David Frigstad
Adam Burns:
David Frigstad, Frost & Sullivan Chairman has used innovation principles to reposition Frost & Sullivan as a growth partner, and later on in the program, I’ll be asking him how he implements this for clients, as well as seeking his expertise around managing a global staff. But we start with a little background. David founded his first consultancy company fresh out of college. I asked him why.
David Frigstad:
I think the big gap in the market that we saw as first in the area that CEOs had a great need to find new growth opportunities, both in terms of emerging markets as well as in terms of new technology and disruptive technologies, things like that. We also saw about 20 years ago that the world was going globally very fast. So we wanted to really make sure that we had a global footprint to support our clients as they looked at new opportunities globally.
Adam Burns:
Fresh out of college to have that kind of worldview is slightly unusual. What was your background?
David Frigstad:
Well, my partner and I got our degrees at Indiana University in business, but from a very young age, we were both interested in the international community and got a lot of fun out of looking at the international issues. So I think that’s probably what sparked our interest in the global perspective ’cause we could also see that there was kind of a big need for someone to support countries globally.
At that time, which was in the ‘80s, most companies were either very American or very German or very English. And you could see that those companies over time that were just focused on their own region were not doing that well compared to the companies that were taking more of a global perspective.
Adam Burns:
I suppose history has borne you out with the increasingly global village. Have you still seen – is that very much the way Frost & Sullivan gets a lot of its traction in that sort of global outlook?
David Frigstad:
I think there’s two things that are really exciting right now. One is that we were obviously correct in our rapidly building global platform because you don’t really launch any regional products any more the way you saw in the ‘80s or ‘90s. Every product now goes global almost immediately.
The other one is what we see on the industry convergence where now when you look at business, it’s not fair to just look at energy or just look at automotive. You have to look at what’s going on with mobility and entertainment as they across virtually all the industries. So we’ve been rather blessed to have a company that’s a mile wide and an inch deep because we really have a specialty now in industry convergence, helping companies look outside the box for those innovation applications or new applications for existing technologies to really keep their company strong on innovation principles and on an innovative growth strategy going forward.
Adam Burns:
I noticed that Frost & Sullivan is now described as a growth partner, you’ve really badged the company, I supposed, in that way. How did this strategy and direction evolve?
David Frigstad:
Well, in the partnership side, when we started the company, it was very transactional‑based where we’d have a client to one of our strategy events where we would sell them a report. And what we immediately started to see is clients really needed full‑time support. They needed help with the generation of ideas, evaluating those ideas, building a stronger pipeline. And now, more recently, they’re really struggling with getting those ideas implemented effectively.
We have a lot of companies that come up with great products and then fail on the implementation, and we watch other competitors take their innovative advantages away. So we’ve seen with the word “partnership,” where we make everything we do available to the clients that we have, we can support them really from Steps A to Step Z, and it’s really a much more effective way to deal with our clients.
Adam Burns:
Of course, conservatism build solid foundations. Perhaps it doesn’t get shareholder policies racing. How do you encourage your clients to balance risk and reward?
David Frigstad:
Well, I think the great risk is being conservative. If you look at when I got out of college in 1979, I had a job interview with General Motors and Ford, both wildly arrogant companies at the time, and very conservative companies at the time. And you can see how the conservative effort that they’ve made over the years – with the conservative strategy that they’ve had over the years has killed them.
General Motors is on the verge of bankruptcy right now, in 1979, General Motors was the world’s larges corporation in terms of market cap. So I think there’s a much greater risk not to integrate growth, innovation principles, and leadership in your company. It’s almost without that you’re taking too much of a risk. So from an investment perspective, I would never advise somebody to go with a conservative company that manages risk too well. These are the companies that I think in the long-term, unfortunately, go bankrupt.
Adam Burns:
A company like General Motors widely publicized, going through a terrible time at the moment. What would your advice be to something that was a huge incumbent very entrenched system? How do they build in growth and innovation now?
