis right at the outset of the deal, backing the right
management teams and implementing sustainable value creation.
Consistent with prior years, PE continues to outperform
comparable public market companies, with their strategic and
operational improvements delivering a large share of the returns
over the entire study period as evidenced by earnings before
interest, taxes, depreciation and amortization (EBITDA) growth.
This finding is consistent in all four geographies where the study
is conducted — North America, Europe, Africa and Latin America.
Breaking down findings from the various geographies, our
analysis of sources of EBITDA growth clearly shows organic
revenue growth has been a vital component. In North America,
this has increased markedly in the recovery period. Prior to the
recession, organic revenue growth accounted for less than 40%
of EBITDA growth in the portfolio. In the years since, however,
organic revenue growth has increased to well over half of the
value created.
In Latin America and Africa, there is a greater focus on growth
capital, partnering with entrepreneurs to formalize businesses
and strengthen corporate governance and finance functions.
Value also lies in the provision of access to networks and the
ability to expand companies’ operations geographically.
While PE’s value-creating capability has evolved and catalyzed
growth in its companies in the face of challenging economic
conditions, an increase in holding periods plagues the industry.
Our most recent analysis exposes the longest hold period
since our studies began — 5.1 years for North America and 4.7
for Europe. After a significant and successful focus on value
creation in its portfolio, PE must now find ways of increasing the
rate at which it realizes value through exits.
The PE industry has proven it can weather even the most
difficult of macroeconomic environments, creating stronger,
more valuable businesses. As the signs of improved economic
prospects continue to become apparent, PE faces its next
challenge — to increase the focus on selling and prove it can
generate strong realizations more quickly. Only by selling well
will the industry be able to crystallize the value inherent in many
PE-backed companies for their investors.
More information
Please visit ey.com/privateequity for more insights
on private equity.
Exceptional January–June 2014
11
Analysis: Family offices
Family affair
Asset consolidation and protection, confidentiality, flexibility and tax are
just some of the compelling reasons a growing number of top earners are
looking into setting up family offices.
The DNA of a successful family office
Future
management
structure
Balancing
risk
E
12
Managing
capital
Family
Family office
words Mark Alexander
ven in turbulent times, one thing
is certain: the wealthy are getting
wealthier. The number of people
in the world with at least US$1m
of investable assets, excluding primary
residence and collectibles, rose to record
levels in 2012.
With private wealth management
emerging as a key issue, some industry
experts believe family offices are becoming
a major driver for investment. Single-family
offices are also becoming an important
vehicle for controlling assets. Indeed, some
reports suggest these institutions currently
oversee a larger pool of investable wealth
than all the hedge funds put together.
Culture and
responsibility
Others state family offices are among the
fastest-growing investment vehicles as more
families seek to secure a greater say in how
their assets are managed.
Greater control
Following unprecedented upheaval in the
capital markets during the past few years,
it should surprise no one that successful
entrepreneurs and wealthy families are
seeking out alternative ways of preserving
their wealth. A new report, Pathway to
successful family and wealth management,
produced by EY in conjunction with Credit
Suisse, the University of St. Gallen and a host
of active family offices, explores the issues
facing families and individuals looking to
manage their wealth through the framework
and security offered by family offices.
“Family offices have gained prominence
because wealth-holding families want
greater control over their investments,”
says Peter Englisch, Global Family Business
Leader at EY.
It makes sense. Minimizing intra-family
disputes and ensuring a smooth transfer of
wealth from one generation to the next is
one thing, but the idea of taking control of
financial activities in times of uncertainty is,
for an increasing number of wealthy families,
a compelling reason to establish their own
wealth management vehicle. Moreover, family
offices enable entrepreneurs to draw a line
between the family business and its wealth
while building a stronger bond with their
financial advisors — a relationship that can
be lacking when multiple advisors counsel
different members of the family.
For most families, the core objective
of proactively handling their wealth is to
maximize returns. Through the centralization
of asset management activities, family offices
can achieve higher returns and/or lower risk.
They can also properly oversee philanthropic,
risk, tax and estate planning in accordance
with specific objectives and expressed goals.
While much can be said for family offices,
there are also downsides to this approach.
For instance, many family offices operate
most effectively within sophisticated,
mature legal and tax frameworks where
the necessary financial infrastructure is
well established. In the absence of these
Wealth
Sustaining
growth and
profitability
Effective
tax
management
Managing and
retaining
talent
Succession
planning
conditions, the development of family offices
can be undermined, and this may explain
their limited uptake in emerging markets.
More generally, regulatory and compliance
reporting — and its associated costs — can be
considerable. In fact, before committing to
such a venture, individuals should first verify
“One size does not fit all,” Astrid Wimmer
from EY Tax Services explains. “As the single
family office can purely focus on the specific
needs of the underlying family, traditional
providers of multi-family offices, such as
private banks, provide a much broader
platform of services.”
“Some reports suggest
family offices currently
oversee a larger pool
of investable wealth
than all the hedge funds
put together.”
In-house or outsourced?
their assets are sufficient to offset
these costs. To address this issue, some
families join multi-family offices in which
several families pool their wealth and spread
the costs.
Another point to consider is which services
the family office should manage in-house
and which ones should be outsourced.
Traditionally, financial planning services,
financial accounting and reporting, asset
allocation, risk management and manager
selection are kept in-house. Areas such as
global custody, alternative investments and
private equity, and tax and legal services are
often outsourced.
While there are no hard and fast rules
for striking the proper balance between
in-house and outsourced, the benefits of
favoring an in-house approach include
privacy, control and the ability to tailor the
service to meet the family’s specific needs.
On the flip side, outsourcing services can
help reduce costs and deliver economies
of scale while ensuring independent and
objective advice.
“Depending on the two different
categories of services — managing wealth
and services related to family support —
there are certain areas, especially related to
managing wealth, where specialized outside
expertise could achieve more efficiency,”
says Wimmer. “I strongly recommend
outsourcing the legal and tax services. Also,
to balance risk, it is always favorable not to
keep all the expertise in-house.”
Marc Halsema, Americas Family Office
Leader believes achieving this ideal depends
on a number of factors, not least the size of
the family, its geographical spread and the
size of its wealth. “All these factors can have
a bearing on the final structure of the office
and all must be taken into account in order
to achieve the right mix,” Halsema explains.
There are also important cost implications
to mull over. The size of a family office can
vary from 1 employee up to 50. Research
from the consulting firm Family Office
Exchange shows that more than 60% of the
total running costs associated with a family
office are allocated to staff.
Calculating the total costs of running a
family office can be even more challenging
due to the huge variations that exist
between different family enterprises. That
said, conservative estimates suggest these
costs reach at least US$1m annually,
meaning a family’s worth needs to be
between US$100m and US$500m to make
the venture viable.
“Securing wealth for generations involves
a lot more today than it did even just a
few years ago,” explains Englisch. “Many
entrepreneurial families are now aware
their wealth needs to be administered and
structured with the same level of care and
attention as the capital in their companies.”
More information
Visit ey.com/familyoffice to
download a copy of this report and
access other materials.
Exceptional January–June 2014
2013
13
Profile: The Jelly Bean Factory
Magic beans
Fun and failure are unique ingredients that have helped Peter
and Richard Cullen taste success at confectionery company
Aran Candy, better known as The Jelly Bean Factory.
A
tour of The Jelly Bean Factory production facility in
Blanchardstown outside Dublin, Ireland, will drive
your sweet tooth into paroxysms of delight. The air
is sweet — quite literally — and perfumed with grapefruit, kiwi
and raspberry, among the 36 available flavors.
If you thought these jelly beans were just like any
other, then think again. The Jelly Bean Factory beans
are altogether different. They are a smaller size, and the
entire bean is naturally flavored, providing a richer, more
intense taste. Most other jelly beans contain a generic
center made of starch and sugar, which is wrapped in a
flavored outer casing.
The company’s founders and Joint Managing Directors
are 70-year-old Peter Cullen and his son Richard, who is
49 — otherwise known as “Old Bean” and “Big Bean,”
according to their business cards. The perfect
partnership, father and son have split their roles to match
their complementary strengths, with Peter heading
operations and Richard putting his business and
marketing skills to use in sales and promotions.
words Simon Brooke_ photography Michael Donald
14
Exceptional January–June 2014
15
Profile: The Jelly Bean Factory
60
Richard continues. “We had a clear
belief that this was where the potential
for growth lay and not in trading
commodities. My passion is all about
The size of the
building the brand with a product and
current workforce
packaging that breaks boundaries.”
Peter takes up the story: “In the
early stages of the company, we didn’t
have the financial resources to set up
production for a small, niche product,
Turnover in 2013
so we took the decision to subcontract
the manufacturing to another confectionery company.
This allowed us to concentrate on marketing activity to
develop the brand in the trade.”
They controlled the product formulations and packing
operations until the business grew to a level that made
subcontracting no longer commercially viable.
In 2003, an opportunity arose for the duo when a
confectionery company in the UK, which they had planned
to partner with, decided to sell its manufacturing facility. It
allowed the Cullens to purchase the equipment and set up
their own dedicated manufacturing plant in Dublin to make
this difficult product.
It was a tough time to be starting a manufacturing
operation in Ireland. It was at the height of the Celtic
Tiger — a period of rapid economic growth from 1995
to 2007 that caused property prices and labor costs to
$16m
US
Clockwise from above: Richard Cullen
(right) with Harry McClean, who has spent
a lifetime in the confectionery industry
and worked with the Cullens at Clara; a
technician adds hot outer shell flavoring to
the jelly bean centers; jelly bean centers set
in starch molds.
They are proud to point out that theirs
is very much premium confectionery. Just
as consumers have responded positively
to the offer of gourmet chocolate, coffee
and ice cream, The Jelly Bean Factory’s
success is largely based on its position as
a high-end, naturally sweet product.
Lessons from failure
Following the failure of Peter’s previous employer, Clara,
a wine gum producer that also specialized in large-scale
production of mainstream gummies, Peter partnered
with Richard to create The Jelly Bean Factory. They had a
vision to manufacture a branded product with added value
and recognized a niche market in Europe for high-quality
confectionery. “Premium products are more difficult
to manufacture, but they can also be more profitable,”
Peter explains.
Peter started his business career in food distribution in
the 1970s and gradually moved to confectionery. He
became Managing Director of Irish confectionery factory
Clara in 1982, and Richard joined the company in a sales
and marketing capacity in 1987.
A decade later, the venture collapsed when the sterling
pound suddenly fell on the currency markets and the company
“In America it counts in
your favor if you’ve been
through adversity.”
16
found itself priced out of the
UK, its main market. “When
you’re faced with adversity
like that, you’ve got no choice
but to start from scratch,”
says Peter.
