2003 JAMES GILLIES ALUMNI LECTURE
SCHULICH SCHOOL OF BUSINESS
OCTOBER 28, 2003
© Copyright 2003 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.
Thank you for those very kind words. It is a real privilege and a pleasure for me to be here tonight, and I must say that it's just a tad intimidating because coming to Schulich and speaking on the subject of corporate responsibility is a little bit like going to Julliard and speaking about music.
But I do very much appreciate the opportunity to share the evening with so many bright lights here in Canada, and I want to thank all of you on behalf of the more than 140,000 employees in HP, and the 176 countries around the world where we operate, and I want to thank you for the opportunity to be here.
Now it was not so long ago that this school was something of a secret. Perhaps even as recently as six months ago, if you asked people in the U.S. - or even people here in Canada - if one of the best business schools in the world was nestled into a small corner of York University in the heart of Toronto, I think many would not have known that.
But I also don't think this great school is going to be a secret very much longer, because this school has been on a real run over the past few months. I know that you know this, but I'd like to tell you anyway because I think you should be very, very proud of it. In the last six months alone, BusinessWeek has named Schulich one of the top business schools in North America; Forbes has named Schulich one of the top ten international business schools in the world, and the top school in Canada; The Economist has named Schulich one of the top seven schools in the world outside of the U.S., and also the top school in Canada. And the World Resources Institute together with the Aspen Institute - which the Dean mentioned - have honored Schulich as one of only six business schools from around the world that are really on the cutting edge in preparing future executives with training in corporate social responsibility.
I know all of these awards took the work and contribution of many teachers and administrators, and I want to say to all of you: congratulations. I think it took determination to see a vision come to reality - a vision that now seems brilliant, but perhaps was not so well understood a decade ago. So, congratulations. You should be very proud of everything that you have accomplished for the school, and for the students who are here tonight. I know that they will benefit greatly from this school, and I hope that as many of you as possible will think about working for HP someday as well.
I hope that you will permit me a few shameless advertisements for my company as we go through the evening…
At HP, we talk today about doing well and doing good; our corporate objectives start with market leadership - and end with global citizenship.
We recognize that how we do things is as important as what we do, and that values and character are as much a part of who we are, and are as much a part of our value proposition and our competitive position, as any product development in what we do.
Our values and our character - which interestingly, are the same set of values that have guided the HP company for almost six decades now - are values such as passion for customers, and trust and respect, and the highest standards of integrity, and contribution to community, and collaboration and teamwork, and innovation and high performance. We added one recently, speed and agility, because the ability of a company to adapt with necessary speed and agility is fundamental to survival.
But our values and our character are what we rely on - what employees in every company rely on when we have to go into the grey areas; when we have to do the right thing both during crises and during times of great opportunity.
In many ways corporate values…corporate character… corporate social responsibility are all about being fast and decisive and appropriate when there are no rule books; when the pressures to perhaps do the wrong thing are the greatest.
And I think corporate social responsibility is not just about splitting hairs; it goes far beyond competitive differentiation or feel-good kinds of things - although doing the right thing always makes us feel good. It is fundamentally about how we behave when no one is looking. And by the way, if all that sounds familiar, it should, because this is exactly the set of things that the Schulich School of Business has been teaching the world for 40 years.
We are also an organization that believes that we are not only defined by our own character, but we are defined as well by the company we keep by partnering with others who share our goals, and share our values, and share our character.
And we are very proud to be a partner and friend of Schulich for more than a decade, including a major sponsorship of the "CEO Back to Campus" program. And in a few minutes at the conclusion of my remarks - just to keep you paying attention for the next few minutes - I will have the distinct honor of announcing how we intend to take that partnership to an even higher level.
But first let me talk about the evolution of the issue that unites us all this evening. Looking out at some of the students that are here today, I like to think that it wasn't too long ago that I was one of them - also a student of business thinking about what direction I should take in my life.
And of course, there has been a lot of water under the bridge since then, and I think the events of the last several years in particular, hopefully remind us all that there is no substitute now - just as there was no substitute then - for the fundamentals; and some fundamentals never change. Fundamentals like a CEO should manage the company - not the share-price; fundamentals like managing means balancing short-term returns with long-term investment; fundamentals like it is a CEO's job to think about a decade, not just a quarter; fundamentals like real profit and real cash flow and real balance sheets matter; fundamentals like trust and integrity, and transparency, and accountability and responsibility matter; fundamentals like I believe a CEO's job in the end is to balance the interests of investors and customers and employees and communities.
And we see so many examples of where that balance gets out of whack, and the consequences of that imbalance. We have seen examples of where the interests of investors gets out of balance, and a series of scandals that were driven in large part - let's face it, by greed - but in large part as well, because under those pressures, some forgot that their job was to manage the company and began to manage the share-price instead.
