Exceptional

ExceptionalAmericasEntrepreneurship + Innovation = GrowthJuly–December 2015Warby Parker’s Dave Gilboaand Neil Blumenthal on Kerouac,social good and rethinking retailWhy J.B. Pritzker built a start-upecosystem in ChicagoLinda Hasenfratz: leading a familybusiness to exceptional growthRedefiningentrepreneurshipHow Jessica Herrin ofStella & Dot is empoweringthousands of women to go intobusiness on their own terms.

Exceptional is an awardwinningmagazine for andabout entrepreneurs andhigh-growth companies.Seeing theworld differentlyCover photography Winni WintermeyerExceptionalFor EYDirector, Brand, Marketing andCommunications Lisa SchiffmanFor WardourEditor Molly BennettDesigner Annelise NelsonArt Director David DonaghyPicture Editor Johanna WardProduction Jack MorganAccount Director Emma FisherCreative Director Ben BarrettProduction Director John FaulknerManaging Director Claire OldfieldCEO Martin MacConnolExceptional is published onbehalf of Ernst & YoungGlobal Limited by Wardour,Drury House, 34—43 RussellStreet, London WC2B 5HA,United Kingdom.Tel +44 20 7010 0999www.wardour.co.ukExceptional is printed in theUS by Angstrom Graphics.For further informationabout Exceptional, pleasecontact Lisa Schiffman atlisa.schiffman@ey.comor +1 215 448 5596.There are millions of successful entrepreneurs in theworld. They fuel employment and economies, easeour daily lives and make industries more sustainable.But not all entrepreneurs are created equal. Thetruly exceptional ones — the ones who inspire thenext generation — aren’t just whiz kids with an eyefor figures and networking skills to boot. They lookat the world in a different way, spotting not just gapsin the market but ways in which entire sectors andindustries can work differently.This issue of Exceptional is full of leaders like these. Our cover star, JessicaHerrin, is a serial entrepreneur who set out to transform the lives of thousandsby offering them the chance to define entrepreneurship their way. Her socialsellingjewelry company, Stella & Dot, is successful financially but has also givenwomen (and a few men) the flexibility to be their own bosses and earn money intheir own time and at their own pace.We also spoke to Dave Gilboa and Neil Blumenthal, cofounders of Warby Parker,the eyewear company that is turning the optical industry upside down. Throughtight control of its supply chain and a view that retail should be both online andoffline, it can offer stylish glasses at modest prices — and it has been rewardedwith a US$1.2b valuation.And J.B. Pritzker, who grew up around entrepreneurs, not only cofoundedan investment firm to support new ventures but also built an entirely newentrepreneurial ecosystem in Chicago to attract and retain some of the city’sfinest minds. We ask him how he did it.Also in this issue, we profile Benny Landa, the Israel-based inventor of digitalprinting who is revolutionizing his industry once more, and Linda Hasenfratz, whohas quadrupled sales at Canadian family-run machinery company Linamar. Bothrepresented their countries at this year’s EY World Entrepreneur Of The YearAward in Monaco. We also feature the inspiring story of the winner ofthat prestigious award, Mohed Altrad of French company Altrad Group.All this and much more in this issue of Exceptional. Enjoy!Herb EngertAmericas Leader, Strategic Growth Markets, EYExceptional July–December 20151

Contents“ We are at the nascent stageof this ecosystem taking off.It has its own momentum.”J.B. Pritzker, Chicago’s start-up champion16Profiles06 Entrepreneurshipon her own termsWith Stella & Dot, Jessica Herrinwants to put entrepreneurshipwithin the reach of everyone.16 Creating a buzzWe talk to J.B. Pritzker, investorand start-up champion.24 The Bedouin who builta business empireMohed Altrad’s journey fromBedouin tribesman to EY WorldEntrepreneur Of The Year winner.32 How to keep thewheels turningLinda Hasenfratz on how shequadrupled sales at Linamar.36 Vision questWarby Parker: the unicorn that’sshaking up the world of eyewear.44 Born in a panicHe invented digital printing. NowBenny Landa is leading a revolutionin the print industry once again.48 From communismto the cutting edgePing Fu, 3D-printing softwarepioneer and embodiment ofthe American dream.54 Agent of changeRio Mayor Eduardo Paes says theOlympic Games is a chance totransform his city.243258 From Italy with loveOscar Farinetti of retail chainEataly on its forthcoming IPO.2

50%The proportion of the world’sentrepreneurs aged between 25 and 44.(page 42)“I feel there is so muchI have to do and no timeto do it.”Benny Landa (page 44)Analysis12 Why 80 years is just too longGender parity by 2095? It’s timebusiness accelerated change.30 7 ways family businessescreate lasting success... and their lessons for everyone.“ Customers don’tsee the world asonline or offline.Retail is no longerblack and white.”Dave Gilboa of eyewear retailerWarby Parker42 Entrepreneurship risingStatistics from around the world.52 Everything’s connectedThe Internet of Things’ potential.Regulars04 InspirationThe man who took Caterpillarglobal, plus much more.14 Q&A: Jon SakodaThe New Enterprise Associatespartner on today’s VC landscape.22 Beyond profit:the human connectionWhy Dr. Rebecca Thomley respondsto the world’s worst disasters.62 IntelligenceEvents, programs and publications.64 Quote/unquoteWise words from our interviewees.364448EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and qualityservices we deliver help build trust and confidence in the capital markets and in economies theworld over. We develop outstanding leaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in building a better working world for our people,for our clients and for our communities.EY refers to the global organization, and may refer to one or more, of the member firms of Ernst& Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited,a UK company limited by guarantee, does not provide services to clients. For more informationabout our organization, please visit ey.com. Ernst & Young LLP refers to the client-servingmember firms of Ernst & Young Global Limited operating in the US and Canada. EY Israel refers toErnst & Young (Israel) Ltd, which is a client-serving member firm of Ernst & Young Global Limitedoperating in Israel.© 2015 EYGM Limited. All Rights Reserved. EYG no. BE0276. ED 0116In line with EY’s commitment to minimize its impact on the environment, this documenthas been printed on paper with a high recycled content.This material has been prepared for general informational purposes only and is not intended tobe relied upon as accounting, tax, or other professional advice. Please refer to your advisors forspecific advice.The views of third parties set out in this publication are not necessarily the views of the global EYorganization or its member firms. Moreover, they should be seen in the context of the time theywere made.ey.comExceptional July—December 20153