Picking themselves up,
the Cullens established
Aran Candy in 1998 from
an office consisting of the
family’s dining table, a
couple of computers and,
most importantly, a list of
contacts and their combined
40 years’ knowledge of the
confectionery market. The company began as a marketer
and broker of a variety of confectionery products, including
the brands JollyTime gummies and The Jelly Bean Factory
gourmet jelly beans. When the popularity of the gourmet
jelly beans began to build, Richard and Peter saw potential
to grow the brand further and decided to drop the other
products from their line. With a product they believed in,
the Cullens set about creating a marketing strategy to
take the brand to new markets, feeling the smaller, more
flavorsome, high-end bean had global appeal.
“We decided to focus on building The Jelly Bean Factory
brand, even though it meant our turnover halved,”
soar. “Securing an affordable property to work in and
a workforce to staff it was one of the business’s early
challenges,” says Richard.
“It was an uphill battle, but our suppliers were great,”
says Peter. “We kept our overheads very low. From year
one we started to make a profit, but it was small and we
didn’t pay ourselves much.”
By controlling costs, working closely with their existing
customers and identifying new markets that would be
relatively low risk, the father and son managed to build up
sales year by year.
But the Cullens have not forgotten those who have
stood by them. Walking through the factory with the
pair, the respect and care they have for their employees
is clear. The company has low staff turnover and a warm,
family atmosphere, with great camaraderie as Richard
and Peter greet each worker by name.
“My passion is building
the brand with a product
and packaging that
breaks boundaries.”
The Jelly Bean Factory’s global distribution
Canada
UK &
Ireland
Europe
US
Far East
Middle
East
98%
South
Africa
Australia
New
Zealand
of beans are exported
to 55 markets globally.
Exceptional January–June 2014
2013
17
Profile: The Jelly Bean Factory
Below: The different flavored
beans are mixed together.
Right: The revolving sieve is
part of quality control, filtering
out large or misshapen beans.
The demise of Clara, their early employer, was not
easy and taught both men the value of sound financial
management. Today the company has no debt, and waste
in the factory is less than 1%. Their original business
influenced them in other ways, too, including the culture
of the company and its core values.
“Losing my job in the early days was tough,” says
Richard, “and then I bumped into a friend who said, ‘This
is the best thing that could happen to you.’ He was right.
You build up your resilience and your determination to
succeed after an experience like that.”
Both men believe there needs to be more of an
The Jelly Bean Factory makes
12 million
beans a day, planning to rise to 14 million in 2014.
45,000
The Jelly Bean Factory products are sold in
retail outlets in the UK alone.
18
Below: Jelly beans are
sorted into a range
of different packaging.
Right and below right:
The beans reach the end of
the production line.
acceptance of business failure in Europe. “In America it
counts in your favor if you’ve been through adversity —
you learn so many lessons,” Peter says. “That’s the real
test of an entrepreneur.”
Global gourmet appeal
As a premium product, The Jelly Bean Factory beans do
not contain gelatin or genetically modified organisms. The
beans are also halal, vegetarian and kosher. The Cullens
have put great effort into standardizing their product so
that it complies with regulations in all markets. Expanding
internationally was a long and well-planned process, with
the Cullens undertaking substantial travel to assess each
market’s individual needs.
They found, unsurprisingly, that tastes vary greatly
among their export markets. Mango-flavored beans, for
instance, are big in Indonesia. The French hate cinnamon
while the Americans go wild for it, along with cotton
candy and popcorn.
Taking these insights back to headquarters, they used
them to shape their strategic growth plan and marketing
activities, trying to exploit the different opportunities in
individual markets. Offices have since been established in
the UK and the Middle East, and each distributor in these
markets have a strategic plan to grow the brand with yearon-year sales growth. That’s something the Cullens monitor
36
flavors,
closely, providing support
and advice where needed to
There
help that growth continue.
are
Currently, their key
growth markets are the
UK, Europe, Scandinavia,
South Africa, Australia
including chocolate and Lucozade.
and New Zealand, with a
two-year, multimillion-euro
investment program looking
Each bean takes
at strategic partnerships,
trade marketing campaigns
to make.
and product development,
which is predicted to grow
export sales by a further 50%. They’ve looked closely at
exploring South America, but they’re cautious about moving
into this vast and fast-growing region too quickly, wanting
to be firmly established in earlier target markets first to
guarantee sustainable growth.
And the business has grown rapidly ­— it’s about to move
from its 98,000-square-foot facility to one that is nearly
one-and-half times as big.
Thanks to the growing visibility of the brand, the
company has received a number of overtures recently.
“In the past few months, we’ve been offered opportunities
that would double our capacity,” Peter reveals. These
two
weeks
include collaborations with other confectionery
manufacturers and retailers. “But we’d be busy fools,”
says Richard, who is dismissive of manufacturing
own-label brands for supermarkets and other companies:
“All you’re doing is competing with yourself.
“We’re looking for strategic alliances, but it’s important
that we also get our own brand exposure,” he continues.
“We’re constantly striving to break boundaries with the
product, to do things that are difficult and haven’t been
done before.”
To that aim, they currently partner with a large Finnish
confectionery company that looks after all Finnish
distribution, and they market a co-branded product in the
US, The Jelly Bean Planet.
“The candy business is about fun and nice things,
and that makes it enjoyable,” Peter concludes.
Nevertheless, the Cullens have clearly been steeled
by their experiences. Focus and financial discipline
are two qualities they frequently stress. As Richard
puts it: “This is a fun brand, but it’s a serious product
and a serious business.”
More information
To read more articles like this on the go, download the
Exceptional apps from iTunes or Google Play.
Exceptional January–June 2014
19
Profile: Quintiq
puzzle
The planning
Dr. Victor Allis is the ultimate
problem solver, and as CEO and
Founding Partner of supplychain optimization business
Quintiq, it’s an essential quality.
words Christian Doherty_ photography Sabine Bungert
V
ictor Allis solved his first Rubik’s cube at a very
early age. While at school, in between earning
a few Dutch guilders tutoring older students in
mathematics, he represented the Netherlands
in the International Mathematical Olympiad and finished
14th in the world. It was clear the boy had talent.
“When I got to university, I started to create programs
that played thinking games, programs that played chess,
Connect Four, Go and all sorts of weird games,” he
remembers. “The question is always, how do you outwit
your opponents? So in 1988, I wrote a program that played
Connect Four perfectly. I was always intrigued by how you
have a puzzle that has an enormous number of possibilities
and how you find the optimal path to the solution.”
For those who subscribe to Malcolm Gladwell’s outlier
theory, which holds that successful people are defined by
insatiable hunger for their subject allied with relentless
practice, then Victor Allis is living proof. He’s one of
the very few academics to have translated their natural
intellect into business success.
20
Exceptional January–June 2014
21
Profile: Quintiq
Today, it is a background that makes
him stand out in the business world.
While many leaders would focus on sales
and marketing, Allis takes a rigorous
and scientific approach to perfecting the
product, ensuring that it always provides
the best possible solution. For Allis, this is
a prerequisite for success and growth.
Having completed his PhD in artificial
intelligence, Allis was lured by the
puzzles of the business world and joined
a knowledge technology firm as a senior
consultant and manager. But when that
business rejected his big idea in 1997, he
joined up with four computer programmers
to form Quintiq and got to work creating a
custom-made scheduling application.
Keen to keep 100% control of the business, the
founders avoided asking for venture capital in order
to fund it. Instead, each put a sum into the company,
supported by a substantial bank loan. While they
developed the product, they took on contracting work —
consulting on business processes — which earned enough
money to pay the interest on the loan until they were
ready to go to market. Two years down the line, the
product was ready and Quintiq signed its first contract.
Quintiq is now the world’s fourth-biggest supply-chain
planning and optimization software company.
The big idea
Quintiq’s killer app was simple: its algorithms allowed
the software to move beyond the limitations of a basic
enterprise resource planning system to something
different. Where existing software simply allowed
“When a business
gets to a certain
complexity, it needs
to change.”
In the Quintiq
offices, individuals
are encouraged
to be confident
and experiment.
businesses to systematize their business data — inputting
orders and invoices and authorizing payments — Quintiq
took the next step. By using a range of data inputs to spot
patterns and use resources more efficiently, Quintiq was
able to help businesses optimize their supply chain and
logistics, and therefore save them time
and money.
Award highlights
“If you look at the role of business,
• 2013 Quintiq named Technology
whether it is about making products,
Company of the Year in Philadelphia
moving things or deploying people, there’s
• 2010—12 Quintiq named as one of
always an enormous puzzle: how do we
the 45 best managed companies
get everything to flow optimally?” Allis
in the Netherlands
explains: “What we find is that when a
• 2008 EY Entrepreneur Of The Year
business gets to a certain complexity, it
Netherlands award winner
needs to change. So we made a single
• 1997—2004 Six-time gold medal
software application that can solve all
Dutch Programming Champion
those puzzles. That’s what we do.”
• 1989—93 Six-time gold
Having fun playing around with possible
medal winner, International
scenarios and their solutions has been
Computer Olympiad
central to Quintiq’s success, with Allis
• 1983 Silver medal winner at
as innovator-in-chief. And this unique
the International Mathematical
application of puzzle solving seems
Olympiad in Paris as representative
to be proving extremely popular. The
of the Netherlands
company now employs 700 people and
has operations in more than 20 countries.
22
While Allis is Dutch, he is now based at the company’s
US office in Pennsylvania and sees his role today as
maintaining the original Quintiq ethos of approaching each
conundrum with a fresh, innovative approach — something
he has been careful to instill in his army of engineers
and programmers.
Such has been the success of Quintiq’s offering that
growth has been nothing short of phenomenal. Within
10 years of being established in the Netherlands, the
business was reporting an average annual growth rate
of approximately 40%. Operations were expanded
environment where you want to be. Then I can support
beyond Europe to the US and then Asia, where Allis sees
the right initiatives and maybe slow down some of the
exceptional opportunities — not just to grow consumer
wrong ones.”
markets, but also to tap into the extraordinary talent and
That working environment is one where there is a noenergy of the emerging graduate class there to provide
blame culture and where individuals are encouraged to be
the next wave of programming geniuses.
confident and experiment. Attracting bright minds with
Growth came, Allis says, through being able to
PhDs and master’s degrees, Quintiq’s recruitment process
demonstrate the power of the product.
is rigorous, with puzzles and practical tests a key part of the
Initially, that meant inviting several
process. “We are also looking for a cultural fit,” says Allis,
companies to a seminar, where he
Number of daily users
“so we like people who are open but also show humility and
showcased the product software to give a
of Quintiq software
want to win for the team and not just for themselves.”
taste of what it could do. Today, Quintiq
across numerous global
Allis’ meticulous approach has its origins in his
is signing up international retail giants
organizations
academic background, which, it should be said, does not
as well as customers from the mining,
manufacturing, metal, transport and
logistics industries.
