Daily Reports from the Philadelphia Summit

Benjamin Franklin himself introduced Monday's General Session at the CoreNet Global Summit. Franklin reminded the audience the significant role that Philadelphia has played in U.S. history – and predicts the city will continue to be important in the nation's future.

But how can we know what the future might bring?

Keynote speaker, Wolfgang Grulke, told the audience that hindsight is 20/20 - and that if examine our past, we can often predict the future.

He explained, "As you go through life, you go through predictable changes – step changes."

The so-called step changes are major events – "tsunamis" he called them – that alter your course. Childhood, marriage, and parenthood are all major life events. He explained that business has similar step changes.

Looking back on three generations – the Silent Generation, the Baby Boomers, and Generation X – we find that each has its own unique set of attitudes. He explained we need to learn from these generational changes to succeed.

"If you aren't getting into the right generational thinking," Grulke said, "you are missing it."

For example, he explained, Sony had the technology for the iPod six years before Apple introduced the product. They didn't launch it themselves because they were afraid it would destroy their Walkman business. It has. So what is the lesson?

"Eat yourself before somebody else does," Grulke said.

To be successful, communities must create economic development strategies that reflect today's changing realities. That's one of the key messages from Monday's Session 4 at the Philadelphia Global Summit.

Moderator John Rhodes, President of Moran, Stahl & Boyer, observed that globalization is the result of companies looking for ways to reduce costs and risk - and gain access to brainpower and markets.

Left to right: McInroe, Gibson, Rhodes

More and more companies are setting up shop in leading emerging markets, such as China and India. "We're actually in the second or third generation of off shoring," said Mark Gibson, Senior Manager, Ernst & Young. "Off shoring is not just about the cost base, but the customer base. Off shoring is set to continue."

Don Schjeldahl, Vice President and Director for Facilities Location, The Austin Company, told attendees that some types of projects (such as low-cost manufacturing) are destined for off-shore locations. And some projects, such as fresh food production, will remain stateside. All other projects, perhaps 60 percent of the total, are "up for grabs," he said.

Schjeldahl

Communities often make the mistake of assuming that general manufacturing in the United States will come back the way it once was, he said. And frequently communities have the unrealistic expectation that they'll become the next Silicon Valley or biotech haven.

Successful communities conduct an honest evaluation of community strengths and weaknesses and select target industries that make sense based on that, Schjeldahl said.

The changing global economy really isn't new, observed Kate McEnroe, President of Kate McEnroe Consulting. "Economies have always been in transition," she said.

Beautiful Chinese music played on traditional instruments to a modern beat greeted attendees of the relevant session Winning Strategies for Asian Locations. Moderator Alex Lam of CoreNet Global compared the tunes to Asia today-an exciting mix of the modern and the ancient.

The first part of the session focused on site selection and incentives that midsize companies should consider when entering emerging markets in Asia. The speakers, Brian Corde and Christopher Steele of Mintax, Inc., stated that, first, companies should evaluate their reasons for going overseas and the benefits that may come from conducting business in Asia. They encouraged companies, second, to conduct considerable planning and suitability evaluations. Third, companies should assess risks involved in locating in Asia. Next, the speakers addressed possible pros and cons related to labor, intellectual property, treasury and repatriation, infrastructure and logistics, partnerships and JVs. The speakers spent considerable time walking attendee's through possible tax incentives as well as possible adverse tax and regulations companies face in Asia, factors that influence taxation, and how many companies benefit from favorable conditions. Finally, they encouraged companies to consult their peers who have located in Asia as one of the best tools available to companies considering Asian locations.

Next, Jay McNaughton presented a case study on Wescast Industries, Inc. manufacturing location in China. Wescast Industries was driven to locate in Asia by competition, margin erosion, and customer demands. Partnering with Tractus as advisors, Wescast Industries explored joint venture options, and developed a back up site selection strategy. Due to a solid secondary plan, Wescast was able to quickly consider 400 China-wide economic development zones when the join venture negotiations broke down. Dennis Meseroll of Tractus explained that Tractus encouraged Wescast Industries to take the Wayne Gretzky approach: "Skate not to where the puck is, but to where the puck is going." As a result, in addition to considering China's large cities and current "hot spots," Wescast evaluated locations that would offer them real long-term competitive advantage. From the final four locations, Wescast chose to negotiate with two areas, and two weeks ago, settled on to their site.

Sustainable business models address the triple bottom line of "people, profits and planet" as seen in CoreNet Global's CoRE 2010 research.

The whole idea of sustainability is based on corporate social responsibility that also makes good business sense. But sustainability is not limited to environmental concerns or conservation. It takes on other forms.

The Business Case for Supplier Diversity panel featured (from left) Wachovia’s Sonya Dukes, Geri Swift of the WBENC, Coca-Cola’s Lynne O’Brien, Anne Sheheen of Real Property Tax Advisors and Gayle Matthei-Meredith of Grubb & Ellis.

Sustainable business models also incorporate diversity as a cornerstone of competitive advantage - a point made imminently clear by the Monday panel addressing diversity during the Philadelphia Global Summit.