InspirationIdeas, facts and figures from the world of businessLessons for myteenage selfSusan FranklinFounder, Franklin CompaniesBusiness pioneers Louis B. NeumillerHe oversaw huge expansion, but the Caterpillar CEO exemplifiedmodesty in management.Two months after Louis B. Neumillerwas named Chief Executive ofCaterpillar, the Japanese attackedPearl Harbor. It was an act ofwar that would transform thegeopolitical landscape. To Neumiller,it was also an opportunity to turnCaterpillar into a global operation.Neumiller (pictured above,left) started his career at HoltManufacturing Company in 1915,when he was 19 years old. Despitehis minimal formal education, herose through the ranks first at Holtand then at Caterpillar after thetwo companies merged. He got thetop job in 1941, just before the USjoined the war.When Caterpillar was asked toconvert its factories to artilleryproduction, Neumiller convinced theArmy that it would be better servedif Caterpillar continued to buildbulldozers and tractors. He believedits heavy machinery could be usedto clear roads and construct landingstrips in the theaters of war.His gamble paid off. In just fouryears, Caterpillar sold US$500mof equipment to the Governmentand doubled its workforce. And bythe end of the war, Caterpillar’syellow-and-black livery had becomea familiar sight in Asia and Europe,continents now badly in need ofreconstruction. The companycapitalized on this need by settingup sales offices to push newproducts and service centers torepair old equipment in war-torncountries. It would form the basisfor a truly global operation.By the time he stepped downin 1954, Neumiller had tripledCaterpillar’s net assets and securedhalf the market for earth-movingequipment. But he never wantedcredit for these achievements,preferring to let the companytake the glory.THE BIGNUMBERUS$1.2bThe amount atwhich WarbyParker hasbeen valued,making it a“unicorn”• See feature,page 36“Be more intentional aboutthe company you keep,as those relationshipswill define you. Cultivaterelationships with individualswho will encourage youto achieve with excellenceso that you may serve thegreater good and see thebenefits sooner.”My first jobSean KaneCofounder and COO,The Honest Company“[I worked] at my parents’dry cleaning business. Theaverage temperature duringthe summer indoors wasaround 95 degrees. It wasmy first experience providingexcellent customer service —something my mom wasmost passionate about.On top of that, you neverknow what you’ll find inpeople’s pockets.”Photography Time Life Pictures/Getty Images4

Lip service Jack Welch“ An organization’sability to learn,and translate thatlearning into actionrapidly, is the ultimatecompetitive advantage.”Snapshot US IPO highlightsFinancial sponsors drive US IPO marketPE and VC account for:64%of US IPOsHow do you say … in formal Spanish?EnglishHello.How are you?Thank you.Do you speak English?I’m fine, thanks. And you?Sorry, I didn’t understand that.Source: omniglot.com64% of US IPOs(65 deals)59% by proceeds(US$11.3b)Source: US IPO highlights 1H15 (January–June 2015)SpanishHola.¿Como está usted?Muchas gracias.¿Habla usted inglés?Bien gracias. ¿Y usted?Lo siento, no entiendo.DID YOUKNOW?The historyof printinggoes backmore than5,000 years.• See page 44Book clubHow to Fly a Horse: TheSecret History of Creation,Invention and DiscoveryKevin Ashton(Doubleday, 2015)If you’ve been holding onto the idea of the “Eureka!”moment, Kevin Ashtonwants you to think again. Hemay have coined the term“Internet of Things,” but he’sout to bust the myth of thecreative genius.Ashton says creating isn’ta magical, instantaneousoccurrence: “Ideas are likeseeds: they are abundant,and most of them nevergrow into anything.”Instead, true creation isthe result of hard work andunfettered collaboration.He cites the Wrightbrothers: they weren’t thefirst people to conceive ofa flying machine or even tobuild one. But through trialand error, they were the firstto fly in one.Ashton uses this andother examples to illustratehis central thesis: that a“small, isolated, highlymotivated group is the bestkind of team for creation.”Exceptional July–December 20155

Profile: Stella & DotEntrepreneurshipon her own termsHow do you create more female entrepreneurs whenthe system so often seems to be working againstthem? For Jessica Herrin of Stella & Dot, the answeris flexibility, independence and fun.words Roshan McArthur_ photography Winni Wintermeyeressica Herrin is in the people business. Morespecifically, she is in the women business. Asfounder and CEO of the jewelry and accessoriesretailer Stella & Dot, she generates more thanUS$200m in annual sales through independentsales representatives, the vast majority of whomare women.But there is much more to the Bay Area-based companythan trunk shows and turnover. When she founded it in2003, Herrin’s mission was “to give every woman themeans to style her own life.” She wanted to find a wayto help more women become entrepreneurs.“I feel like I won the lottery of time,” she explains.“Women played menial roles in the workforce forthousands of years, and then we come along in thecentury in which that all changes. That’s mind-blowing.”The company’s name pays homage to those pastgenerations of women. Stella is Herrin’s grandmother,and Dot is that of her business partner Blythe Harris.“Stella was an amazing woman,” says Herrin. “Sheraised five children. She was such a tough, funny, lovinggrandmother. She didn’t have a college education, shedidn’t accomplish a big title, but she was the glue of herfamily and her community. She was the essence of whatreal success is — and that’s happiness.”A born risk-takerBy anyone’s standards, Herrin’s own career has been areal success. In 1998, at the age of 24, she dropped outof Stanford Business School to found online weddingplanning site WeddingChannel.com. It was clearly a riskworth taking, because TheKnot.com bought it in 2006for about US$90m.In 2001, after relocating to Austin, Texas, with herhusband, Chad, she took a position as a senior managerin e-commerce at Dell. However, she soon felt the pulltoward entrepreneurship again.“I had achieved everything that people said shouldbe on the checklist,” she remembers, “yet I wasn’tfulfilled. I thought the far greater risk was to leavethe passion untended to. So I asked myself what wouldreally be meaningful.”6

“I believe theworkplace has tofundamentallychange so thatmore womenaren’t sidelined.”Exceptional July–December 20157

Profile: Stella & DotThe peoplepoweringStella & DotJessica Herrin’s stylists are a diversegroup. Eighty percent of them haveother full- or part-time jobs outside thehome, and she counts among them“lawyers, an OB/GYN, an ER doctor, aresearch scientist, a teacher, a formersinger, a Disney performer, someonewho grew up on a peach farm inGeorgia.” (And the occasional man.)Most want to earn an extraUS$1,000 a month and work aboutfive hours a week organizing trunkshows and online sales. Approximately10% put in more than 20 hours a week.“It’s their business, their way, theirpace,” Herrin explains. “We don’t havequotas or territories. This business isdesigned for flex work, so we’ll haveaccountants that don’t do it during taxtime, teachers that only do it duringthe summer, moms that don’t do itduring their kid’s sport season.”What has surprised Herrin mostis the deep connection within thecommunity. “What stylists do for eachother is extraordinary,” she says. “InSan Antonio recently, a stylist’s househad burned down. She lost everything.It was the other stylists in San Antoniowho, within 24 hours, replaced all herdisplay materials, gave her outfits andoffered to give toys to her kids. Thething I’m most proud of with our tribeis this spirit of giving.”The answer came to her when shestumbled upon a Mary Kay convention —a moment she describes as serendipitous.“It was, in an instant, clear to me that itwas about so much more than makeup,”she says. “It was an on-ramp for women inthe workforce. It was about enabling choiceand a community.“I didn’t resonate with the businessmodel or the brand, and I thought: whatabout today’s woman? What is her versionof flexible entrepreneurship?“No one’s going to stop needing flexibleincome,” she adds. “Women are not goingto stop having babies. They deserved asmart, simple business that worked — thatdemocratized entrepreneurship.”Her experience at Wedding Channel, whenretailers were initially wary of e-commerce,taught Herrin to look at an industry onthe cusp of change and work to smashthe remaining barriers. In 2003, her firstdaughter, Charlotte, was born and Herrinlaunched Luxe Jewels, a social-sellingbusiness based on DIY jewelry parties.“It was crazy to be a technologist andstart making jewelry in my living room,”she laughs. “People really did think I wasnuts, and I was one of them! But I wasutterly convinced then, as I am today,that it needed to exist. If I just worked alittle bit harder at it every day, it wouldcome to fruition.”Three years later, her second daughter,Tatum, was born and Luxe had grown toUS$1m in annual sales. Harris, formerly8