Allis says the focus since the beginning
of the Quintiq story has been on honing
and refining the software packages
to a point of certitude. And with the
meticulous analysis and careful planning
synonymous with Allis, Quintiq has
Manufacturing
retained its founding spirit of problem
Security
Metals
solving, in part thanks to its relatively
flat management structure. Business
units around the world manage their own
profit and loss, while managers have the
Field services
Natural resources
freedom to choose which customers they
Quintiq is
pursue and who they hire.
transforming
The autonomy Quintiq allows its
the world’s
managers stems from Allis’ insistence on
supply chains
treating them like grown-ups. “I’ve found
across these
that, if you start by trusting people, you
Broadcasting
Logistics
industries.
get a lot of trust back,” he says. “If you
start by distrusting people, they start
trying to work around the rules. So I think
control is not an effective baseline to
manage a business. It’s an inefficient way,
Aviation
Health care
because what you’re trying to do is stop
people from doing things they want to do.”
Of course, this places greater pressure
on executives to find the right talent. Allis,
Retail
Rail
though, is unperturbed. “All I can do is
help hire the right people and make an
12,00o
Public transport
Exceptional January–June 2014
23
Profile: Quintiq
Victor Allis believes
that being able to
demonstrate the
power of the product
is critical to growth.
Viewpoint
Link in the chain
Andrew Caveney, Global Leader for Supply Chain and Operations, EY
conform to the stereotypical back story of the successful
entrepreneur. “I never grew up thinking I wanted to be a
businessman or an entrepreneur,” he admits. But he says
his insatiable desire for the next challenge did free him
from the fear of failure that restricts many of those with a
good idea but doubts about their ability to carry it off.
It’s certainly clear Allis has extraordinary drive. When
he’s not solving puzzles, he relaxes by doing endurance
running, and in his youth he played in the team that
won the Dutch Basketball Championship in 1979. The
experience taught Allis an important lesson: “It left me
with a feeling that if you want to achieve something and
are able to set your mind on it, there’s no good reason
why you shouldn’t try.” It is a lesson that has served him
well in business.
As Allis looks out from the window of his 12th-story
office in Den Bosch in the Netherlands, he ruminates on
where the company can go next. Has he completed the
puzzle? “No, not yet. I think there will probably be more
puzzles in more areas. Right now, we don’t think we will
change course in the next 5 or 10 years.”
Allis is most concerned about maintaining the
business’s innovative edge. “I don’t worry too much about
the long-term future, but I worry every single day about
what we’re missing today that we could do to be better
next quarter or next year,” he says. It comes back down
again to the view that if the product is as perfect as it can
be, success in the rest of the business should follow.
“Some people say you can be either an entrepreneur
or a manager. I don’t think that is necessarily true.
Entrepreneurs are people who say ‘why not? I can do
that’ and think outside the box.
Managers are diligent people
who hold to their promises and
do the things that are needed.
Number of countries
You can be both. Being able to
where Quintiq software
manage the things you dream
is used
up is very important.”
8o
24
Exceptional January–June 2014
Has there ever been a more testing time
for supply-chain managers? Increasing
globalization, demand volatility, growing
costs and operational complexity combined
with political, economic and environmental
instability make managing supply chains
hugely demanding.
This is especially true in mature
markets. Sales growth is limited, margins are under pressure,
and cost inflation is running at 5%—8%. To drive top-line growth,
our commercial colleagues continue to increase product
and channel complexity through innovation and promotion,
potentially forcing more cost into the supply chain. Trying
to balance supply-chain cost cutting with greater agility and
responsiveness is a thankless task.
The current market is complex, but it’s also rewarding.
Globalization and the latest technologies offer rapid-growth
companies a catalyst to become world players in a flash. But if
you want to rise quickly and dominate your market, you need an
effective and streamlined supply chain. Bearing in mind supply
chains account for 70% of business costs and are critical to
facilitating growth, here are a couple of pointers.
To turn this challenge into a competitive advantage, you need
to revisit the purpose of the supply chain and your business
strategy. Is the business commercial proposition about products
at the lowest cost, or is it about delivering higher customization
and customer intimacy? Product and customer portfolios, when
segmented, will likely require different value propositions. The
key to an efficient and effective supply chain is to understand
the business requirements for each segmentation and align each
part of the extended supply chain to deliver what is needed at
the right cost and service level. This will deliver both improved
service levels as well as cost savings in areas of over-delivery.
The next macro area to get right is your supply chain
extended network of partners, external providers and alliances.
Understanding what to keep in-house or outsource is critical
in an emerging markets growth strategy, where choosing the
right partnerships is key to market entry or expansion success.
Joint ventures or partnerships with local companies or shipping
partners can be vital, but you must plan these commercial
affiliations so mutual and coherent objectives are identified and
rewards for success are agreed.
Finally, whether you are focused on established markets
or keen to venture into new ones, investing in operational
excellence is critical. First, establish what level of maturity
in operational excellence each supply chain function must
attain. Then, ensure integrated performance metrics are
established across the supply functions to provide a common
goal of service, cash, cost and sustainability outcomes and not
optimization in silos.
More information
Email Andrew Caveney at [email protected] for further
insights about supply-chain management and optimization.
Analysis: G20 Entrepreneurship Barometer 2013
growth
Engines of
Entrepreneurs play a critical role in economic recovery – so
how do the world’s leading economies fare when it comes to
cultivating an environment where they can flourish?
words Mark Alexander
I
t may be early yet, but there are
increasing signs that a fledgling
recovery is doing its best to take hold.
But if this recovery is to be sustainable,
it will have to rely on a multitude of
macroeconomic and microeconomic factors
working in a coordinated and concerted way.
The good news is that entrepreneurs and
fast-growth companies increasingly lie at the
heart of this recovery, fueling growth through
rapid job creation and capital expansion.
Recognizing the overwhelmingly
positive impact entrepreneurs and their
fast-growth enterprises can have on an
economy, the EY G20 Entrepreneurship
Barometer 2013 was devised to help
leading G20 countries benchmark their
progress and performance with cultivating
entrepreneurship. The publication also
lists practical steps in areas where the
G20 countries need to take urgent action
to improve the business environment
for these innovators, encouraging their
establishment and growth.
Combining the results of a survey of
more than 1,500 entrepreneurs with
qualitative and quantitative data based
on economic and business conditions
across the G20, the report identifies the
countries that lead the way in facilitating
business start-ups and their growth. Each
country is measured and subsequently
ranked against five fundamental criteria:
access to funding, entrepreneurship
culture, tax and regulation, education and
training, and coordinated support.
“The need to act is clear.
Entrepreneurs have the
power to create jobs and
drive growth — but first
we need to give them the
tools and environment
that will enable them
to succeed.”
Maria Pinelli, Global Vice Chair,
Strategic Growth Markets, EY
Access to funding
Unsurprisingly, access to funding is
where entrepreneurs feel the greatest
improvements are needed. Seven
out of 10 entrepreneurs surveyed
Ranking and scores — pillars
Ranking
Access to
funding
Score
Entrepreneurship
culture
Score
Tax and
regulation
Score
Education and
training
Score
Coordinated
support
Score
1
United States
7.12
United States
7.67
Saudi Arabia
6.40
France
6.58
Russia
6.23
2
United Kingdom
6.86
South Korea
7.53
Canada
6.34
Australia
6.53
Mexico
5.89
3
China
6.75
Canada
7.45
South Korea
6.34
United States
6.50
Brazil
5.87
4
Canada
6.62
Japan
7.28
United Kingdom
6.19
South Korea
6.40
Indonesia
5.84
5
Australia
6.48
Australia
7.18
South Africa
6.10
EU
6.25
India
5.76
United Kingdom
7.00
Japan
6.07
United Kingdom
5.98
China
5.75
Scores
on a 1 to 10 5.95
scale.
6 are computed
South Africa
Exceptional
January–June 2014
5.89
Turkey
5.66
7
Japan
5.81
Germany
6.88
Germany
5.84
Germany
8
South Korea
5.75
EU
6.07
Australia
5.75
Argentina
5.85
South Africa
5.65
9
Brazil
5.67
France
5.68
Russia
5.65
Canada
5.81
Argentina
5.64
25
Analysis: G20 Entrepreneurship Barometer 2013
Access to funding for start-ups
Access to funding for start-ups
Top performers in the Barometer do better at providing funding for start-ups.
Top performers in the Barometer do better at providing funding for start-ups.
Playing catch-up
Barometer score
Barometer score
9
9
8
8
7
7
6
6
G20 average
G20 average
5.8
5.8
5
5
4
4
3
3
2
2
1
1
0
0
Mature markets
Mature markets
Rapid-growth
markets
Source: EY G20 Entrepreneurship Barometer 2013
Rapid-growth markets
Source: EY G20 Entrepreneurship Barometer 2013
indicated they find it difficult to
obtain funding support, with half saying
improved access to funding would be
the most effective way of accelerating
entrepreneurship. Improving the situation
is not straightforward, but with the right
policies in place, governments can enable
a deeper and more diverse mix of funding
options to support every stage of growth.
For example, allowing investors to accept
and pool donations from multiple investors
is one possible solution.
Entrepreneurship culture
The importance placed on the role of
entrepreneurship in a country’s culture
also proves to be a pressing issue.
15%–20%
of students who participate
in a mini-company program in
secondary school go on to start
their own business.
26
Countries that champion risk-taking and
have an abundance of inspirational role
models tend to encourage more individuals
to start new ventures, improving the pace
of new business growth in that country.
Indeed, 84% of G20 entrepreneurs believe
raising awareness of entrepreneurs’ roles
as job creators would improve attitudes
toward their work — making it easier
to establish and grow their businesses.
In reality, only 15% reported their own
country had a culture that fully supported
their efforts.
Encouraging a tolerant attitude toward
business failure is also necessary to help
create realistic, entrepreneur-friendly
conditions and expectations in a country’s
According to The EY G20
Entrepreneurship Barometer 2013,
mature countries create the best
ecosystems for entrepreneurship
simply because they’ve had more
time (and capital) to get a head
start. More extensive funding options,
stronger education systems, and more
mature and stable tax and regulatory
environments mean economies such
as Australia, Canada, South Korea, the
US and the UK lead the way, for now.
The research also shows, however,
that rapid-growth markets are closing
the gap, and quickly, by learning from
the successes and failures of policies
previously implemented by the
more mature economies. Countries
such as Russia, Mexico and Brazil
are making the greatest gains, with
a particularly positive effect being
seen when government, corporations
and entrepreneurs provide that
all-important coordinated support.
culture. Countries such as the US,
which scores highly in this area, do not
excessively punish honest businesses
that fail and actively encourage private
sector lenders and investors to take a
similar approach.
All G20 countries can make a more
concerted effort to acknowledge
and leverage the emerging pool of
entrepreneurial talent among women,
immigrants and young people. These
demographic groups require targeted
strategies to encourage business start-ups
“Companies have to pay a heavy
tax burden. They pay tax at an
aggressive rate in proportion to
number of employees, regardless
of revenue or profit. It’s a serious
disincentive to entrepreneurs.”