David Frigstad:
Well, assuming it’s not too late and they can get refinanced, what they really need to do is start with a diagnostic of their entire global growth strategy, really finding out where their growth culture is talking to their people that belong to the union, talking to their management team, going through where they get their innovative ideas, innovation priciples how they partner with clients.
’Cause by finding out where they are today in terms of their growth culture is the only way that you can really reinvigorate the company to come up with a new strategy. ’Cause just throwing money at some of the growth innovation and leadership techniques is not gonna solve anything if we don’t know where Point A is. Point A is where the client is, and Point B, let’s say, is where they want to be. So we spend a lotta time really finding out what Point A is.
’Cause one of the things we’ve seen in working with CEOs around the world is on average, they have let’s say a misunderstanding of where the company is and where the people are. I often find in talking to them, and then doing surveys of CEOs every year, that they’ve miscalculated where their actual position is. And so getting into line or in alignment with their staff, with their vision, and these things, is the first step to really put the company on a road to recovery.
Adam Burns:
I spoke with a guy called Fred Rickeld who does net promoter... I don’t know if you’ve heard of it, but it’s customer experience metrics and stuff. And he was talking about – I said, “Is there a huge disparity between the CEOs who come to you and say, ‘Well, we don’t need your assistance, because we provide a great customer experience,’ and then what happens when you’ve actually put that metric in place and they’re getting independent feedback?”
Do you find it’s the same thing with you, once you’ve put your metrics in place, CEOs are frankly shocked by what the picture evolves?
David Frigstad:
Yeah. I don’t know why it is, but I think the CEO is definitely a difficult position because so much is going on. But almost every time we do a metric, the CEO is out of touch or way off the scale, especially the CEOs that say, “Were best in class and leadership,” or, “My Company is great at implementing growth strategy.” I get that a lot. Or they’ll say, “We’re best in class in marketing,” or, “We have a great brand.”
I was recently with a very large company called Microsoft, and the people at the top of Microsoft really feel that Microsoft is one of the great innovative brands in the world, with some of the best innovation principles. But if you really ask the consumers and the users of Microsoft products, they don’t see Microsoft as an innovative company or an innovative brand. They see it as a highly competitive, very tough brand, and a good brand, but not one related to innovation.
So I think that’s what we talk about that it’s very easy I think for the CEO to get off track. So having outside independent research taking more metrics to bring them back in alignment with reality is a really core part of making a great company going forward.
Adam Burns:
How do you build that growth culture into a company?
David Frigstad:
Well, I think it goes back to what I said before that if we look at Point A as where the company is today, and Point B as where they’d like to be tomorrow, ’cause virtually every CEO says, “I wanna be innovative. I wanna be a growth‑focused company. I wanna have great leadership.” The very first thing is to really sit down and go through a series of diagnostic measurements to see where are you today.
A lot of times we find out they’re out of alignment on vision, that they don’t reward innovation principles, that despite the fact that Ford Motor Company might say, “We’re very innovative,” yes, the people in the R&D department or the marketing department. When you talk to them about the bureaucracy it takes to get a new idea through the system, you realize that the CEO says, “We’re over here,” and the staff says, “We’re over here,” and the customers say, “We’re down here.”
That’s what we mean by really diagnosing where the company is. And it takes weeks to a month to really get some idea of where they’re positioned. Once that’s done and you have it – we have 23 different metrics that we take on. Then we can sit down with a CEO and say, “This is exactly where you should spend your money.” Most CEOs will see a tape or see a speaker and say, “Well, let’s do more of this.” And often times it’s good things, but it’s not the right things to do to get them back on the developing that growth, innovation, and leadership – it’s not the right thing to do to get them back on track with growth, innovation, and leadership culture.
Adam Burns:
Do you find that there is a battle then to win the hearts and minds, even though you’ve got the metrics, you’ve got the systems, you’ve got the proof?