Stella & Dot’s design teamis led by Blythe Harris,who launched BananaRepublic’s jewelry line.Growing a business in stylewith Banana Republic, came on board asChief Creative Officer in 2007, and Luxewas rebranded as Stella & Dot.Growth businessDespite the economic downturn, thecompany’s sales reached US$33m in 2009.A year later, EY chose Herrin as one of 10EY Entrepreneurial Winning Women inthe Class of 2010. By 2012, Stella & Dot’ssales had reached US$200m.Today, Herrin runs three “Stella &Dot Family Brands”: Stella & Dot; EVERSkincare, a beauty and wellness line; andKEEP Collective, another social-sellingenterprise, this time of keepsakes andcharms. The companies work with morethan 40,000 “independent businessKelly Smith, aStar Stylist fromPittsburgh, has beenwith Stella & Dot forfour years.My background is in pharmaceutical sales.After I had my first son, I heard about Stella& Dot through the EY EntrepreneurialWinning Women Program. I loved Jessica’spassion, how she talked about working onher own terms. Stella & Dot gives me theflexibility to be with my children and stillwork and make money. That’s really whatattracted me.When I first signed up, it was somethingI thought I would try out and see whatwould happen. Today, this has becomemore of a career than a hobby. I thinka typical week now is 12 to 15 hours,between doing shows and events andcoaching team members. I have a team of13 women, who range from stay-at-homemoms to teachers, who make it fit intotheir lives where it can. In the future, I’dlike to have a team of 100 women.I’ve definitely grown and stepped outsideof my comfort zone, making my ownbusiness instead of having someone tellme what to do, working on my own terms.I’m networking in our community withdifferent business owners, doing things Inever thought I would do. I’ve partneredwith salons, photographers and boutiques,other women who are entrepreneurs aswell — and we really like working togetherto help each other out. You really can haveit all if you put your mind to it and you’repassionate about it.Exceptional July–December 20159

Profile: Stella & DotJessica Herrin saysflexibility is key forwomen in the workplace.owners” in six countries — the US, Canada, Ireland,the UK, France and Germany — and have a total of 400employees. To date, the brands have paid out more thanUS$270m to their independent business owners.It’s a far cry from the early days when Herrin (eitherpregnant or with a new baby) did everything herself, frommaking the jewelry to holding the trunk shows. Learningto develop and delegate, she admits, was one of thehardest tasks. “You can be a good entrepreneur but aterrible leader,” she says. “An entrepreneur has to do it allthemselves because there’s no one else there, but at somepoint you have to make the transition.”Time to change the systemAs a working mother, she also knows how strong the pulltoward family can be, so she established clear groundrules: family comes first, her husband and daughters arethe only ones with “votes,” and she prioritizes eyeball-toeyeballtime over, say, cooking or volunteering at school.Flexibility is key — for herself, her independent businessowners and her employees. “It’s not about how much youwork,” she explains. “It’s when you work and who decideswhen. If you decide when, all of a sudden everythingcan work out. Because you can decide it’s not duringthe school play, it’s not during family dinnertime. I reallybelieve the workplace has to fundamentally change so thatmore women aren’t sidelined.”Studies have shown that female entrepreneurs are muchless likely to scale big than their male equivalents, andHerrin believes it is because of this balancing act. “In your30s, when you’re raising small children,” she says, “it’s thesame time you would be scaling a business.”At that point in their lives, she believes, women askthemselves a lot of internal questions — most often,“Am I doing the right thing?”“I think women ask themselves that more than men,because if they do become mothers, they are oftenthe default primary caregivers,” says Herrin. “And someof that is quite physical, obviously. There’s no 50-50with pregnancy.”Herrin herself didn’t sail through hers, and her firstbornhad to have heart surgery as a toddler. “There were somany times during those years when I could have quit,”she recalls. “I just had to develop every skill aroundprioritization to make sure that I was efficient.”While Stella & Dot is a fashion retailer, the product hasalways been secondary for Herrin. “I’ve fallen in love withthe industry,” she says. “I’m absolutely enthralled withthe design process. I love how much beauty will brightensomeone’s day and how they can express themselves10

through color and texture. But in the beginning, thiswas very much mission-led. It was about democratizingentrepreneurship, not about fashion per se.”Stella & Dot is, she believes, equal part head and heart.“The heart was the calling of the mission,” she says. “Thehead was looking at a very large addressable market thathad a big white space, and that was jewelry for a fewreasons. It’s a public product, as women often complimenteach other on their accessories. When you’re sellingsomething else, you have to have more confidence to“ It’s not about how muchyou work. It’s aboutwhen you work andwho decides when.”bring it up. It’s very renewable, because women update itseasonally as a way to stay current with trends. And it’sa US$30b industry in the US.”When Herrin walked away from that serendipitousMary Kay convention, she decided to create a newbusiness model. “Our business is the combination of hightech and high touch, and while relationships are formedin person, we have tremendous business online. So all ofour independent business owners have mobile apps andpersonal websites and get social media training.“It’s how people connect today,” she says. “Thecredibility that comes from trusted recommendations inyour social network is a far better marketing message.This isn’t a relationship with someone who walks into asuperstore. This is a sale within a community. The productmust be excellent.”Herrin’s business school professor, Irv Grousbeck,once described entrepreneurs as lone eagles, and it’s areference that stuck with her. “They are people who soarhigh and nest alone,” she explains. “The biggest gift I haveever given to myself was the courage to have my ownconfidence and go with my own path. I’m independentlyowned and operated. I look internally for my ownvalidation and choices instead of looking for society’srubber stamp. I think that’s allowed me to define my ownpath to success and happiness.”This confidence is something she believes everyone hasand can cultivate. The key is figuring out what matters andasking the right questions. “Running a business is way toohard to persist in if you’re not passionate about it. If it’snot authentic, give up now! Because you will simply quitlater,” she laughs. “So shortcut that one.”ViewpointScaling successfullyLisa Schiffman, Director, Brand, Marketing and Communications,Ernst & Young LLPWomen start businesses at 1.5 times the rateof men and are at least half-owners of 46% ofprivately held firms. Yet, according to recentresearch, only 2% of women-owned businessesin the US break US$1m in revenue. That’s a lotof job creation lost. Here’s what a number ofhighly accomplished women said at a recentEY forum about closing the growth gap:• The importance of confidence. Claire Shipman, coauthorof The Confidence Code: The Science and Art of Self-Assurance — What Women Should Know, believes womenroutinely underestimate their abilities while men routinelyoverestimate theirs. Success, she says, correlates moreclosely with confidence than with competence: “Confidenceis the stuff that turns our thoughts into action.”• Lessons from failure. Naomi Whittel, CEO of nutritionalsupplement manufacturer Reserveage, recalls a ski instructorwho encouraged her to fall again and again, an experiencethat inspired her to be brave, be bold, take risks and neverbe afraid to fail, because it will ultimately lead to success.“Anything you can believe,” she says, “you can make happen.”• Community reinforcement. Asking for help is a sign ofstrength, according to Lili Hall, President and CEO ofbranding, advertising and design firm KNOCK: “Sitting onan island alone is a waste of time.” Whittel takes it one stepfurther, spending 10% of her time nurturing relationshipswith a diverse group of advisors: “They help you see theforest through the trees.”• The power of purpose. Purpose drives the most successfulbusinesses and helps establish trust and safety, which in turnfoster collaboration, innovation, happier customers and moreengaged employees. Sherry Stewart Deutschmann, founderand CEO of LetterLogic, built her company on employeecentricity,establishing high levels of transparency andemployee support. The result is uncommon worker loyaltythat translates into extremely high customer satisfaction:“We are showing the world that you can put employees firstand still take great care of your shareholders and the planet.”• Be the leader your company needs today. Allentrepreneurs have to adapt their leadership styles overtime. Cultivating the self-awareness, confidence and greatcommunication skills necessary to scale big may not comenaturally to all entrepreneurs, but these traits can bedeveloped. Be authentic, advises Roz Alford, a principal andowner of business solutions brand ASAP Solutions Group,and occasionally let people see that you are vulnerable. “Myjob now is to think strategically and motivate my team,” sheadds. “I’m their cheerleader.”More informationTo learn more, email lisa.schiffman@ey.com or visitey.com/us/entrepreneurialwinningwomen.Exceptional July–December 201511