Stefano Neri, Chairman and CEO, TerniEnergia SpA,
Italy, on the tax burden in Italy
87%
of entrepreneurs believe that
improving communication about
success stories would improve
the image of entrepreneurship.
One in three entrepreneurs want
to see government start-up
programs and business incubators
improving the long-term growth of
entrepreneurship.
and fast growth. This strategy can also
serve to broaden the entrepreneurial base
in individual countries.
Tax and regulation
Government support of entrepreneurial
ecosystems doesn’t need to be based
solely on leniency. The analysis of tax
and regulation across the G20 countries
revealed low corporate income tax rates,
business-friendly regulations, and the
availability of good information and
resources. These are key attributes that
have put Saudi Arabia on top of the table
for tax and regulation. These Keynesian
qualities resonate with the G20’s
entrepreneurs, 84% of whom want tax
systems to be simplified.
Education and training
But even before new businesses reach the
point of filing a tax return, a lot can be done
to cultivate the nation’s entrepreneurial
culture through education and training.
For instance, more than four out of five
respondents believe entrepreneurial skills
can, and should, be taught in schools and
colleges. In more mature economies, such
as Australia, South Korea and France,
education and training in start-ups and
innovation are most prominent thanks
to a legacy of public spending and public
interest allowing entrepreneurs to become
true drivers of growth.
Meanwhile, large corporations,
philanthropists and existing entrepreneurs
have shown they can make a significant
contribution in time and money to support
educational courses, mentoring and
peer-group clubs to raise the prominence
of entrepreneurship in the general culture.
This can make a considerable difference to
the success — and pace of success — of an
entrepreneurial enterprise.
Coordinated support
Finally, the report shows that integrated
and coordinated support through better
One in four entrepreneurs
think entrepreneurial-specific
programs in schools/universities
would improve the image of
entrepreneurship as a career.
“More can be done, not
least given the potential
for governments to learn
from each other, exchange
best practices and avoid
any pitfalls or unintended
consequences that others
have already encountered.”
Uschi Schreiber, Global Markets Leader
and Global Government and Public Sector
Leader, EY
orchestrated links between the public,
private and voluntary sectors are more
effective than isolated actions.
In this respect, the rapid-growth
markets of Russia, Mexico, Brazil and
Indonesia are leading the G20 countries
in providing networks, mentors and
incubators — programs designed to
support the successful development of
start-up businesses. And the implications
of these efforts can be quick. In Russia,
for example, one in four entrepreneurs
say access to incubators has improved
over the past three years, with the country
now having more than 1,100 registered
incubators and technology parks and
a burgeoning entrepreneurial culture
as a result.
None of these factors alone can create
the fertile ground needed to nurture
thriving entrepreneurs, but implemented
together, in a coordinated way, the
barometer shows a more congenial
environment for growth can be achieved.
More information
Visit ey.com/g20ey to read more
in-depth analysis of individual
G20 countries.
Exceptional January–June 2014
2013
27
Profile: Technogym
Healthy
outlook
As the entrepreneur behind the pioneering and rapidly
growing Technogym, Nerio Alessandri is on a mission
to make the world a healthier and happier place.
words Eric J. Lyman
28
enthusiastically, passionate about his cause. “Fitness is
about looking good, whereas wellness is about feeling
good — it’s a more balanced and holistic approach.” He has
certainly done more than his part to promote the type of
wellness lifestyle his company offers.
Following a degree in industrial engineering, Alessandri
founded Technogym in 1983 in the small town of Cesena,
south of Bologna in central Italy. Combining his love of sport
with his skills for design, he began crafting exercise equipment
in his father’s garage.
“In those days, gyms were devoid of any form of technology
and were frequented almost exclusively by bodybuilders and
fitness fanatics,” he recalls. “I set out to design and create
a tool that would make exercise safer, easier and more
accessible for a greater number of people.” In so doing he had
opened the door for the health and fitness industry and had
begun to bring his vision to life.
Rapid growth
His game plan worked. The company quickly outgrew its
garage space and is now one of the world leaders in exercise
equipment, with more than 2,300 employees and over
€400m (US$540m) a year in revenue. Technogym has
sponsored five Olympic Games — most recently, the London
2012 summer Olympic and Paralympic Games — while Cesena
is now home to the Technogym Village where the company’s
wellness philosophy has become a key part of the community
and the company’s productivity.
Portrait Danilo Scarpati/Contrasto/eyevine
A
nyone trying to gauge the impact Italian
entrepreneur Nerio Alessandri has had on the
world need only consider one fact: the term
“wellness” was not widely used until the founder
of fitness equipment maker Technogym popularized it two
decades ago. Now it’s a common term that appears in the
Oxford English Dictionary.
The 52-year-old Alessandri says the secret to his — and
his company’s — success boils down to a simple formula:
“Innovation, innovation, innovation.” And perhaps his
popularization of the term “wellness” helps illustrate that
point most effectively.
“In the early 1990s, when the American concept of fitness
was so popular, we defined the term ‘wellness’ as an Italian
kind of lifestyle alternative, rooted in the Roman concept of
mens sana in corpore sano,” Alessandri says, referring to the
Latin phrase for “a sound mind in a sound body.”
“Wellness,” he continues with an energy that befits his
business, “means striking a balance between regular physical
activity, healthy eating and a positive mental approach.
I aspire to improve the health of the world through the
promotion of wellness as a kind of preventive medicine.”
Defining his contribution to the fitness industry as
“transforming a business based on hedonism to a sector
with a high social impact,” Alessandri aims to spread his
wellness concept across the world, believing there cannot
be sustainable development without personal health.
“Healthy people, healthy planet,” Alessandri reasons
Nerio Alessandri sits on one of
his own Technogym exercise
balls in his villa in Cesena
Exceptional January–June 2014
29
Profile: Technogym
The Technogym Village in Cesena is an example of what
Alessandri calls a “wellness campus,” complete with the
company’s headquarters, a research center, and a cuttingedge wellness center with a gym and restaurant. Alessandri
is convinced the best way to communicate his vision for the
industry’s future to customers and other stakeholders in the
wellness economy is to create an attractive and integrated
business complex they can try out for themselves.
The Technogym difference
With a range of in-gym and home-based
training equipment, Alessandri has used
innovation to set Technogym fitness tools
apart. Notable launches include:
Clockwise: Nerio Alessandri is a keen user of his
own fitness equipment; the Technogym Village is
in Cesena, Italy; Alessandri tosses a fitness ball
with former US President Bill Clinton.
“Fitness is about
looking good,
whereas wellness is
about feeling good.”
The Run Personal
VISIOWEB treadmill
30
A wellness family
Photography 2012 Venturelli, Courtesy of Technogym, Associated Press
1988 C
onstant Pulse Rate, an automatic
training program that allows users
to train at the rhythm of their heart
1992 REV 9000, an isokinetic
rehabilitation machine
1996 Technogym System, gym training
management software
1998 Biostrength, a new strength line with
electronically controlled workload
and exercise position
2002 Excite, the first cardiovascular
training line with an integrated
TV screen
2008 Excite Vario, the first cardiovascular
machine that adapts to the step of
the user, as well as the
eco-sustainable Run Now treadmill
2010 VISIOWEB, the first integrated
display for surfing the internet
during training
2013 A series of Wellness on the go
mobile apps and Artis androidpowered gym equipment
“We also have what we call a ‘wellness university’ open
to the community of people who work with our products:
personal trainers, architects, doctors and so on,” Alessandri
explains. The Technogym Village was created by acclaimed
Italian designer Antonio Citterio to give employees and visitors
an innovative workspace oriented toward wellness.
The village not only represents a business opportunity,
Alessandri says, but an opportunity and example for
society: for governments to invest in policies for health and
prevention, for companies to promote productivity and
motivation, and for individuals to improve their daily lifestyle.
As a result of these efforts, Technogym has evolved from
a micro-start-up in a garage to a cutting-edge multinational
leader in a competitive sector. With a specific range of
equipment for medical rehabilitation and equipment for
elite and Paralympic athletes, Technogym today has more
than 200 pieces of equipment on offer. The company’s
rapid development has coincided with technological
advances that Alessandri says he and his team have been
quick to embrace in order to get and stay ahead.
“Back when I was working alone in my garage, it
sometimes took me months
to obtain information I was
looking for, like new trends
or products in the United
States,” he recalls. “Today,
thanks to the internet,
anyone can access all kinds
of information in just a few
minutes. Now the challenge
is no longer finding
information, but knowing
how to filter and understand the information, and how to
value and then use it. I believe that is one of our strengths.”
This, alongside a capable team with a shared vision
which produces high-quality, innovative products that
clients want, is counted among the company’s biggest
assets and has helped Technogym expand far beyond
its humble beginnings. The company’s products are
now sold in more than 100 countries, through offices
and showrooms worldwide. The leading market is the
UK, where Alessandri highlights the company’s market
leadership in segments as diverse as private gyms, public
facilities, hotels, corporate gyms and private homes.
“In spite of our successes in Europe, we are also very
busy developing markets such as China and Brazil,” he
adds, citing that these large, developing markets are
expected to grow quickly and have demonstrated a demand
for fitness technology he is keen to meet. As well as the
physical retail environment, the digital arena is another
area where expansion will likely come in the future.
Alessandri foresees that the digital world represents a
great growth opportunity for Technogym. “Digital allows us
to reach an increasing number of people with the ability to
provide customized programs and experiences, both within
our products and on the web and mobile devices.”
But where will it lead? “Globally, less than 10% of the
population does regular exercise,” he says. “So our growth
potential and potential customer base is still huge!”
Foundation for wellness
Alessandri pauses to be philosophical as he reflects on the
company’s past and future. “I have always been inspired
by the example of Adriano Olivetti [Italian engineer,
industrialist and Founder of Olivetti]. He was a visionary
entrepreneur who was among the first to understand a
company is a kind of social heritage to all its stakeholders.
He combined an innovative business vision with a strong
social commitment to the development of his community.”
It is partly with this in mind that Alessandri established
Technogym’s Wellness Foundation, a charitable
organization he sees as a catalyst for the company’s
In establishing his wellness empire,
Nerio Alessandri has not only stayed
close to home, pitching the Technogym
headquarters in the region where he
was born, but he has kept his family
close, flanked by his younger brother
Pierluigi Alessandri (above, left) as
Vice President. It was Pierluigi who
oversaw the wellness village project,
from the first draft plans nine years
ago to its opening in September 2012.
Among the celebrities, politicians and
sports stars who attended this opening
was Nerio and Pierluigi’s mother
Filomena (above, center).
evolving role in the future.
The Wellness Foundation
has been active for
more than a decade and
promotes wellness in public
institutions and private
companies and among individuals.