We have seen examples as well, of where perhaps the interests of employees get out of balance, and economies like Germany or France, or maybe even in some cases Japan - those economies lose their competitive edge.
In the end, the very difficult but very important job of a CEO is to balance sometimes competing interests - investors, and customers, and employees and communities.
Now, how to think about that balance has absolutely changed over time… how to think about the appropriate balance between those four elements…
The appropriate balance between those elements, I think, has had a long evolution going back more than century… from Pullman's company towns that hoped to create a rational and aesthetic order for his workers, to Sears and the first pension fund set up to benefit employees because it was seen as a good business, to HP and its then groundbreaking introduction of flex-time - all the way up to Peter Drucker and his book "The Future of the Industrial Man," which argued that companies had a social dimension as well as an economic purpose.
Now, on the specific question of social and environmental responsibility, I would argue over the past three decades, we have traveled a road as a society that has basically gone from - and I will be a bit provocative here - gone from self-deception to self-promotion to self-defense, and now hopefully to self-interest - enlightened self-interest, to be precise.
So let me build on that notion. When I was in business school, Milton Friedman had a very influential work called "The Social Responsibility of Business is to increase its Profits," and at the time, that idea was less than 10 years old and it dominated the debate at most business schools, and it argued fundamentally that business leaders basically had no responsibilities other than to maximize profits for shareholders who in turn could use their dividends in any way they saw fit, and governments and communities could use the taxes that a company paid on its profits for any goal that they saw fit.
This is a period that I frankly would call self-deception because a lot of corporations bought into that idea and truly allowed themselves to believe that while they operated in communities around the world, that they had no responsibilities to those communities or to their employees other than to maximize profit.
Now during the seventies and the eighties, schools like Schulich - and actually companies like HP, under our great founders Dave Packard and Bill Hewlett, argued just the opposite. They argued that the actions of corporations actually fit into a much larger eco-system of causes and effects… that the push and the tug of one side of the globe could positively or negatively affect families and people on the other side.
And in conjunction with the environmental movement, companies like HP and schools like Schulich and others argued that the proper role of companies was to operate within the system, rather than in isolation or apart from the system.
A lot of companies during this time took that idea and they invested in good works and they brought attention to them - which I would call the period of self promotion. Now, I don't say self-promotion to indicate that the actions were not sincere, but I do mean that being a public role model by definition meant being very public about good works.
And then, as we got through the nineties, the question of social responsibility in many ways went from exception to expectation - and all of a sudden there was no place for business to hide from social problems.
And so, I know that I oversimplify a bit, but the food industry got blamed in some circles for obesity, and energy companies were blamed for bad air, and Internet service providers were challenged to protect children from on-line pornography, and record companies are criticized for going after those who share files on the Internet. And in those kinds of situations, for companies in those circumstances, social responsibility becomes a question of self-defense. What are you doing to be responsible?
Now of course, I am oversimplifying by talking about these eras leading all the way up to self-defense, self-deception and self-promotion. The eras are not as clear cut, and elements of all three certainly exist today, but the one quality I think that held all of those eras together was that questions about social and economic and environmental responsibility were fundamentally considered on a separate track from business schools. There was the business, and then there was corporate and social and environmental responsibility.
Of course, social and environmental responsibility had been seen as important from a public relations point of view, or from a public policy point of view, or from a customer point of view, and increasingly, in some circles from a shareholder point of view. But they have not been seen as fundamental to long-term business success, or to the jobs, and the markets, and the innovations that propel long-term business success.
I would argue that we now must enter a period of enlightened self-interest where community development objectives and contribution to community and global citizenship - which comes with global responsibility - are not seen as separate from business objectives, but fundamental to business objectives. In other words, business leaders can no longer view doing well and doing good as separate pursuits; they are one in the same, where communities are indeed an important aspect of that balanced equation, as CEOs and other leaders in the business seek the right balance between investors and customers and employees and communities.
Now, what companies like ours are learning today is that cutting-edge innovation can result from weaving social and economic considerations into a business strategy from the start, and in the process, that weaving can help develop the next generation of ideas and employees and customers and products.
Fundamentally, I think that environmental and social responsibility are no longer matters of philanthropy. As important as philanthropy is, it is no longer simply about doing the right thing - although doing the right thing is important - it is increasingly about competitiveness, and it is a smart thing to do - not just the right thing.
For every nation, for every company that chooses to participate in the global economy, the primary question each company and each nation faces is one of competitiveness: what will we do to compete in the global economy and in this inter-dependent world? Competitiveness drives growth, and growth drives jobs and opportunity. If a nation or a company is not doing the things necessary to be competitive, it hurts itself and global growth at the same time. In the past decade, we have absolutely seen that this new economy of information and communications does best in highly entrepreneurial societies where people with new ideas have access to capital…where barriers are low to establishing a new business…where the rule of law and governance and transparency are strong, and where citizens are empowered to make the most of their lives.