Analysis: Women. Fast forwardWhy 80 yearsThe numbers don’t lie: everyone benefits when women arerepresented in senior roles in the workforce. So why does the WorldEconomic Forum say we will only achieve gender parity in 2095?And what can companies do to beat the clock?words Molly BennettAlot can change in 80 years. In1935, the jet engine hadn’t yetbeen invented. Horse-drawnwagons still ferried goodsthrough the streets of Manhattan. And thevaccine for tuberculosis had been widelyavailable for less than a decade.Eighty years from now, what willthe world look like? Flying cars?3D-printed everything? Gender parity inthe workplace?If you think the last item on that wishlistseems out of place, think again. It will be2095 before we achieve it, according tothe World Economic Forum’s Global GenderGap Report 2014. That means 80 moreyears of women’s talent underused andcareer ambitions thwarted.But the gender gap isn’t just a women’sissue. It’s everyone’s issue. Why? Becausewomen’s advancement and leadershipare central to business performance andeconomic prosperity. Profitability, ROI andinnovation all increase when women arecounted among senior leadership.Consider this. If the ratio of womento men in India’s workforce were moreequal, the country’s GDP would rise by27%. 1 Male-dominated industries in manycountries could increase their productivityby between 3% and 25% if more womenentered the labor force. 2 And between2005 and 2014, boards with a higherthan-averagepercentage of womenoutperformed those with a lower-thanaveragepercentage by 36%. 3Smart companies interested in improvingperformance need to take three steps.Step 1: Illuminate the path to leadershipby making career opportunities morevisible to women. Everybody needs arole model — but with women comprisingjust 5% of Fortune 500 CEOs, they can behard to come by. In a global EY study of400 companies, 26% of male respondentsand 35% of female respondents saidgood opportunities for progressionwas a top enabler to create parity. Thehighest-performing companies in thestudy smooth women’s route to the top:they run leadership pipeline programs,have measurable targets for leadershiprepresentation, appoint male sponsorsto female employees and developwomen’s networks.Step 2: Speed up company culturechange with progressive corporatepolicy. Even well into the 21st century,women do most of the caregiving andhousework in their families. That meansmany take jobs of lesser quality in exchangefor flexibility and greater work-lifebalance. A lack of flexibility stalls careers,particularly those of women in their 30sand 40s, who often have young childrenand aging parents. The top-performing1. Empowering the Third Billion: Women and the World of Work in 2012. Booz & Company, 2012. 2. Inequality and EconomicGrowth. World Bank, 2011. 3. The CS Gender 3000: Women in Senior Management. Credit Suisse Research Institute, 2014.companies in the study support flexibleworking for both men and women, whetherthey have dependents or not. And it hasto come from the top: leaders shouldchampion policies that allow all employees,including the leaders themselves, to visiblyintegrate flexibility into their working lives.Step 3: Build supportive environmentsand work to eliminate conscious andunconscious bias. Women need activeCEOs to be their advocates. From thatstems programs, such as sponsorship,that aid women’s advancement. Leaderengagement also helps fight unconsciousbias — something male respondents saidwas the top barrier for women in theworkplace and women said was the No. 2barrier. But management training programsaren’t enough. Leaders need to spread themessage that bias is unacceptable and thateach person is responsible for adjusting hisor her behavior.Change takes time. But it could startimmediately. Everyone in the workforcecould actively help fast-forward towardgender parity. We wouldn’t wait 80 years toimplement any other business imperative —why wait for this one?More informationRead the full report, Women.Fast forward, at ey.com/womenfastforward and followthe movement on Twitter:#womenfastforward12

is just too longClosing the gender gap makes senseBoth financially …Fortune 500 companies with the greatest numberof women in the C-suite outperform the average.% return% increase on return15 25%17%1245%9630Investedcapital… and economicallySalesEquityTopcompaniesAverageSource: The Bottom Line:Corporate Performanceand Gender Diversity inthe C-Suite (2004–2008).Kenan-Flagler BusinessSchool, University ofNorth Carolina, 2011Businesses,nationsand economiescannot affordto wait another80 years to fullyengage the talentof the world’swomen.Mark Weinberger,Global Chairman & CEO, EYGenerally, countries with greater economic participationby women have higher GDPs.Top 10countries forgender parityin 20141. Iceland2. Finland3. Norway4. Sweden5. Denmark6. Nicaragua7. Rwanda8. Ireland9. Philippines10. Belgium...19. Canada20. US...71. Brazil...80. MexicoIf as many womenworked as men, GDPwould get a boost of9%in the US13%in the EurozoneSource: Gender Inequality,Growth and Global Ageing.Goldman Sachs, 2007GDP per capita(constant 2011 international $‘000)140120100806040200Saudi ArabiaYemen0.2 0.4 0.6 0.8 1.0Economic Participation and Opportunity subindex 2014 score(0.0–1.0 scale)Source: Global Gender Gap Index 2014 and the World Bank’s WorldDevelopment Indicators online database, accessed July 2014QatarKuwait LuxembourgSingaporeNorwaySwitzerlandFinlandBrazilChinaImprovementsare on the way105out of 111countriesnarrowed theirgender gapsbetween 2006and 2014Source: The GlobalGender Gap Report2014, World EconomicForumExceptional July–December 201513