“For example, here in Emilia Romagna [the region that
includes the company’s Cesena headquarters], we are
building the first district dedicated to well-being anywhere
in Europe,” he enthuses. “On an international level, we
collaborate with the Clinton Foundation [the nonprofit
organization founded by former US President Bill Clinton]
in the fight against child obesity. We also work with other
companies or organizations, such as the World Economic
Forum, to promote wellness in the workplace.”
It is no surprise, therefore, that Alessandri is a keen user
of the company’s products. He says he works out three times
a week, and he encourages others to do the same.
“Today, cardiovascular disease, which is largely
attributable to lifestyle choices, is the world’s leading cause
of death,” Alessandri explains. “But it takes only 30 minutes
of exercise three times a week to halve the chance of
acquiring the disease. Let’s make that more common.”
Exceptional January–June 2014
31
Quote unquote
Wise words
“Do not be
intimidated
by the
doubt that
others show.
You’ve got
to proceed using the
principles of business
and have a vision.”
We asked our entrepreneurs to share some of the most important
insights they’ve learned in business. Here’s what they said.
“In business you’ve got to be
you. You’ve got to have your
own philosophy and stick to
it. Everyone’s different. I’ve
learned from other people, but
I have my own ideas – and it’s
important that I put them into
practice. This company
is very much an expression
of my personality.”
Vladimir Levársky, Founder
and CEO of OMS Lighting (page 4)
“One of the most important
lessons I’ve learned in business
is that diverse teams,
if managed well, deliver
the best
“My risk calculations
performance.”
work like this: ‘If it
Andrea Vogel, Strategic Growth
Markets Leader EMEIA, EY
“Some people say you can
either be an entrepreneur or a
manager. I don’t think that is
necessarily true. Entrepreneurs
are people who say ‘why not? I
can do that’ and think outside
the box. Managers are diligent
people who hold to their
promises and do things that are needed. You can be both.”
Dr. Victor Allis, CEO of Quintiq (page 20)
32
does fail, how much
are we willing to let
it fail by? This is my
red line.’ I try to take
emotion out of the
equation. That’s one
thing I’ve learned
over the years.”
Akram Khreis, CEO of
International Beverage
Consultancy (page 34)
Paul Cvilak, CEO of AfB (page 40)
“To be a market leader you must create an exciting,
engaging brand which has core values and global
appeal. Investment in packaging, brand identity
and trade marketing are vital to survive in this fastmoving category.” Richard Cullen (above right, with father
Peter), Co-founders of The Jelly Bean Factory (page 14)
“If I could start up any
company today, it would be
a company where decisions
are pushed to managers
who are close to our
customers so that we can
be responsive and nimble.”
David Dunlap, President and CEO of
Superior Energy (page 44)
“Over the long haul, honesty and
transparency pay off. I learned this
from my father, who was a simple and
humble man. But the values and ethics
he had guide me today.”
Nerio Alessandri, CEO of Technogym (page 28)
“If you take the business
plan that we had, or even
that of leaders like Bill Gates,
or Michael Dell, or Howard
Schultz, or Jeff Bezos, they
probably bear no relationship
to what the company actually
became. When you’re
starting a company, you have
a vision or an idea, but the
world changes around you
and you adapt.”
David Rubenstein, Co-founder
of The Carlyle Group (page 6)
“People always ask me, because I have worked in the public and
private sectors as well as the government sector, how did I learn
to make those transitions. In every case, there was someone
who was willing to help me. And as a result, I feel very strongly
about giving back, and particularly as a woman who leads an
organization, I have a responsibility to help those who are coming
up the ladder now.”
Amy Rosen, CEO of the Network for Teaching Entrepreneurship (page 48)
Exceptional January–June 2014
33
Profile: International Beverage Consultancy
An enterprising
influence
A
thirst
Khreis’ management style would
appear to have had some influence on
his two sons, as his business acumen
is clearly infectious. When he is not
sailing with them in the Mediterranean,
he’s teaching them about business and
the value of learning independence. On
a recent trip, his 9-year-old son said
he wanted to start his own business,
and borrowed money from Khreis to
set up a deal importing Turkish towels
to Jordan. “He made 100% margin!”
for growth
Akram Khreis, founder and CEO of
International Beverage Consultancy,
explains how his company puts fizz
into the global drinks industry.
F
words Peter Shaw-Smith_ photography Kate Brooks
or a soft drinks manufacturing engineer
and business leader, it is surprising to learn
that Akram Khreis’ favorite drink is water.
But then, the German-born entrepreneur
with Jordanian parents defies conventions.
His approach to growing his business, for
example, is both surprising and refreshing.
“I’m goal-orientated, but it’s not about the money,” Khreis
explains. “It’s about doing different things, having an
impact and creating.”
As a tenacious networker with a gift for spotting
opportunities, Khreis has rapidly built up his business,
International Beverage Consultancy (IBC), and its client base
over the past decade. Dominating market share in the Middle
East and Africa, IBC operates in a niche market offering an
array of technological, technical, executive and consultancy
services to the beverage manufacture and packaging industry.
After only a few minutes in his presence, it is clear Khreis
has the demeanor of a man whose success and prospects
put him in the highest league of achievers. Wearing an
immaculate gray suit and black tie, Khreis sinks back into
the large sofa in his office and occasionally leans forward to
emphasize a point. “We are among very few companies in
the world doing this,” he says.
34
Akram Khreis sits in the
lobby of business incubator
Oasis500, of which he
is a board member.
Indeed, IBC has only three major competitors, two of which
have been in the market for 20 years. Despite this, IBC stands
out, Khreis explains, because it is seen as a company that
delivers faster than others but with the same level of quality.
Opportunities from challenges
Having studied mechanical engineering in the US, Khreis
began his career in the beverage industry in 1997 as an
operations manager in Lebanon for one of the biggest
soft drinks brands in the world, covering the Middle East
and North Africa. It was in this role that he identified a
significant niche need in the market for specific ingredients
and lubricants used in the bottle-filling industry. So in 2000,
Khreis and a partner launched Original Chem Group with just
US$7,000, equivalent to about 30% of the company’s first
letter of credit.
The company’s first sale of bottle-cleaning additives
managed to cover its debt and the business has gradually
expanded from there. But it was his experience of helping to
establish a production line for another global drinks brand
in Libya that gained Khreis the attention of Krones. At the
time, the German bottling and packaging manufacturer was
struggling to maintain its business in an increasingly volatile
Iraq. Khreis was able to persuade Krones that his engineers
could support it, provided they were trained to Krones’ own
exacting standards. A joint venture was established. “It
helps a lot having a German background,” Khreis explains.
“Working with a German company is very technical. So if you
know the language, it’s an advantage in this industry.”
“The technology started in Germany, home to a major
proportion of the [global] bottling industry,” Khreis says. “It
was in the hands of a closed group of people, so there was
no knowledge transfer. We convinced them to share that
knowledge with IBC.”
Out of this deal, IBC, which acts as an umbrella company
for a string of joint ventures with international partners,
Exceptional January–June 2014
35
Profile: International Beverage Consultancy
Supporting
Jordan’s
entrepreneurs
was born and quickly made a name for itself in the global
soft drinks industry.
Khreis and his team come in before a plant starts
operating, supplying designs and directing product
development and line specification. Once equipment is
shipped in, IBC helps install, operate and commission a
manufacturing line before client handover. If a plant is
already up and running with its production, then technical
and spare parts assessment, as well as preventive
maintenance, help with fine-tuning the production line.
“We [offer] from A to Z. When a client comes to us, he
doesn’t just get a product,” says Khreis. “By offering the
full spectrum of services, we are a one-stop shop. That
is our strength.”
The group, which is now valued at US$100m, operates
in 38 countries and has worked on more than 185
projects. It employs about 350 people and expects to
add 50 more in 2014. Company value has doubled
annually in the past decade, and, he says, “next year, we
should grow by another 50%–60%.”
Future growth
“We see a lot of growth opportunities in Africa,” Khreis
says “We realized about two years ago that it is a place
we should start investing in.” A number of local and global
drinks brands have entered the African market in recent
years as there is a significantly expanding customer
36
Akram Khreis is a board member of
and investor in Oasis500, a Jordanian
technology incubator backed by a
US$10m fund that helps entrepreneurs
start their own businesses. Several
ventures, including ShopGo, an online
store builder, and arabiaweddings.com,
which helps couples plan their big day,
appear to be taking flight. “We facilitate
the start-up phase and [give new]
entrepreneurs money and a network.”
For him, helping other businesses
succeed is vital: “I believe that the
more you give, the more you get
back. I think it’s a universal law. Out of
giving, you get more. We believe that
investing in a society and its people,
and helping them achieve something,
is a win-win [formula].”
Khreis wants to see more done to
market Jordan to outside investors.
“I think Jordan has a lot of potential,”
he says, “and I think where we are
today is very promising.” Meanwhile,
unsurprisingly for someone who has
invested so heavily in the technical
training of his team, he has a strong
belief in the nation’s talent pool: “If
you look at electrical and mechanical
engineering, you will find that
Jordan is among the top engineering
locations in the region.”
“Our
philosophy
is: we sow
our seed
and we wait.”
Clockwise from left:
Work takes place at an IBC client
plant in Malaysia; Khreis seated
in his IBC offices; Khreis receives
the EY Jordan Entrepreneur Of
The Year Award 2013.
base. “Today, 90% of our work is in Africa,” he says. “For
us, South Africa is a hub. While Angola is growing very
strongly, Nigeria, Kenya and Ethiopia are also important.”
Meanwhile, Khreis says he is always looking into different
areas and is keen to break into the US market once
regulatory proceedings are complete.
“What we learned from working in Africa is that you have
to be patient,” Khreis says. “Our philosophy is: we sow our
seed and we wait. Sometimes you do something, but you do
not see the effect of it until years later. Patience is a virtue.”
Some of those seeds were established back in 2000 when
Khreis was managing operations in Libya, where he built
up a network that was to prove crucial when he came to
Viewpoint
Manage the risks,
reap the rewards
Rajiv Memani, Chairman, Global Emerging Markets Committee, EY Global
establish and develop IBC outside his domestic market.
The company’s phenomenal growth has led admirers to
ponder the reasons for its success.
“We are lucky to have a team that bubbles with ideas; that
really helps to export success,” he says. “So finding the right
people is critical.” He has often remarked on the importance
of what he calls “superstars” in a company. “When you have
a superstar, you do everything to keep them. Working with
them, you mentor them and support their will to go that
extra mile. Do they think outside the box? Do they have that
internal passion to succeed in the business?”
Khreis’ management philosophy is simple: “I have an
open-door policy. Anybody who feels they have a problem
can walk in and discuss it with me.” IBC’s flat management
structure fosters trust and good relations between
employees and their boss.
Meanwhile, the company has invested heavily in human
resources and recruiting and puts candidates through
several stages of testing before they are hired. “What we
measure here is return on human capital,” Khreis explains.