And we have also seen that the most competitive nations in the global economy are able to invest in three things: first, they invest in education and training of their people because the information economy is first and foremost a knowledge economy; second, they invest in research and development to nurture new ideas and to bring the fruits of new technology to the market; and third, they work to create societies or companies grounded in predictability - ones that are focused on openness, and transparency, and accountability, and trust, and rule of law - ones that recognize merit and reward achievement, and what is true for countries is also true for companies.
The competitive bar keeps going up for countries, and the competitive bar keeps going up for companies. And perhaps at this time more than any other time in history, we are in an environment where if you wait until it's obvious what you should do - when it's obvious to everyone else what needs to be done - it is usually too late.
Making the changes you need to stay competitive and stay ahead of course are hard, but the consequences of not making them are much harder. So, I will expand on this notion of competitiveness and how it is inextricably linked to corporate social and environmental responsibility.
Competitiveness requires companies as well to invest in education and development to fund and train and find the best employees possible. It requires research and development and innovation. It is why HP, for example, spends $4 billion a year on R&D…why we are proud of the fact that we generate now five patents per day - an increase in our innovation rate of 350 percent in the past two and a-half years alone.
And it also means that investing in the fundamentals that I talked about earlier - transparency, accountability, integrity, good corporate governance, creating a system of performance that is based on true meritocracy - those are the things increasingly, that investors as well as employees and customers are looking for. This is where true investments in social and economic and environmental responsibility can increase competitiveness.
Let me give you a couple of examples, starting with the environment… At HP today, we operate in 176 countries and more than one billion people on the planet use our products. We have more than 10,000 suppliers that we do business with around the world. Our supply chain alone is almost $50 billion a year. Just think about what that means in terms of paper and plastics and all of the other resources that contribute to our environment.
We can either go about our business without regard to the world around us, or we can be a fundamental part of the solution. And just think about the power we have to make a difference if we choose - as we do - to leverage our depth and breadth…our impact on the world around us to produce results.
As an example…one issue where we have applied that power is on the issue of recycling. In 1996, we opened our first end-of-life electronics recycling facility in California in Roseville - and we are proud to have one of our partners here tonight - and then we opened a second plant in Nashville, Tennessee. Here in Canada we use a recycling facility recently opened by one of our partners just around the corner from York in Brampton, Ontario.
And here's what that means: it means that we are working to incorporate parts made from recycled material into our new products knowing full well that there has to be demand for parts made of recycled materials, or it won't be a viable business.
By the way, I should mention just as an example of this, that I happened to go to South Africa last year and I ran across a company that had been built on the basis of our recycling program. They took recycled parts and they turned them into wonderful objects - wine racks, maps - they had literally created a business from recycling, so the benefit of that was we recycled our parts - we built a business and that business is now a supplier to us of gifts for our customers, and they are also a customer of ours.
We have a pilot under way using plastic from recycled bottles and from recycled print cartridges to build a new scanner. And we will continue to apply this approach to other products as appropriate while committing to meet HP quality standards and customer expectations.
We will continue to do this because, yes, we think it is the right thing to do. But we will also continue to do it because we believe that the potential savings for us and for our customers are huge. And here's how this plays out right down the supply chain. We again have a great need for paper contracts - the contract we sign for paper is about $1 billion a year - just for paper. When we shopped that contract around, as we had an opportunity to do, we insisted on companies that had environmentally sound processes in place at every step along the way, and we required that the company that won our business had to make a lot of changes in how they ran their business. But not only did that winning company wind up with a big contract, now they are actually using the changes they made to market their services to other companies with whom they want to do business.
That is example of getting environmental processes and business processes aligned.
The same I think goes for sustainable development. When it comes to developing markets around the world, investing in sustainable development hasn't always been one of the primary places where companies look to become more competitive. Maybe it's easier to see the linkage between competitiveness and the environment than perhaps competitiveness and investing in some of the poorest and most under-accessed and under-served communities around the world. And generally, when companies have participated in developing economies, they have thought about it as philanthropy.
But I do believe that greater competitiveness and greater sustainable development lies in corporations taking a more direct role as well in the developing world.
As an example of this, at HP several years ago, we began a new initiative that we call "e-inclusion." Rather than sending a check half a world away, or maybe shipping some recycled or reused equipment from half a world away, we are committing in underserved and underprivileged and under-accessed communities around the world. We are committing teams of our best talent for up to three years backed with a financial commitment of several million dollars. And in those communities, we are building public-private partnerships to accelerate economic development through the application of technology, while simultaneously opening up new markets and developing new products and services.