Q&A: Jon Sakoda, NEAA view ofVC fromboth sidesJon Sakoda went from venturecapital to entrepreneur andback again. He spoke toEY’s Jeff Grabow about howhis experience informs hisinvestments and the valueVC can bring to companies.interview Jeff Grabow, US Venture Capital Leader, Ernst & Young LLPon Sakoda is better placed than many to commenton the venture capital (VC) landscape. Startingout in the VC investments team at Goldman Sachs,he caught the entrepreneurial bug and cofoundedenterprise software company IMlogic, whichSymantec acquired in 2006. He then joined VC firmNew Enterprise Associates (NEA), focusing on software,internet and mobile applications.He’s seen the VC world from both sides of the table anduses this experience to benefit his investments, whichinclude Blue Jeans Network, Opower, The Players’ Tribuneand Uber. It’s an interesting world at the moment: thefundraising environment is robust, especially at the laterstage of the market; entrepreneurship is hot again; andthe cost of starting companies is low. Finally, there areplenty of angel investors who can provide capital to startupsin preparation for entering the VC pipeline.I asked Sakoda for his perspective on the current VClandscape, strategies for obtaining funding and the valuethat VC can bring to companies looking to go public.You’ve taken an interesting path to your currentQ role. How have your different roles contributed toyour investment philosophy and decision-making?As a former entrepreneur, I know firsthand howA difficult it can be to build a company. VCs have tobalance enthusiasm for disruptive opportunities with thechallenges and risks of any new venture. I think seasonedentrepreneurs learn how to persevere through toughtimes, and in our role as VCs, we can coach foundersthrough good times and bad.How have your experiences helped you work withQ entrepreneurs and founders?Statistically, start-ups are destined to fail. Those thatA thrive find a way to survive the moments of crisisthat kill weaker companies. As an entrepreneur, you neverforget the moments that determined the success or failureof your company. I think it’s critical to show up and helpentrepreneurs as much as possible, and do everything youcan to focus on the moments that matter.Photograph Courtesy of New Enterprise Associates14

What value do VCs bring to companies that areQ undertaking IPOs?An IPO can seem mythical and opaque toA entrepreneurs who have not gone through theprocess. We help to demystify everything about the IPOand make sure that entrepreneurs (and their employees)understand how their business will change as a publiclytraded entity. Many people view an IPO as a liquidity eventand an exit for employees and shareholders. This is largelymisunderstood. We frequently remind companies that anIPO is not the end; it’s the beginning of the next chapterin a company’s life.How do you decide which exit strategy is rightQ for a portfolio company?The most significant decision a company makes isA whether to pursue an IPO or sell to an attractiveacquirer. This choice is more than a financial decisionand can ultimately be determined by more subjectivecriteria. I think one of the most important variablesis whether the mission and values of a start-up aretightly aligned with those of the acquirer. Ultimately,entrepreneurs go public if they feel they can achievetheir goals alone, and many times they choose to sellwhen they feel their objectives can be accelerated orenhanced with the help of a larger partner.What are your thoughts about the “unicorn”Q phenomenon?There’s some confusion in the market about unicorns.A I think the term has become synonymous with highvaluations and bubble-like environments. I believe many ofthe best companies are choosing to stay private longer andthus are getting financed at valuations more frequentlyseen in public markets. These companies will ultimatelygo public at even higher valuations if they continue toperform. I think the existence of these so-called unicornsis not a bad thing and is likely to be a sustaining trend.Given the activity in the VC market right now,Q what is your advice to anyone seeking to raiseventure capital?There are many sources of VC available toA entrepreneurs right now. Wealthy individuals, hedgefunds, private equity firms, mutual funds and strategicinvestors are all now willing to fund start-ups. I thinkthe diversity of investors entering the space is largelya reflection of the increasing size of the technologyecosystem, but investors can have wildly differentobjectives and approaches for working with companies.Entrepreneurs should be thoughtful about types ofinvestors they want to partner with for the long term.What is the most common misconception aboutQ seeking VC funding?Many people believe VCs invest as a herd and are allA chasing the same themes and memes. In reality, thereare thousands of individuals in the VC industry looking fordifferent investment opportunities. Silicon Valley is a muchmore diverse community than is portrayed in the media oron television.How has the role of a VC fund changed, with otherQ sources of funding available to entrepreneurs?VC funds have had to refine and enhance theirA differentiation within the market. All of the largestinstitutional firms have modernized and institutionalizedthe suite of services offered to entrepreneurs and portfoliocompanies, including HR, PR and business development.In addition, start-ups are growing faster, both domesticallyand overseas, than ever before, and VC funds have had toexpand worldwide to meet the needs of their portfolios.What’s in store for the rest of the year andQ into 2016?Many people believe the tech industry is goingA through an explosive period, similar to the firstinternet bubble in 1999–2000. It is popular to forecastthe end of this era, but it’s hard to imagine a dramaticchange in the near future. The operating and financialfundamentals of the companies we are backing have neverlooked better, and the technology waves of disruption arestrong and sustainable. I think the funding environmentwill remain hot for the foreseeable future.What is the next big industry?Q Technology is now pervading and disrupting almostevery industry, which makes it hard to identifyA only one. We invest in almost every subsector oftechnology, from new mobile applications to virtual realityto novel medical devices and cancer therapeutics. We havemore than 300 active portfolio companies!QWhat is the one piece of advice you always giveyour portfolio companies’ CEOs?Always have a plan B. The only thing I know about aA start-up’s long-term plan is that, at some point, it willneed to change.Exceptional July–December 2015 15

Profile: Pritzker Group“You have to builda track record.And so I built one.”16

Creatinga buzzThrough Pritzker Group’sventure activity and the 1871digital incubator, J.B. Pritzkerhas helped put Chicago on thestart-up map. But while thecompanies he helps grow maybe driven by technology, thecity’s heritage plays a key role.words Joanne Cleaver_ portraits Matthew GilsonAny healthy ecosystem needs a honeybeeor two — and a start-up ecosystem is noexception. Chicago’s honeybee goes bythe name of J.B. Pritzker.Ten years ago, the Windy City’s techstart-up scene was fragmented, small and barely growing.Would-be entrepreneurs spent more time piecing togetherresources, chasing money and pleading with talent thanthey did building their companies.Today, Chicago has an ecosystem entrepreneurs relish.Much of this is due to 1871, a digital start-up incubatorled by Pritzker and backed by the city’s business andpolitical power brokers. Headquartered in Chicago’shistoric Merchandise Mart, it has fostered more than400 companies since 2012.Exceptional July–December 201517