“When we identify an employee, we invest a lot of money in
that person. We look at how we can bring him/her up to the
level we need.”
Khreis is set upon combining the benefits of more
technological training abroad with Jordan’s pool of human
talent. “We’d like to attract new investors in the future
in order to go to the next level.” Always an advocate for
networking and getting meetings with people who appear
out of reach, Khreis is sanguine about the prospects.
“Most entrepreneurs see obstacles. I don’t. You will always
find someone who will help you.” With such a positive
outlook and determination, it’s hard to imagine that
Khreis won’t succeed.
For entrepreneurs who want to harness
long-term growth in rapid-growth markets
(RGMs), there are some key considerations
that need to be made. Often grouped
together as one category, these markets need
to be seen for their diversity with individual
strategies for each. An overarching strategy,
however, must be ambitious and bold,
tempered with a gradual approach, and considerable time should
be devoted to identifying and understanding the market.
Brazil, Russia, India and China have consistently been
attractive, but the hot new markets are countries such as
Colombia, South Africa, Mexico and parts of the Association
of Southeast Asian Nations (ASEAN). Though RGM growth is
affected in the short term by the global slowdown, investors
believe they will all bounce back with their strong demographics.
Over the years, several successful multinational corporations
have recognized the peculiarities of the RGMs in general, relying
on local teams, who have provided the insights to adapt products
and services to suit the domestic market.
First-generation entrepreneurs, however, need to prioritize
these markets based on potential and risks, coupled with their
own organizational strengths. It is crucial to recognize that the
RGMs are long-term opportunities and hence it is critical to secure
sponsorship at the senior level. There also needs to be an intense
focus on governance and compliance-related risks.
To succeed in the RGMs, fast-growth companies must keep
their cost structure competitive, use technology and innovation
efficiently, and create a management team that is dynamic and
quick in decision-making to deal with differences and volatility.
There also needs to be the right balance of localization and
globalization, especially with regard to brands and understanding
of the local culture. This would ensure maximum effectiveness
and impact, both from a people and market perspective.
Acquisitions are another way to leapfrog growth in RGMs.
It can benefit the organization to integrate emerging-market
functioning with the global supply chain for goods and services,
creating a win-win situation for operations both globally and in
the local market. Strategic partnerships provide speedy access to
market knowledge and talent. However, these partnerships and
investments must be effectively managed and should also include
mutually agreed exit options for the partners.
While regulation is a deterrent in many of the RGMs currently,
we expect to see a significant recovery in the growth of these
markets in the longer term with policies to attract investment,
including easing of norms for mergers and acquisitions. It is now
up to organizations to see how they can make the most of the
emerging RGM potential.
More information
Please go to ey.com/emergingmarkets for further insights
about rapid-growth markets.
Exceptional January–June 2014
37
Dr. Victor Allis, CEO of Quintiq
(page 20)
Insights on
governance, risk
and compliance
IPO destination guide
With investor confidence rising,
now is the time to find the right
market strategy to maximize the
value for your IPO or secondary
listing. If you have decided to go
public and are ready to map out
all the necessary steps, you must
now set your goals to determine
the specific requirements for
your IPO. Which capital market
or listing zone, stock exchange,
and segment will best support
your company’s strategy? Visit
ey.com/ipocenter for more
information.
Transactions
in focus
As the M&A
environment
becomes more
specialized,
it helps to
understand
different
perspectives on potential opportunities
and M&A strategies. Our regular
report brings you the latest insights
and experiences from global corporate
development leaders on the changes
in the transaction climate. Visit
ey.com/transactionsinfocus for
more information.
Multiple:
European
buyouts
watch
The private
equity market
continues
to attract
interest, but
the level of
deals actually completing in 2013
remains low. However, these subdued
levels of buyout activity are not
reflective of what we are seeing
in the marketplace in terms of
pipeline and deals in progress. Visit
ey.com/multiple for more information.
October 2013
Under cyber attack
EY’s Global Information
Security Survey 2013
Under cyber
attack:
EY’s Global
Information
Security
Survey 2013
As many
organizations
have learned, sometimes the hard
way, cyber attacks are no longer
a matter of if, but when. Our 16th
annual information security survey
explores three levels of response
to cyber risk in an environment
where cyber attacks are numerous,
constant, and increasingly complex:
improve, expand, and innovate. Visit
ey.com/giss for more information.
Capital
Confidence
Barometer
Identifying
trends in the
way companies
manage their
capital agenda,
the 9th EY Capital
Confidence Barometer has revealed
a return to deal making. Results
predict that growth mandates, driven
by increased confidence and credit
availability, will spur M&A activity
across mature and emerging
markets. Visit ey.com/ccb for
more information.
Download the Exceptional app EY_Exceptional from iTunes or Google Play, or follow us on Twitter @EY_Press, @EY_Growth.
38
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MAR
World Entrepreneur Of
The Year Awards
Monte Carlo
JUN
On the shelf
On the web
Global IPO Center
of Excellence
For everything you need to know
about navigating the risks and
opportunities of going public.
You can access all of our IPO
thought leadership, knowledge and tools in one
easy-to-use resource. ey.com/ipo
Strategic Growth
Forums
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of Excellence
Our Strategic Growth
Markets network is dedicated
to serving the unique needs
of fast-growth companies.
Don’t miss your opportunity
to hear inspirational
speakers and create valuable
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events. ey.com/sgfevents
Seeing that family businesses can access
a network of partners that understand
their needs, the Center provides the latest
developments and thought leadership relating
to family businesses. ey.com/familybusiness
Coming in 2014:
Global Center for Entrepreneurship
and Innovation
The Center showcases entrepreneurial
programs, conferences and forums from around
the world and provides access to an extensive
global network. ey.com/entrepreneurship
Good to Great: Why Some Companies
Make the Leap ... and Others Don’t
by Jim Collins (Random House Business Books)
Over five years, Jim Collins sought to answer the
question: “Can a good company become a great
company?” Investigating 1,435 companies, Collins
and his team of researchers looked for those with
substantial improvements in their performance
over time. They identified 11 —
­ including Gillette,
Walgreens and Wells Fargo — discovering common
traits between them that challenged many of the
conventional notions of corporate success. This
roadmap to excellence shows how you too can
grow from good to great.
Publications
For further expert
insight and
opinion, EY
also produces
T Magazine,
Capital Insights
and Reporting.
zineleaders
Maga
for business
Capital Insights
10
Q3 2013
In the diary 2014
of G20 entrepreneurs want tax systems
to be simplified. (page 25)
10
In the know
84%
T Magazine
Intelligence
“The question is always, how do
you outwit your opponents?”
Helping businesses raise, invest, preserve and optimize capital
Tax insight
Making
the market
SAP’s Werner Brandt on smart
M&A, organic growth and
clear capital management
The top 10 acquirers
India: open for business
Asset management:
the dawn of a new era
the risk
Rethinking process
ent
managem
for tax
markets
Emerging
tax muscles
flex their
The tax function
a new role:
welcomes
rsy
Head of Controve
gap
Closing the
becoming
are
Why tax risksthe boardroom
an issue for
MAY
China
OCT
Israel
OCT
Brazil
Visit ey.com to find your local contact, or contact any of the EMEIA SGM leaders below.
NOV
Palm Springs, US
Europe
Andrea Vogel
+ 31 088 407 4070
[email protected]
Middle East
Ashraf Abu-Sharkh
+ 971 4312 9135
[email protected]
Africa
Cheryl-Jane Kujenga
+ 27 11 772 3741
[email protected]
Russia and the CIS
Dmitry Neverko
+ 7 495 755 9943
[email protected]
India
Farokh Balsara
+ 91 22 4035 6300
[email protected]
Financial Services
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+ 44 20 7951 1086
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Check out the LinkedIn
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Contacts
Exceptional January–June 2014
39
Profile: AfB
Second
chances
Nobody believed AfB founder and CEO Paul Cvilak could make
a profit employing disabled people to refurbish IT hardware.
Today, the company is not only making a profit, it’s raking in
awards for its sustainable concept.
words Rhea Wessel_ photography Oliver Tjaden
Paul Cvilak, CEO and
founder of AfB
W
hen Paul Cvilak applied for funding
from banks in the Karlsruhe
region of southwest Germany
in 2005, bankers shook their
heads and wished him well. They
were unwilling to provide loans for a business model that
involved refurbishing IT hardware, and doing it with a staff
of workers with disabilities.
But Cvilak was determined. Armed with 20 years
of experience in IT and an education in IT business
administration, he had witnessed how companies struggled
to dispose of their data and IT hardware safely. Cvilak
40
knew that his idea was a win-win situation for large firms
and his budding enterprise alike. He just needed funding
to expand. Companies were already donating their old IT
hardware in exchange for the service of having their data
deleted securely. Cvilak would turn around and refurbish
the hardware and then sell it online and in shops.
Founded in 2004, AfB (which is an abbreviation of “Work
for People with Disabilities” in German) is now considered
a model for other social enterprises. At the beginning,
Cvilak approached the project from a purely business
perspective, giving little thought to the concept of a social
enterprise. But when he called the local employment office
looking for employees, he was told that several people with
disabilities were looking for jobs. Cvilak said he’d see if
there was a fit, and sure enough, the four people he hired
to get the company off the ground all had disabilities.
Having had little contact with people with disabilities
before, Cvilak quickly realized that many people labeled
with a disability lacked good job opportunities, despite their
talent and work ethic.
“It quickly became my dream to build an IT company that
was competitive on the market, but also
pursued social goals at the same time,”
said Cvilak. “We were the first social
Number of appliances AfB
enterprise in the IT sector in Europe.”
processes each year
The AfB model
Cvilak’s hunch was right. Many
companies were more than willing to
Rate at which the business is
give their old IT hardware to AfB so
growing each year
data could be deleted through a secure
200,000
20%-25%
Desktop
computer cases
are stacked on
rollers at the
AfB warehouse
near Karlsruhe.
“We were the first social
enterprise in the IT sector
in Europe.”
procedure recognized by the International Organization for
Standardization. The companies donating their hardware
benefit from keeping their IT waste out of landfills, and
they support a social enterprise that is self-sustaining —
both things that stakeholders like to hear about.
Starting with a staff of just four in 2004, AfB has
since grown to 200 employees and processes more
than 200,000 appliances each year. About half of the
employees have a mental or physical disability.
“At hiring time, we don’t focus on what type of disability
the candidate has,” Cvilak explains. “We look at the jobs
we have available. We need people in the warehouse with
different skills than in the front office. Sometimes the
person’s disability is not so obvious. For us, the main point
is that the person does a good job.”
Cvilak, 56, recites the history and ethos of the business
as he tours the AfB warehouse near Karlsruhe. He is
dressed sharply in suit and tie, wearing silver-rimmed
glasses. It’s a bright sunny day in southern Germany, and
people on the shop floor are visibly in a good mood.