David Frigstad:
I don’t think it’s so hard. Most people that work in companies really are – they’re investing a lot of their energy, a lot of their time and their life in a company, and nothing they’re rather do is than work for a visionary leader like Steve Jobs or one of the great leaders that we see today. So I think it’s quite easy to get people in line with the CEO. But it puts great leadership pressure on the CEO to actually be a visionary, someone that actually understands the industry as well as where the industry’s going. And, unfortunately, out of the 20 million corporations in the world, there’s very few that are run by true visionaries.
Adam Burns:
Are said – and I’ll quote, if I may, “There are no experts in the new economy in much of the traditional experience which consultants and managers have developed has become obsolete.” What did you mean by that, and I suppose how are you working to resolve that issue?
David Frigstad:
Well, I think in terms of the new economy and the fact that I don’t see experts existing any more, things are changing so fast that one of the things that we see when we’re working with clients is the executive that says, “I don’t need any help because I've been in the industry for 30 years and I know everything there is to know.” This is a real red flag warning signal that goes up because it’s changing so fast that you never expect that the traditional automotive dealerships would be being closed down for new distribution channels.
What’s going on with the netbook and the impact that’s gonna have on the laptop industry, or what’s happened to the music industry with our friends from Apple, all of these things go outside the bound of industry experience, and it obsoletes all of that expertise that someone might have from 30 years in the automotive industry or 30 years in the recording music industry.
So that’s really what we mean. Certainly experience helps, but many, many times we see experience is actually part of the problem to really get a company being innovative again.
Adam Burns:
And I suppose we can turn that innovation inwards on Foster & Sullivan in order to be able to consult and partner growth. You have to be aware of all of these areas. How are you enduring that your network is ahead of the issues I suppose?
David Frigstad:
That’s an incredibly tough challenge is to keep a global team of consultants up to speed with everything that’s going on. And we do that by always keeping our eyes open for other growth thought leadership. We do that through our strategic partnering. We do that by working with other consultants. So we, too, have to have a very different viewpoint of how we work in the industry.
Traditional consulting companies would have virtually all the consultants being employees of the company, where we’re working with advisory boards. We’re doing the – the event we’re running tomorrow, the Gill Global Event, is really a way to get all of our strategic advisors and partners together where we get many different perspectives and many new – everything from the entrepreneurs to the Fortune 500 CEOs contributing to what’s going on, and that way we come closer to staying on the leading edge of where the new economy might be going.
Adam Burns:
How would you make your recommendations? Do you have to wait for a business model to be proven until you would recommend it for somebody else, or would you look at something and think, “Do you what? I have a gut feeling that that’s going to work”?
David Frigstad:
I don’t think we use – we’re a research‑based company, so we really don’t go with the gut feeling as much as perhaps a strategy firm might go with. I think our basic tool are very geared towards developing research, a thing we call team‑based research which is technology, economic, customers, competitor, and best practices research.
So we use these standard models that I think have been working for the last 100 years. By taking those measurements and trending those measurements, we can start to see where the industry’s going. We start to get kind of a visionary perspective of where the industry’s going. And from that, we can better coach our clients on what they should be doing.
We really try not to tell clients what to do. We more – I really enjoy the role of a coach where we’re facilitating. We’re asking the right questions. We’re presenting the right data. ’Cause at the end of the day, they have to take their decision on what they’re gonna do going forward. But the actual models are fairly basic and straightforward in terms of we do a lot of what I call research‑based decision‑making. I’m not a big fan of gut‑based decision‑making. I’ll leave that to the real strategy wizards out there. But I think over time, we’ve seen that the research‑based decisions are the ones that statistically prove out to be the correct decisions over time.
Adam Burns:
On February of this year, you said, and I’ll quote again, “President Obama’s stimulus package is clearly serving to convince businesses and consumers that we can get back on track. The program will stimulate optimism and let the US and the rest of the world get back to business.” Is your message I suppose still positive, and a horrible phase. Where are you seeking the green sheets of recovery?