Profile: Pritzker GroupThe other string to Pritzker’s bow is PritzkerGroup, the private investment firm he founded withhis brother, Tony, in 1996. It is split into three divisions —private capital, venture capital and asset management —and invests directly in and oversees digital start-upsand middle-market service, manufacturing and healthcare companies.Childhood educationThe Pritzker brothers know a little something aboutstarting and growing a successful business. Members ofthe extended Pritzker family, one of America’s wealthiest,founded the Hyatt hotel company and industrial gearmanufacturer Marmon Group (since sold to BerkshireHathaway) and have stakes in numerous investmentsand nonprofit organizations.But while J.B. Pritzker may have been born with strikingadvantages, his parents also set expectations on how hewould use them. He, Tony and their sister, Penny, pitchedin as their parents and uncle built the Hyatt hotel chainone property at a time. And Pritzker watched as theirdemocratic leadership style infused everyone they hiredwith responsibility, accountability and enthusiasm.“In hotels, the talent are the bellmen, thehousekeepers, the front desk staff. Everyone makes itsuccessful,” says Pritzker. That’s why he’s on the lookoutfor entrepreneurs who describe their ventures as “ourendeavor,” not “my endeavor.”It follows that when he was just getting started himself,he fully expected to put in the hours.His first business opportunity came in the early 1990s.As the internet and all its potential were emerging,Pritzker realized that he and his law degree were not agood fit for the traditional world of investment banking.He smelled opportunity in the newfangled internetand went all in with US$3m of his own money, which heinvested in several promising start-ups. Venture capitalwas where he wanted to make his mark. But nearly allthe venture firms winning digital deals were based inCalifornia, especially in the Bay Area. Pritzker, whoseheart was and is in Chicago, realized he would need morethan his pedigree to build something even approachinga Silicon Valley in his hometown.“You have to build a track record. And so I built one,” hesays. “The tipping point for me came when I was thinkingabout the Chicago ecosystem. [Pritzker Group] hadsuccess with several companies. We were one of the bestventure capital firms in Chicago. Could we be one of thebest in the Midwest? And if we could do that, could we beone of the best in the country?”1871, Pritzker’s digital start-upincubator, is based in Chicago’shistoric Merchandise Mart.Building a support networkPritzker readily acknowledges that luck and good timingexplain some of his early wins. But he also smashed somehidden barriers that had made it harder to successfullylaunch a Chicago tech company. “It’s not just seed money”that young companies need, he says. New entrepreneurstrying to develop new ideas also need advice, mentors,champions and a constellation of expertise and talent.Retaining local talent was an especially pricklychallenge. The University of Illinois produces hundredsof top-notch computer engineers every year, but manyimmediately decamped for Silicon Valley, where theirtalent and ideas were valued more. The never-endingexodus of Illinois engineers dismayed politicians andemployers, and Pritzker realized that the state was alsolosing an entire generation of entrepreneurs.Photograph Raymond Boyd/Getty Images18

The company’s EurekaInnovation Lab plays akey role in Bergh’s visionof a more sustainableproduct line.J.B. Pritzker hasconcentrated on smashingthe hidden barriers toentrepreneurship in Chicago.“ To sustain yourselfas a venturecapitalist, you haveto invest throughdownturns.”To reset the growthdrivers for Illinois, thestart-up ecosystem hadto be much bigger thanPritzker Group. To be sure,the brothers expected thatfew of the start-ups theybacked would grow soquickly that the companiesin their private capitalportfolio would in turn acquire them. But their sharedvision was about much more than creating a closedecosystem. It was about turning Chicago into the citywhere good ideas went to thrive.J.B. and Tony knew what that looked like. They’d seenthe challenges of building companies through economicups and downs — especially the downs. “I realized that tosustain yourself as a venture capitalist, you have to investthrough downturns. That’s when some of the best, mostsustainable ideas emerge,” says Pritzker.So he rallied commitment and money to found 1871,named for the year of the great Chicago fire, which iscredited with resetting the city’s growth trajectory.“In 2005, there wasn’t any seed capital available inChicago,” says Pritzker. “You couldn’t find it. There wasn’ta place to go. Nothing existed. Now, there’s something.Entrepreneurs and engineers come — and stay.”Chicago might get the last laugh yet, as the Internetof Things gains traction. After all, the Midwest, with itsheritage of manufacturing companies, knows “things”like no other region. That means Chicago tech talentand companies are perfectly poised to connectExceptional July–December 201519

Profile: Pritzker GroupJ.B. Pritzker learned valuablelessons from watching his parentsbuild the Hyatt hotel chain.“ We are at thenascent stage ofthis ecosystemtaking off. Ithas its ownmomentum.”the digital world with the real world. And the kindsof companies in which Pritzker’s private capital divisioninvests stand to gain the most.For instance, PECO Pallet, part of the Pritzker portfolio,is redefining itself from a manufacturer of woodendecks to a data-driven logistics company. The Pritzkerapproach of investing time, expertise and money is payingoff. PECO increased its year-on-year revenue by morethan 22% between 2011, when Pritzker Group acquiredit, and 2014.Searching for common groundThis melding of two seemingly disparate worlds is at theheart of the Pritzker approach.“They’re like chocolate and peanut butter,” says Pritzkeras he walks down the cubicle corridor at Pritzker Group.Employees from the three divisions of the company workside by side. And while it might appear that start-upshave little in common with solidly growing companies ahundred times bigger, it’s also true that start-ups succeedonly when they solve real-world problems. The privatecapital group offers plenty of those. Packaging, metalcasting, shipping and distribution — it doesn’t get anymore real than that.As staff from both divisions work side by side, ideasspark, with digital concepts finding practical applicationsand established companies applying digital sandpaperto chronic friction points. “The tech team found theindustrials,” says Pritzker. “Chocolate and peanut butter:they’re better together than they are on their own.”Brand new entrepreneurs discover their owndelicious moments at 1871. A beehive of chatter,with people young and old huddling over screens andcoffee, the bright loft space is redefining MerchandiseMart, a landmark art deco building on the banks ofthe Chicago River.Pritzker enjoys sitting down with new entrepreneursto hear how things are going. But he’s also on the lookoutfor those who remind him of his parents.“A great entrepreneur will do anything it takes,” hesays. “In the early days of Hyatt, everyone wanted inon the act. My parents worked 24/7.” 1871 gives himand other senior business leaders a chance to see risingentrepreneurs in action and to invest accordingly.He sees not just people exercising their entrepreneurialmuscles, but tomorrow’s mentors, investors andadvocates. Serial entrepreneurs, he believes, are theoverlooked drivers of sustained expansion for Chicago.Photograph Bloomberg/Getty Images20

When today’s start-ups sell, and their owners reinvest inmore companies — their own and others’ — that’s whencapital builds a city.“We have the fundamental underpinnings, and now we’retaking advantage of the Fortune 500 companies basedin Chicago and of the universities here, especially theengineering program at the University of Illinois at Urbana-Champaign,” says Pritzker. “We are at the nascent stage ofthis ecosystem taking off. It has its own momentum. And ifyou are an investor, you want that ascent.”Links with the pastHe thinks his parents would feel right at home at1871, with its caffeine-fueled conversation. “In theventure capital world, every day you meet entrepreneurswho are doing what my father did,” he says. “Where youare an ally, advisor and owner, and you can help thembuild success.”And help he has. Chicago’s start-up ecosystem hasnow grown so large that, in 2014, venture investmentin the city’s companies passed US$1b for the first time,according to Crain’s Chicago Business.It appears Pritzker is on his way to creating theenvironment he’s always dreamed about.ViewpointAn ecosystem forentrepreneursMatthew Udoni, Partner, Transaction Advisory Services, Ernst & Young LLPThe repercussions of the 2007–08 financial crisiswere many and varied. One that affected bothdeveloped and developing economies was risingunemployment, an issue that had an impact onthose under the age of 25 in particular. Globalyouth unemployment has reached 16.1%, andthe plight of the young is evident in almostevery community around the world.As part of our ongoing work to supportentrepreneurship and its impact on job creation, an EY report,Avoiding a lost generation: ten key recommendations tosupport youth entrepreneurship across the G20, gives clearand actionable guidance based on best practices adopted bygovernments across the G20. At its heart is the belief that youngentrepreneurs hold the key to reducing youth unemployment.The report highlights the importance of encouraging a cultureof entrepreneurship among young people and notes that thiscan best flourish within a regional ecosystem framework thatfosters and attracts a critical mass of talent, capital and, mostimportantly, entrepreneurial leaders.The prime example of a regional ecosystem in the US, andindeed the world, is Silicon Valley in California, a hub forhigh-tech innovation and development, which is a magnetfor venture capital. It was formed by the convergence onone site of new technological knowledge; a large pool ofskilled engineers and scientists from major universities inthe area; generous funding from an assured market with theDefense Department; the development of an efficient networkof venture capital firms; and, in the very early stage, theinstitutional leadership of Stanford University.While Silicon Valley has a head start, other US citiesand regions have a great opportunity to develop their ownentrepreneurial ecosystems, and thus retain and attract talentedyoung people, if they follow the recommendations in the report:• Provide an overarching ecosystem framework and a flexiblefunding model to support regional entrepreneur ecosystems.• Provide funding for a lead organization or consortiaof organizations at the regional level that includescomprehensive entrepreneurship ecosystem indicators.• Provide funding to regional organizations and have them workwithin a regional alliance model comprised of all entrepreneurservice providers (nonprofit organizations), colleges anduniversities, and all levels of government.• Emphasize the pillar of entrepreneurial education and skillsdevelopment for the 21st century.• Collaborate with business to deliver more robust testingof entrepreneurs’ ideas and bring commercially viableopportunities to market.More informationYou can download Avoiding a lost generation: ten keyrecommendations to support youth entrepreneurshipacross the G20 at ey.com/lostgen.Exceptional July–December 201521