"The Business Case for Supplier Diversity" is a compelling one because companies that exceed the basic tenet of hiring and retaining a diverse workforce will likely reap the rewards. Corporate supplier diversity initiatives offer a prime example, and thus provided the central focus of this education session.

Citing the Philadelphia Summit's opening session keynote speech by Wolfgang Grulke, Diversity Panel co-moderator and Grubb & Ellis VP of Marketing Gayle Matthei-Meredith observed, "Mature corporations can't innovate fast enough (to remain industry leaders), so their best chance is a network of smaller providers, making supplier diversity a reason for survival, more than a social responsibility."

Meredith serves as co-chair of CoreNet Global's Diversity Committee along with Anne Sheehan, President of Real Property Tax Advisors. She also co-moderated the Philadelphia panel discussion. Both pointed to the recent development and introduction of CoreNet Global's "Diversity on Demand" data base as a key tool for corporations to match their business models to their markets at least in part through minority and woman-owned business enterprises (MWBE's).

According to Sheheen, the ways that corporations do business - including procurement - should reach well beyond "the four walls" of the enterprise and be "more representative of their customer and consumer bases."

Sheheen and each of the panelists also stressed that the calibration of model to market requires top-down support from the C-Suite, including linkages that go beyond established or traditional supplier relationships to MWBE's.

"We must be a leader in supplier diversity to remain a leader in the marketplace," according to Neville Isdell, Chairman/CEO of Coca-Cola Company, which is one of a growing number of global corporations to channel supplier diversity mentoring and matching through the corporate real estate department - either in part or as a whole.

Panelist and Coke's Director of Corporate Real Estate Lynne O'Brien shared the Isdell statement to illustrate the company's 30-year history of diverse procurement approaches, one that today has resulted in what she describes as "integrated into business management and the corporate culture." The long-running commitment involves not only MWBE's directly supplying the company, it also "extends to our bottling and supply chain" partners, adds O'Brien. To supplement this, the company shares its diversity supplier database with suppliers and partners, including the CoreNet Global Diversity on Demand database.

The fact that Coke publicly committed $800-million in 2000 is among the key reasons why Diversity Inc. magazine ranks Coke #3 among all companies practicing supplier diversity, O'Brien points out. In 2005 alone, the company spent nearly $256-million on first and second tier MWBE's on a combined basis, she relates.

With high-level commitment in place, next comes organizational buy-in.

Sonya Dukes, Wachovia's VP and Diversity Director, Corporate Real Estate, addressed this dimension of how companies are changing their business models relavent to diversity.

The bank's commitment to supplier diversity centers on corporate real estate - as reflected in Dukes' title.

"We looked at how to ensure that all key real estate partners owned and had accountability to diverse suppliers," Dukes comments. She takes a team approach promoting the use of certified MWBE's within the bank's wide scope of purchasing activities. Regional directors are viewed as "champions." Five supplier diversity executives are the "front line." And project managers are "key stakeholders." Each of them is part of an integrated model coordinated by the Corporate Real Estate Operations Committee, which is "the chief advocate" of Wachovia's view of supplier diversity.

Reinforcing one of the leading themes of the panel's message, Dukes emphasized that Wachovia CEO Ken Thompson "sets the tone from the top down." She relates that there are senior managers involved, metrics are being set, results are tracked, and results are linked to corporate practices to be sure that barriers to diverse suppliers are not included in company policies or procedures, and in RFP's or contracts.

Perhaps most important the way she hones in on the key role of corporate real estate as the prime advocate of diversity, describing her team as "subject matter experts for a case requiring attention unlike (standard) procurement models." Getting the bank's buyers to understand the subtly different ways to recognize or evaluate a diverse supplier's qualifications is the main challenge. Wachovia's total spend for first and second-tier MWBE's was $176.4-million in 2005, showing that Dukes' message must be resonating through the ranks of the financial institution. The total spend was $12-million only five years ago.

Both corporate real estate executives shared examples of how they leverage diversity into their partnerships with key suppliers. Coke brings ADM, aluminum producers, and other suppliers to the table, engaging them in dialogue about the value of diversity, and providing direct linkage to the company's internal and external diversity networks.

The network extends to associations like CoreNet Global and CREW. One CoreNet Global member, John Guillory of Northbridge Group Inc. shared his recent approach to establish ties with the retail real estate group ICSC. Northbridge is part of Concordis Real Estate and is made up of seven different minority-owned real estate interests.

Wachovia applies a similar philosphy with partners like Interface and Herman Miller. The bank even has a partnership with another early adopter of integrated supplier diversity programs, BellSouth, which itself has an extensive buyer-supplier collaboration that now overlaps with Wachovia's and Coca-Cola's.

These companies are all practitioners of CoRE 2010 models and methodologies that point globally integrated enterprises toward changing views and approaches on doing business in the networked world. Sustaining competitive advantage in that world of rapid change is a multi-dimensional challenge, and supplier diversity has emerged as part of the solution.