David Frigstad:
Well, a couple interesting points that that brings up. First, I was really impressed what the global political community did this time, because they moved very fast during the economic crisis. They worked in unison, and they actually did the right thing. And I think the right thing was not – they called it an economic stimulus plan, but what was more effective as a plan to stop the panic. Because the global media and the impact of the Internet in English, spread the bad news so fast about sub prime mortgages, about Lehman collapse, that it put virtually everybody into a panic mode.
And what I was really excited about the economic stimulus plan is that the global political community came together very fast and passed those stimulus packages which effectively stopped the panic. Because when you think the banks aren’t gonna be there tomorrow, every CEO did the same thing, and that was to freeze spending. When they froze spending, we saw the fourth quarter and the first quarter of 200 just collapse like I've never seen it collapse before.
So where I don’t think the economic stimulus plan is actually stimulate the economy, it stopped the fear. Know your question about my positive attitude about Obama’s plan, ’cause I don’t just give him credit. There’s a lot of political leaders around the world that cooperated with themselves to make that happen.
I was positive then. Now I’m wildly positive, because you’re starting to see commodity prices tighten up, firm up. Real estate is starting to rebound around the world. There’s records numbers or increasing numbers of unit sales. Prices have stopped going down. The panic is out. The mortage/re‑mortagaging activity’s very high. So the consumer confidence is better. So there’s a million little points of very positive light that we have. In fact, already started the rebound.
I think that we were predicting a rebound at the end of the first quarter. I think that’s actually happened. What’s exciting about it is I think it’s actually gonna be a stronger rebound than anybody predicts because any time you see the fear‑based panic going down, I think the excitement and the inspiration about the economy is gonna be equally strong on the upside.
What we see with the fundamentals of the global economy, which is the English – what’s it called? In China, they call it Englishmania, but the business language of English is being accepted around the world. This is a very strong productivity driver as is the Internet, as is global communications and the price of communications coming down, new technologies in communications improving the way we work together, helping things like outsourcing and better trade.
All of these are very difficult for economists to measure, and I think these are gonna be really powerful drivers of the economy going forward, which I think the next five to ten years of the global economy are gonna be incredibly powerful for all of our clients.
Adam Burns:
This has been a wake‑up call for many industries. What are the long‑term learnings going to be?
David Frigstad:
Well, first probably everybody in Wall Street should be put in jail. I’m just kidding. But the big problem is obviously government regulation, that we allowed the greed to get out of control again on the financial side. So there’s some balance of regulation that needs to stop that. ’Cause if it weren’t for the sub‑prime mortgages and what was going on with the CDOs, which is actually a relatively small part of the economy – this small fraud, created a global collapse in our economy, creating permanent damages for so many small businesses as well as large buses.
So I don’t know if the human race will ever learn how to avoid fraud and greed. I don’t know if we’re destined to always go through these cycles. But certainly, we’re heading into an era of increased government intervention. I think that’s something that’s changed fore ever. But I also the governments now are much more prone to support the business community and work in cooperation with business, where usually in the past it was, “How can we stop business?”
So I think that should be very positive for the global economy going forwards.
Adam Burns:
In times of trouble, people tend to be more resourceful. And in the business sense, of course, this comes down to principles of innovation. Are you seeing particular case studies where you think this incredible innovation is a direct result of these poor trading conditions?
David Frigstad:
It’s a great question ’cause if you look at where some of the great companies have been built, and some of the great ideas came out, so many companies were built during bad economic times. They put people outta work that had to think of new ideas and a new way to stay in business.
I think like this one, probably a couple years from now we will see some very entrepreneurial, exciting, innovative companies some out of this economic turmoil on tope. At the time, I don’t know of any specific companies that I could talk about. But I’m sure two years from today we’ll be talking about them or they’ll be sitting in this chair instead of me.
Adam Burns:
How does a global company like Frost & Sullivan manage through a global downtown? What are you telling your staff?
David Frigstad:
Well, it’s always tough because as the global world of business panicked last fall, suddenly orders stopped. They weren’t cancelled; they were just postponed, in the meantime you have to pay your bills. You have to pay or salaries and things like that. So certainly at Frost & Sullivan, as well as all of our other companies, clients, and competitors out there have been through salary cuts and cuts and postponements.