Regular: Beyond profitThe humanconnectionCorporate social responsibility isn’t an add-on forDr. Rebecca Thomley, CEO of management services enterpriseOrion Associates. Volunteering is at the heart of her for-profitcompanies – and out of this focus came Headwaters ReliefOrganization, which responds to some of the world’s mostdevastating disasters. She tells us her story.interview Molly BennettIwas practicing psychology full-timewhen my parents were diagnosedwith cancer a month apart in 1995.I became more involved in MeridianServices, which my mother founded in1980 to help people with intellectualdisabilities live fuller lives. After my fatherpassed and my mother no longer wantedto be as involved as she was, I took overthe business.On one level, I resented having to runmy parents’ business. I had built areally great practice, I’d spent manyDr. Thomley in the Philippinesin 2013 after TyphoonYolanda and (right) in Haitilater the same year.years in school and I loved what I wasdoing. But I was also committed tomy family and to their legacy. I’m aScandinavian — we were brought up withthe values of putting family first andworking hard. So while my heart wasn’tthere in the beginning, who wouldn’t beexcited about this tremendous possibility?We’re 24 times the size we were whenI took over. It’s been a tough pace ofgrowth, because we’ve expanded intoa few more states in the past couple ofyears. But the growth means we cancontinue to offer additional benefits andpay our staff better.Orion Associates donates 28%annually to charitable causes. I grew upvolunteering, and it has become so much apart of the community at Orion that it’s nowdiscussed in job interviews. Job candidateslearn that their workmates will ask them toengage with this kind of activity, and theyneed to be aware of that coming into thebusiness. It’s part of who we are here, fromtop to bottom.I’ve been a mental health responder withthe American Red Cross since 1992.I went to New Orleans after HurricaneKatrina, and it was very different fromany other disaster situation. Usually, youcan see the services coming into playand the system picking things up. But Iwas assigned to the Ninth Ward, which isprimarily a poor black community, and noservices were coming. Thirty-five coworkersended up going back to help with cleanupand rebuilding.Headwaters Relief Organization, whichdeveloped out of that experience, isvery much a grassroots organization.Photography Courtesy of Orion Associates22

Dr. Thomley’s work with Headwatershas taken her everywhere fromOklahoma after the 2013 tornado(above) to Nepal after theearthquake in April this year(right).About OrionAssociatesOrion Associatesis a managementorganizationfor both relatedand unrelatedfor-profit andnonprofitorganizationsthat provides management services,primarily in the social services arena.Founded in Minnesota, the for-profitgroup has since expanded into sixother states and launched HeadwatersRelief Organization. This year, Dr.Rebecca Thomley was ranked No. 2 onthe Women Presidents’ Organization’s50 Fastest-Growing Women-Owned/Led Companies. Thomley is also amember of the Class of 2011 of EYEntrepreneurial Winning Women.It taught us that you can spend a lot ofmoney on leadership training, and you cando all kinds of things to build relationshipsin your organization, but nothing does itlike putting someone in a disaster situationwhere they have to help others withminimal resources.Orion invests extensively in volunteering.People get a couple days of paid timeoff each year for volunteering at theirchurch or school or anywhere of theirchoice. We also have a committee thatpicks four big charity events each year,and employees get paid time off for that.And anyone who chooses to volunteerwith Headwaters gets paid time off too.I think the most time an individual hastaken for volunteering was six weeks ina year. Of course, they have to get theirjob done, too.We don’t factor employee volunteeringtime into our books, because whatwe get back in terms of our people’sdevelopment is so much more powerful.Plus, we actually get business becausewe’re known to give back to the community.They say, “We’re here because of whatyou’ve done in Haiti, or the Philippines, andwe want to be part of this community.”There’s no rationale for which disastersHeadwaters responds to — it’s aboutbeing called. Often, one of our partnerorganizations will ask us to come andsupport it. In Nepal, we’ll be providinga mental health component to supporta few larger organizations’ services forsix months. We’re not just providingsupport to the local community; that’spart of it, but often we’re supporting thefirst responders, who are affected byseeing things they never expected tosee in their lives.We don’t respond and leave; we stay.We went to the Philippines afterTyphoon Yolanda (Haiyan), and we’renow teaching skills to help peopleprocess the experience and developcoping and resilience techniques. Wehave ongoing operations with local staffboth in New Orleans and in Haiti.Our latest project is a series of children’sbooks. The first was for children in Haiti,many of whom died because they ranback into the buildings. Our book teachesthem what to do in an earthquake, andthe Ministry of Education is putting it inall the libraries. We’ve also done a bookfor Filipino children about coping withtrauma in the aftermath of a typhoon,and we’ve just printed one about Ebola forchildren in west Africa. We deal with thepublic health issue and also the orphanaspect, which is now a huge concernthere. All our books are designed to assistwith developing coping techniques andpromoting resiliency.When you’re in a time of disaster,everything’s gone; everything’s strippedaway. It doesn’t matter what the person’sbackground is, their education, race orreligion. That human connection feelsalmost like you might have looked into theface of God. It’s so powerful, and when yougive people the opportunity to connect witha fellow human being and have an impact,you, as well as their lives, are changed.Exceptional July–December 2015 23

Profile: Altrad GroupThe Bedouinwho built abusiness empireMohed Altrad escaped a nomadic life in theSyrian desert to create a building equipmentempire that is now worth billions. His incrediblestory demonstrates what can be achieved with acombination of tenacity and an instinct for business.words Dominic Midgley_ portrait Laura Stevens24