High racks are stacked floor to ceiling with hard drives,
monitors and laptops, and computers seem to be oozing
out of the shelves. A wire container keeps hundreds of used
keyboards from spilling on to the floor. Behind Cvilak, a
man in a wheelchair works on reassembling a laptop.
After a tour of the warehouse and nearby retail shop,
visitors get a better sense of the large scale of the work
that AfB does. According to Cvilak, sales were US$9.6m
(for IT hardware and services) in 2012 and are growing
by 20%–25% per year. So the concept is proving popular.
Exceptional January–June 2014
41
Profile: AfB
“Though we have a
socially responsible
focus, we do not have
to worry about funding
like charities do.”
Rapid growth
2004 AfB is founded in Ettlingen.
2007 T
hree new branches are opened
in Stuttgart, Nuremberg and
Cologne.
2008 A fifth branch opens in Hanover
and AfB takes over not-for-profit
business Comtrade GmbH.
2009 N
ew branches open in Unna and
Essen, bringing the total number
of branches to eight.
2010 The first branch outside
Germany opens in Vienna.
2011 A
fB introduces a three-year
vocational training course for
employees.
2012 A
fB receives hardware from
Spain and Italy for the first
time and opens its 10th
branch in Berlin.
AfB employs a workforce
of more than 200, half of
whom have a mental or
physical disability.
Opportunity in adversity
In the early years of the company, receiving
little funding from banks, Cvilak invested
his own money. He hit a low point when a
couple of large firms said they wanted to be
paid for the hardware they donated.
“I began to think the business model
might not work after all,” he says.
Then AfB faced complications with the
German officials who work on behalf of
disabled people. They were unaccustomed
to a private enterprise being the operator
of a nonprofit organization for the benefit
of disabled people. In their experience,
that job was to be done by welfare or
community organizations. Officials were worried about
what would happen if AfB’s business failed.
For Cvilak, living through such moments and dealing
with insecurities, both inside and outside the company,
were part of the process of getting established.
“For me, the lesson was that you’ve got to believe in your
own ideas and not be intimidated by the doubt that others
show,” he says. “You’ve got to proceed using the principles
of business and stick to your vision. It takes a while.”
Indeed, in time and through Cvilak’s persistence, a
number of high-profile, international businesses from
various industries gradually signed up as partners when
they were able to see that AfB allowed them to execute
42
part of their corporate social responsibility more easily.
Once word of AfB’s services began to spread, the
company grew at an incredible rate. By the end of 2007,
AfB had opened an additional four branches. By 2009, the
number of branches had doubled, and in 2010, the first
branch outside Germany opened in Vienna, Austria.
Contributing to this rapid growth and success was
the growing emphasis on corporate social responsibility
and green IT. Luckily for AfB, the company had strong
credentials in both categories and enjoyed press coverage
and attention for the work it was already doing.
It culminated in AfB winning the German Sustainability
Award in 2012 in the midsized category and Cvilak being
named as a finalist for the EY Germany
Entrepreneur Of The Year Award in 2013.
Since 2012, AfB has received hardware
from Spain and Italy and opened its 10th
branch in Berlin. Modest about his success,
Cvilak has been keen to give back to those
who have helped build the company from
the start: his workers.
In 2011, AfB introduced a three-year vocational
training course for its employees, awarding them with
a recognized qualification as a specialist in practical IT
systems. Training is carried out in three of the company’s
11 branches, and Cvilak hopes to expand the initiative
throughout Germany.
The company has also partnered with other German
social enterprises, Mobiles Lernen gemeinnützige and
Social Lease, to launch Initiative 500 — a not-for-profit
limited company with the aim of creating 500 jobs for the
disabled in the IT industry.
Meanwhile, AfB isn’t losing time on its plans to expand
across Europe. Already in France, Austria and Switzerland,
the company recently received an offer to set up in Spain
as well. “I don’t think any other nonprofit social enterprise
is expanding across Europe right now,” Cvilak says.
AfB is also expanding its portfolio of services,
establishing remote IT training and support for users that
will be performed by disabled people within the same
country (as opposed to offshore). Seniors and others
who struggle with operating their computers and mobile
phones can call in and receive basic instruction without
worrying about receiving a huge bill.
Cvilak says: “We’re completely employee-owned, and we
run our business like any other. Though we have a socially
responsible focus, we do not have to worry about funding
like charities do. It really feels like we’re a family-owned
company — even though we’re not.”
One thing is clear — Cvilak has created a unique,
sustainable business that champions both ecological and
social values; furthermore, it continues to grow.
Viewpoint
Sustaining that
competitive edge
Juan Costa Climent, Global Leader Climate Change
and Sustainability Services, EY
As sustainability, environmental, social
and governance(ESG) regulations
become regular fixtures on governments’
agendas globally, they have become crucial
considerations for businesses – not just in
terms of compliance, but also for reputation
and stakeholder management. Ensuring
coverage of these aspects in your company’s
growth strategy can provide that all-important competitive
advantage, facilitating further fast growth.
In the preliminary results of a new EY survey of institutional
investors, compliance and competitive advantage were
identified as the top two reasons for companies to undertake
sustainability measures. Nine out of 10 investors even said
a company’s non-financial performance was pivotal in their
investment decision-making at least once in the past year.
This shows that investors are taking a lot more notice of
environmental, social and corporate governance indicators,
bolstering the trend toward integrated reporting linking all
non-financial and financial data.
Companies that are yet to implement sustainability measures
or reporting need to do so, and quickly, or risk losing stakeholder
confidence. As more legislation is passed globally, the ethical
and sustainable responsibilities of a company grow broader. For
example, US legislation requires businesses to detail the source
of used minerals in order to guarantee that conflict minerals
are not in their supply chain. More recently, the EU Commission
joined the debate on this issue, illustrating a widening trend and
the necessity to plan for new regulation. Of the 250 top private
companies, as listed in the AlwaysOn Global 250, 95% issue
sustainability reports.
It’s not only for stakeholders and institutions that the reporting
and planning of sustainability is important. Perhaps the biggest
ESG advocates are the next generation of business minds
entering the workforce, who understand the value of sustainability
measures. Indeed, 30% of executive respondents to a 2013 EY
survey, Value of sustainability reporting, found an increase in
employee loyalty as a result of issuing sustainability reports.
This same survey also found that the benefits of reporting
could also improve access to capital, increase efficiency and
reduce waste.
To compete in a more transparent business world, companies
would benefit from heeding the results of such studies. ESG
measures, once considered a compliance headache, are now
of increasing importance to any company’s growth strategy,
providing opportunities for businesses to attract investors and
employees while bolstering their reputations and brands.
More information
Visit ey.com/ccass to read more about current ESG and
sustainability trends.
Exceptional January–June 2014
43
Head to head: Superior Energy and EY
The
energy
buzz
Superior Energy’s CEO,
David Dunlap, and EY’s Global
Oil & Gas Leader, Dale Nijoka,
discuss the latest trends and growth
markets in the oil and gas sector.
words Kate Jenkinson_ photography Brad Swonetz
O
il spills, debates over fracking processes and
ongoing pressure from environmental groups
keep the energy industry front and center in
news around the world. Drawing on their experience and
knowledge from a combined 60 years in the industry,
Dale Nijoka and David Dunlap discuss current growth trends,
technology and future predictions for the energy sector.
What have been some of the most critical changes
in the energy sector, and what opportunities do
they present?
Dunlap: For us, the biggest change has been industry
improvements in hydraulic fracturing or fracking, horizontal
drilling, and technological enhancements in drill pipe and
oil-containment systems. We’ve uncovered a resource in a
way that is revitalizing the industrial base of the US and
has the potential to completely change the economy during
the next 25 years. And it’s affecting the industry right
across the globe.
Nijoka: David is absolutely right. It is an exciting time to
work in oil and gas. What we have seen in the past few
years is recent advancements in technology completely
changing the face of the industry and its capabilities.
There are significant opportunities for energy companies
looking to utilize new technology to identify and extract
hydrocarbon resources and lower their supply-chain costs.
However, the sector requires significant investment to
44
David Dunlap
Dale Nijoka
has held leadership roles in the oil and energy
industry for more than three decades and
became CEO of Superior Energy in 2010.
He joined the company after 26 years with
BJ Services, leading it through expansion in
the Middle East, Asia, Africa and Russia.
is the Global Oil & Gas Sector Leader at EY, with more
than 28 years’ experience within the sector. He works
with fast-growth companies and clients from across the
world, amassing extensive experience and knowledge
of this topical industry while assisting these companies
to manage and protect their businesses.
develop and maintain an up-to-date understanding
of industry trends.
What are the key markets for energy today, and which
are the ones to watch?
Dunlap: From our perspective, Argentina, Saudi Arabia,
Indonesia and Australia are the markets we will monitor
closely. You will notice that I omit the big markets
such as Russia and China, because the service
industries have struggled there from a
margin-and-return standpoint, so while we
will watch those markets, we are trying to
stay away for now.
Nijoka: It’s interesting to hear you’re taking a
more risk-averse approach to these markets,
David. I agree they are ones to watch and
anticipate we’ll also see increasing efforts
to replicate successes using new techniques
and technologies, for example shale gas
“We’ve uncovered
a resource in a way
that is revitalizing
the industrial base
of the US.”
extraction, in places such as Mexico, Argentina, North and
South Africa, Australia and, most critically, China. Also,
in Mexico, the Government has indicated it is considering
opening up some of the oil and gas sector to foreign
investment, which should make for some interesting
market movements.
As in many other sectors, recruiting and keeping talent
has been a challenge in this industry globally. How
is this being addressed?
Dunlap: I have certainly seen examples of
talent challenges in the industry, but if I’m
honest, recruitment isn’t really causing
us a problem. In saying that, retention
and talent management is something all
companies must be mindful of. In the US,
booms in shale oil and gas have caused
a great influx of talent. So we now have
several talent-acquisition programs and
“The sector
requires
significant
investment to
develop.”
are looking to expand these internationally. We also
designed a training program to attract former marines
and then provide the training and mentoring to allow
them to become leaders in the sector. Many marines have
a strong technical foundation, a great work ethic and
discipline from the military, so this initiative has been
hugely successful for us.
Nijoka: In my experience working with different clients
over the years, I have seen four trends affecting talent
that all companies need to consider. The first of these is
the size of the energy boom. Higher volumes of drilling
activity, wells and demand for equipment lead to sharply
increased demand for skilled labor. Add to this the fact that
workers may often be asked to do difficult and stressful
work in inhospitable environments, and you have a talent
shortage. This shortage is made more pressing by a third
factor — the aging of the workforce. The average oil and gas
industry worker is approximately 50 years old, and more
than half of those are eligible to retire in 5 to 10 years, so
it’s a difficult situation to manage. Finally, an added human
dimension is the renewed focus on safety, which plays
a role in the attractiveness of an employer to potential
new recruits.