The goal of our work is to create development that is sustainable and replicable. We work with local communities to help them set their priorities and then we work with them to achieve those priorities.
We have these "i-communities" in cities throughout North America, as well as places in India, South Africa, China and Thailand, and also here at home and in Canada.
We are very proud to participate in a Canadian initiative here called "Taking Pulse." This is a groundbreaking collaboration between the private sector, government, educators and Aboriginal leaders who are looking for ways to assist Aboriginal young people to enter the work force. In addition, we were a key supporter for the "World Summit for Entrepreneurs" here in Toronto, and although this was ninth in a series, it was the very first to focus exclusively on those from the indigenous community.
What we are finding in all of these examples is that making the commitment of time and resources, that we can encourage and enable local governments and NGOs and other companies who are also willing to make those commitments; we therefore act as a catalyst for further development.
But again, this isn't just about doing the right thing or doing good…this is about creating real business value. When we get to know local markets, when we develop technology and solutions that we never would have thought of unless we had gone into these communities, we also find talent that we never would have found.
In our i-community in India, where we learned on the ground that electricity was a scarce and unreliable resource, some of the smartest people there, working with our employees, developed a solar powered camera and photo-printer that can be carried in a backpack… and this has created a whole set of micro-businesses for young women in India who go into the villages and make photo-ID cards which each Indian citizen must have. It's actually a great product and we never would have thought of it and we never would have developed it without being in that community.
Increasing our competitiveness, doing the smart business thing as well as the right moral thing is for us a real simple math equation…let me give you the math. We live today as a technology company in a world where only ten percent of the world can afford to buy our products today. And we also live in a world where increasingly, we are finding shortages of engineers and scientists to invent the technology for the future. So, as we look ahead and think about sustainable growth for our company - not just for the next quarter, but for the next decade and the decades beyond - we know that many of the markets, the customers, the talent, the partners, and the ideas are going to come from that other 90 percent of the world that is underprivileged, under-accessed and underserved.
It is in our profound, enlightened self-interest to ensure that we tap more talent in more markets - that we build more markets capable of buying and using and understanding our products and technology, and that we build customers around the world. Again, this to me is about the marriage of social and environmental objectives to business objectives, and that's an opportunity to create new value and raise the level of competitiveness of a company.
I know everything I have said is not a particularly original argument. Here at Schulich - because this school has set the standard in integrating the programming around corporate social responsibility with business fundamentals, and Schulich believes and teaches that it is the alignment of social responsibility and business responsibility that makes both truly sustainable - we have been very privileged to be a part of this school's past and we look forward to being an even greater part of its future and so now for the announcement:
I am very pleased to announce this evening that HP will be investing $2 million to assist this school in creating a new chair in corporate responsibility. The new "HP Chair of Corporate Social Responsibility" will add another outstanding scholar with a strong record of academic research and teaching to the Schulich School, and it will add to an already very impressive set of school credentials. It will play a pivotal role in defining the issues, in conducting the research, and teaching and engaging in community outreach, to help educate people and spread the message of environmental and social responsibility as good business - smart business - an investment in the competitiveness of business for the long term.
Above all, in many ways, this Chair represents our profound belief that many of the great ideas for the next generation of corporate social responsibility will come from within the four walls of this school, and that you will continue to work to bring global focus to a vital issue that is now more fundamental to business than ever before.
You know one of things that I remind both customers and employees of HP is that technology is not an end in itself - although sometimes technologists fall in love with technology. In the end, technology is a means to an end; and likewise all this great discussion we have had about business and government and great institutions - it actually isn't what the discussion is about at all. The discussion we had tonight is about people.
I had a great opportunity to meet one of those people at a community center in South Africa that HP helped to build. This gentleman was sitting at a wirelessly enabled laptop - he had been surfing the Web for the very first time. Not surprisingly, he didn't talk about the technology at all. What he said was: "Looking into this screen is a window on the world that I never knew existed." I realized that the trip that he was taking on that computer was the first time he had traveled across continents and seen the wider world around him. Every community that I have ever gone into convinces me no one has a monopoly on talent or great ideas.
I will close with one last thought. I don't know how many of you have seen our advertisements. One our great partners, CIBC, is featured in one of our advertisements. But if you have seen any of them, you might remember one of things we say at HP is, 'everything is possible'. I actually believe that. Not everything is easy. Not everything happens right away. Not everything happens as we expect it to. But when people work together, empowered by the right tools and technology, enabled by a worthy pursuit - then everything is possible. And I think it does take - it will take - all of us doing our part to bring all the wonderful possibilities of our age to achievement. We're very proud to be on that journey at the Schulich School, and with all of you.
Thank you very much.