At the same time, we know at Frost & Sullivan that the investment and growth, innovation principles, and leadership can never stop. When I see CEOs that say, own we’re pulling back on our expense. We’re cutting expenses. And no my No. 1 is to hit margin. It’s a big mistake if anytime you should have your foot on the accelerator of the grown, it’s during a recession. This is where the prices are best. This is where the opportunities are best.
And this is where you see the market share – the market share changes is in times like these. So now is the time we should feel positive. We should be inspired. We should be aggressive about our business strategy. And the reality it, 99 percent of CEOs are just the opposite. They get more sacred. They get more cautious they stop spending. They stop travel. They stop investing in growth. You’re no looking at merger and acquisitions. You can watch the merger acquisition curve go down that way.
So it’s – when we coach our team on is really be better coaches for our clients. Be more confident. Be a little bit more aggressive and proactive to help them get the inspiration they need, and the confidence they need to push ahead. Many clients think this is the end of the world and they away not survive it. So it’s really tough to keep people positive and moving ahead in these kinda times because we’re all humans and we’re all affected by the negativity and the pessimism that’s driven by our friends, the economists and some of the media that really like to talk about catastrophe and disaster and collapse.
I can say it scares me, too. But I also know that you can’t stop looking at the long‑term no matter what the short‑term looks like.
Adam Burns:
Just one final question what nest to Frost & Sullivan, and which direction are you taking company? Is think there’s two exciting things we’re working on global community of executives focused on growth, innovation, and leadership. We’re running these in all the major cities around the world. What we wanna do is create a really inspirational program focused on growth and innovation that allows executives to come together a few where we take the brain out of their head. We prove it. We massage it. We stimulate it. We put it back in so they can start again fresh.
We’re very excited about that. We’re getting tremendous feedback from our clients, from our CEOs that are starting to join our program going forward I think the other big area for Frost & Sullivan in the future is gonna be on the growth investment side. When you look at the venture capital community, or the private equity community, so many times, especially in venture capital sometimes only one or two investments out of 23 prove to be profitable, or meet their expectation.
Doing some of the things we do of evaluating innovative growth strategies, looking at the future, and taking the measurements, we’ve shown that we can significantly increase the rate of return in some cases, almost double their hit rate of these things by using some of the tools that we used to look forward rather than backwards. When I say forward rather than backwards, most of the time when I’m borrowing money, when we’re tying to do a merger and acquisition for a client, the investment guys always want to look at au audited financial sometimes
Automated – these financial statements are also ways looking backwards, right. So they like to extrapolate these audited financial statements and say, “Based on history, this is a great company in the future.” And statistically, we could show that’s absolute rubbish. It doesn’t work, otherwise Wall Street would be in great shape today.
The fact of the matter is, you have to have measurements of the future, not measurements of the past. So we’re working on some measurement systems where we first measure the power of a company’s growth strategy, how innovative are their products, how visionary are their products. How are their products positioned, visa vie, the customers, and, visa vie, the competitors.
So then we can say these guys have the next iPod. Then we take measurements on their ability to do what we call implementation excellence. Are they best practices at marketing? Are they best practices at R&D? Are they best practices at PR and sales and all of the things that it takes to effectively and quickly implement their growth strategy. And from that, we can start to see which companies have the best future growth potential.
So we’re really excited about this because it’s a tremendous tool to help companies with mergers and acquisitions to see exactly which company they should be acquiring. ’Cause what I see today, it’s very ad hoc. Companies go after mergers and acquisition based on what comes in the door, not on what they’ve targeted. Then for the venture capital private equity, we can actually start to help them look at sectors and pick the right companies for their funds to make the best and long‑term investment as well as reduce that risk.
So I think these tools we’re very excited about, and I think growth investing is gonna be a big part of Frost & Sullivan’s future going forward.
Adam Burns: David, thank you very much, indeed.
David Frigstad: Thank you. Pleasure to be here.