What measures are being employed to mitigate safety
risks in the sector?
Dunlap: As Dale said, this is a big one for us; safety is
central to everything we do. It is the first thing you think
about when you wake up, and it is on your mind all day. In
2012, we launched Target Zero — a company-wide initiative
that aims to improve operational performance while
reducing accidents and injuries. As we expand into new
territories, the underlying challenge is always to provide
safe work environments. The industry has done a much
better job of protecting people during the past 30 years,
but it’s a challenge every day.
Nijoka: I agree. Events over the past few years, from the
Gulf of Mexico disaster to refinery fires and pipeline and
rail-accident spills, have heightened the public focus on
safety. As a result, we’ve all seen more government and
regulatory involvement around operational safety, and
the industry is responding with initiatives such as the
Target Zero example. In fact, our latest Business Risk
Survey shows operational safety and the development of
a responsible culture have moved to the top of the agenda
for many boards of directors, so it will certainly continue to
be a top priority for the industry.
More information
Visit ey.com/oilandgas to find out more about the latest
trends and insights in the sector and access the latest sector
Business Risk Survey report.
Exceptional January–June 2014
45
Regular: Doing business in Russia
Russia
is shaping its future
Russia is experiencing an economic awakening. With vast
natural resources and a huge domestic market, is Russia’s
ascendancy here to stay?
59%
words Mark Alexander
of investors believe Russia’s
investment appeal
will improve over the next
three years.
St. Petersburg
Moscow
W
ith a wealth of
natural resources
and an expanding
middle class, Russia
is continuing to
establish itself as a stellar prospect for
international investors. Add to that the
emergence of a steadying economy and
you can see why this massive country is
catching the eye of those looking for a
good return.
Statistics from the World Bank
underscore this view, confirming that
Russia’s growth exceeded that of Brazil,
South Korea and Turkey in 2012. The
uplifting ceremony Russian President
Vladimir Putin performed to start the 2014
46
Winter Olympics Torch Relay isn’t the only
sign of perseverance and achievement
evident in Moscow.
EY’s attractiveness survey series of
reports analyzes international investment
and considers a country’s prospects for
attracting international investors. The
Russia survey (in its third year) shows
that, in 2012, the country had the secondhighest level of employment generated
from foreign direct investment (FDI) in
Europe and was the sixth most attractive
country for investors in the world.
“[Russia] is vibrant and complex,” says
Dmitry Peskov, Press Secretary to Putin.
“Its citizens are traveling across the
world. Its private and public companies
are working in all continents. Russia is
continuously moving forward.
“We can offer international investors
a unique combination of political and
economic stability, a predictable mentality
and highly skilled talent. We are not just
sitting here waiting for a miracle. We are
growing, we are changing, and we are
removing the hurdles that hamper business.”
This momentum is set to increase
pace with Russia’s recent accession
to the World Trade Organization
(WTO) and the development of an
innovation city near Moscow, designed
to promote the expansion of IT, energy
efficiency, biomedicine, space and
nuclear technologies.
of Economic Development of the Russian
“Following decades of negotiations,”
Perhaps as telling as any statistic
Federation. “We are working hard to make
says Klaus Kleinfeld, Chairman and CEO of
mentioned in the study is the one
sure that no positive information about
aluminum producer Alcoa, and Chairman
reporting that 59% of respondents believe
us is lost. We are not trying to look better
of the US–Russia Business Council,
Russia’s attractiveness will improve over
than we are or mislead the public in any
“Russia’s accession to the WTO and the
the next three years. This compares
way; what is important is the image of
normalization of trade relations with the
favorably with the confidence shown in
how Russia is perceived abroad.”
US have opened new doors for economic
Europe, which reached 39%.
Unfortunately, according to
expansion and diversification.”
Much of this buoyancy may
55% of survey respondents,
Manufacturing leads the way for FDI,
stem from Russia’s plentiful
the country’s reputation
both in terms of project numbers and
supply of natural resources,
Population
is being tainted by
job creation — in 2012, manufacturing
which no doubt influenced
political, legislative
accounted for 98.2% of jobs created by
32% of respondents to
and administrative
foreign investment. Sales and marketing
suggest the energy and
shortcomings. It is
have bolstered its share of FDI projects
environment sector will
a criticism backed by
from 33.2% during 2007 to 2011 to
lead growth in Russia over
recommendations from the
38.3% in 2012, with nearly half of these
the next two years. But this
Organisation for Economic
projects originating from the US.
deep-seated optimism may also
Co-operation and Development
One of the cornerstones of Russia’s
stem from the belief that Russia is
for Russia to improve the efficiency of
economic rejuvenation has been the
changing, as Andrei Kostin, President and
its public administration and to tackle
automotive sector, which received 21.1%
Chairman of the Management Board and
corruption. Of a possible 14 measures
of FDI projects and 35.9% of jobs. Many
Member of the Supervisory Council of VTB
to improve Russia’s investment climate,
of these came from western Europe, in
Bank, proposes.
particular Germany, and much of
the activity was centered around
St. Petersburg and Kaluga, which now
host some of the sector’s biggest names,
following Volkswagen’s decision to invest
there five years ago.
While Russia’s calling card may be
manufacturing, most investors see its
domestic market as the country’s most
Dmitry Peskov, Press Secretary to President Vladimir Putin
attractive asset. With a population of
143 million, you can see why. Russia
44% of potential investors questioned for
has the world’s ninth-largest domestic
“It’s gratifying to note that
the survey opted to reduce bureaucracy,
consumer market and is predicted to
Russia’s image in the West is showing
43% chose improving the effectiveness
become Europe’s largest consumer market,
improvement,” he says. “[However,]
of the rule of law, and 30% suggested
and the fourth largest in the world, by
Russia’s image isn’t changing fast
increasing the transparency of
2020, according to Reuters.
enough, … and this is largely because
business regulation.
With its abundant natural
international investors don’t see all
“Russia is a country
resources and wellthe positive economic and legislative
where you have to
developed telecoms
changes that are taking place. It
understand the market
infrastructure (it has
is important now for the Russian
and commit to a
the largest online
Government to pursue a communication
long-term investment
population in Europe,
policy of maximum openness.”
strategy,” says Muhtar
with 73.8 million
With 2014’s Winter Olympics in
Kent, Chairman of the
users), Russia has, not
Sochi providing the perfect showcase,
of job creation by foreign
Board and CEO of The
surprisingly, emerged
it seems Russia has the opportunity to
direct
investment was in the
Coca-Cola Company.
as one of the world’s
do just that.
manufacturing sector.
“I share the view that
most attractive countries
there are three focus areas
to invest in, with many seeing
More information
needed to improve the country’s
China as its major rival.
Visit ey.com/emergingmarkets to
attractiveness. First, reduce bureaucracy
“Russia’s domestic market is well
download EY’s 2013 Russia attractiveness
and red tape. Second, address corruption.
supported by sustainable demand,”
survey: Shaping Russia’s future.
And third, improve infrastructure.”
explains Sergei Belyakov, Deputy Minister
143m
“We are growing, we are changing,
and we are removing the hurdles
that hamper business.”
98.2%
Exceptional January–June 2014
47
Advantaging the
disadvantaged
As CEO of the US-based Network
for Teaching Entrepreneurship,
Amy Rosen is helping to educate
the next generation of entrepreneurs
and global business minds.
interview Katy Ward_ photography Ben Ritter and Kristy Leibowitz
T
he Network for Teaching
Entrepreneurship (NFTE) runs
programs to inspire young people
from low-income communities to stay in
school, recognize business opportunities
and plan for a successful future.
We typically work in public schools,
offering classes in which every student
has the opportunity to create a business
plan and then compete in our local and
national competitions.
We’re teaching young people to be
entrepreneurs, but also to have the mind-set
to think entrepreneurially while working in
their existing jobs or looking for another job.
To date, we have reached more than half
a million young people and trained more than
5,000 public school teachers as certified
entrepreneurship teachers.
I took over the organization six years ago
because I thought NFTE was a brilliant
idea that could change the world. Children
surrounded by poverty often develop many of
the same skills as entrepreneurs. At an early
age, they have to work hard to get things
they want. They just need a broader picture
of what success looks like and then they can
harness their natural passions and skills.
In the US, one in three high school
students drops out — that’s 7,000 students
a day and one every nine seconds — and
48
Exceptional January–June 2014
students from low-income families are
six times more likely to drop out.
Globally, there are 1.4 billion young people
looking for jobs. We’re expanding our
program into countries such as Mexico,
France, Saudi Arabia and Singapore.
Entrepreneurs are the most promising
employers of our decade, and we need this
army of entrepreneurial citizens to grow our
world economy. That’s why it’s important that
businesses — large and small — support efforts
to send entrepreneurs into the classroom and
mentor these kids.
A lot of corporations around the
world, especially those in financial
services, need to meet corporate social
responsibility requirements. NFTE helps
them meet those requirements in terms of
economic development, financial literacy
and inclusion. We have a number of global
Rosen enjoys the chance to meet
students involved in the NFTE program.
partners, and we’ve had a relationship with
EY since the 1990s.
The magic ingredient to our success is the
thousands of employees who volunteer as
mentors and judges. Many senior leaders
of these corporations talk about the impact
NFTE has on their workforces. These
volunteers bring lessons learned through
NFTE back into their companies.
Recently, I was working at an event for
our Greater Washington, DC, office and a
gentleman walked up to me and told me he
was working in an NFTE classroom. He said
he initially went in as a work obligation but
thought he actually got more out of it than
the students.
Our 500,000 NFTE alumni are, by far, the
best evidence of how we benefit students.
I have the privilege of meeting more and
more of our program alumni every day. There
is a great young man named Rodney Walker
who is now at Yale Graduate School. When
he was 5, his parents were arrested on drug
charges, and he spent the next decade in
foster homes until he ran away and began
living on the streets.
So how did he go from there to here?
He walked into an NFTE classroom after
coming into school for food. Through
this class, he started a video production
business. He is a powerful example of what
can be achieved.
“Children
surrounded by
poverty often
develop many of
the same skills as
entrepreneurs.”
WHO WILL INSPIRE US NEXT?
Inspiration comes from the most unexpected
places, from a whiz kid in a dorm to a visionary
world leader. So when we look for the next big
idea, we look everywhere. And then we bring it
to Monaco.
Join us 4-8 June 2014 at EY World Entrepreneur
Of The Year™ and see for yourself. Inspiration
has no boundaries or borders.
ey.com/weoy
© 2014 EYGM Limited. All Rights Reserved. ED 0914
Regular: Beyond profit
© 2014 EYGM Limited. All Rights Reserved. ED None.
Family office
services: something
your children will
thank you for.
Today, the wealth accumulated
by entrepreneurial families can
be exposed to a wide range of
risks. That’s why our family office
services can help preserve that
wealth for generations. To find
out more, visit
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