Exceptional July–December 201525

Profile: Altrad GroupFew billionaires can claim to haveexperienced as radical a change in fortunesas Mohed Altrad. His entrepreneurialinstincts helped him create a scaffolding and buildingequipment business with a turnover of €1.8b (aboutUS$2b) that employs 17,000 people in 170 countries.Altrad’s beginnings were unpromising, to say the least.Born into a Syrian tribe of Bedouin nomads, he wasbrought up in the margins of the community. After hismother died when he was 4, his position became evenmore desperate.The grandmother who took him in believed shepherdshad no need of books and refused to allow him to attendschool. Eventually, though, the young Altrad realized thateducation was a vital passport to a better life — he wouldtrudge for an hour through the desert to spy on what wasgoing on in the classroom through a hole in the wall. Akindly teacher spotted him and allowed him to sit in onlessons, but he still had no money for pencils and books.It was only when his father gave him a bicycle that hisluck changed.“It’s strange, because I hated my father and that was theonly kind thing he ever did for me,” Altrad recalls. “I was thepoorest guy in the class, with a djellabah [traditional Arabrobe] that was half destroyed and no shoes, but once I hadthat bicycle, I hired it out to my classmates and collectedsome pennies to buy pencils, books and so on. That wasmy first business.”Mohed Altrad bought Montpellier’sstruggling rugby union team in 2011 inresponse to an appeal from the Mayor.He now attends every home game.“ Why did I buy the rugbyteam? Because I thoughtI had to give somethingback to a country thathas been so good to me.”A jar of sandToday, Altrad lives in a grand mansion in the center of thesouthern French city of Montpellier. The red pin he wearsproudly in his lapel symbolizes his membership in theLégion d’Honneur, France’s highest honor, but he keepsa small jar of desert sand as a reminder of his roots. Thecircumstances of his birth mean he can’t be sure in whichyear he was born — he has chosen 1948 — and his children26

Altrad and his wife in Monaco,where he received the EYWorld Entrepreneur Of TheYear 2015 Award in June.Photography Getty Images/Studio Phenixpicked a date out of a hat — 9 March — so he would havea birthday to celebrate.What we do know for certain is that he arrived in Franceon a cold, wet day in November 1969 to study physicsand math at the University of Montpellier. This was afterearning a baccalaureate at the university in Raqqa, thenSyria’s sixth largest city, and winning a scholarship to studyabroad. He could understand less than 10% of what thelecturers said, but his French improved enough for him togo on to study for a PhD in computer science in Paris. In themeantime, he had met and married a French fellow student.He combined his studies with work for first Alcatel andthen Thomson (now Thales), but Altrad was never reallycut out for life as a company man. “To be honest, I didn’tlike being an employee,” he says. “Bedouins are free. Theymove whenever they like. They just fold up their carpet andtheir tent, put it on the back of a camel and move to findanother place where there is grass for the animals to eat.”Exceptional July–December 201527

Profile: Altrad GroupA novel sidelineThere are not manycaptains of industrywho combineentrepreneurialflair with literarytalent, but MohedAltrad is one. He haswritten three highlyregarded books, thebest known of whichis his first, calledsimply Badawi (“Bedouin” in English).Published in 1994 and revised in 2002, itis largely autobiographical. Badawi is muchmore than a straightforward celebrationof rags-to-riches success, though. It alsoexplores the pain of being caught betweentwo very different worlds.The novel was received well by criticsand was awarded a literary prize in2003. Three years ago, it was endorsedby the Academy of Montpellier, whichrecommended that Badawi be put on thecurriculum in regional schools.“It’s a true piece of literature,” saysFrançoise Nyssen, Director of Altrad’spublisher, Actes Sud. “He’s smart enoughto realize that life is about somethingdeeper than just making money andmodest enough to know that literarysuccess can’t be bought.”Altrad says he does most of his writingin the early hours, when he can’t sleep.“Sometimes life is difficult,” he says.“Some people do sports, make love ordrink. I need to write.” He is currentlyworking on his fourth novel.1 francSymbolic amount paid by Mohed Altradand his business partner to acquire lossmakingscaffolding company Mefran — thefoundation on which Altrad Group was built€1.8bAnnual turnover of Altrad Group170Total number of subsidiariesof Altrad Group worldwideHe enjoyed a four-year stint back in the Middle Eastworking for the Abu Dhabi National Oil Company, but whenhis first son was old enough to go to school, his wife wantedthem to return to France. It was while they were stayingat their holiday home in the village of Florensac nearMontpellier that he had the encounter that was to changethe course of his life.“A neighbor asked if I was interested in buying abankrupt scaffolding company,” Altrad recalls. By thistime he was modestly wealthy, having made a quick returnon a portable computer business he had launched with afriend on his return to France. “This was the first time I’dheard the word scaffolding — échafaudage in French — andI was curious. So I went to see this company and fairlyquickly had a good feeling about it. Scaffolding is used insuch a wide range of businesses that I thought, ‘This is ahuge thing,’ so I went for it.”The company, Mefran, had 200 employees and waslosing the equivalent of hundreds of thousands of eurosa year, so Altrad and his then-partner paid a symbolicone franc for its factory and assumed a range of liabilities28

Altrad at his mansionin MontpellierPortrait Laura Stevens/Forbes Collection/Corbis Outlineamounting to around €700,000 (about US$800,000).A rigorous cost-cutting campaign and the extension ofincentive-based pay schemes soon paid off.“The company was profitable at the end of the firstyear,” he says, “and that profit was invested in an affiliatein Italy. With the money generated by the French andItalian companies, we bought another company, and thenanother, and so on. In March this year, we bought ourmain competitor in Europe, Hertel, a Dutch companywith 70 affiliates, so we now have 170.”Company charterIntegrating two large international groups is never easy,but Altrad is better equipped than most, thanks to hisrevolutionary company charter. When he first got involvedin the scaffolding business, he swiftly realized that in amarket involving such a basic core product, the way to gaina competitive advantage was by motivating the workforce.“If your employees are happy, they are more efficient,”he says. “I started writing down my ideas about this 30years back. Then, they were just short notes. These wereused as material for a discussion, and then it becamea small book. Now it’s a proper charter running tohundreds of pages.”Having almost doubled Altrad Group’s revenues throughthe acquisition of Hertel, the CEO now has his sights set onNorth and South America. Since the group’s US operation“ To be honest, I didn’t like beingan employee. Bedouins are free.They move whenever they like.”turns over just US$10m and its presence in South Americais “marginal,” he believes the potential for expansion inthe region is huge.Meanwhile, one of Altrad’s more unusual diversificationshas been his acquisition of the ailing local rugby unionteam, Montpellier Hérault Rugby. “Why did I do it?” hesays. “Because I thought I had to give back somethingto a country that has been so good to me.”Exceptional July–December 2015 29

Analysis: Family business survey7 waysfamily businessescreate lasting successClear succession plans, strong boards, effective conflictresolution: what can all businesses learn from familyfirms? An EY and Kennesaw State University globalsurvey uncovered their secrets.words Katie DolamoreFamily businesses are sourcesof prosperity and stability inthe global economy. Not onlydo these businesses createjobs, they also tend to investin their communities and give back tosociety. A report by EY and Kennesaw StateUniversity, Staying power: how do familybusinesses create lasting success?, featuresdata from a survey of 25 of the largestfamily businesses in the top 21 globalmarkets. It reveals seven key areas familybusinesses focus on to prosper and buildan entrepreneurial legacy. This approachmay be a product of family businesses’unique circumstances, but all companiescan learn from their experiences.So what do family businessesdo differently?1. They embrace succession.“If a family intends the business to remainin family hands, succession must beconsidered a process, not an endpoint,”says Peter Englisch, EY’s Global andEMEIA Family Business Leader. Morethan 87% of survey respondents haveclearly identified who is responsible forsuccession; the training of successors forboth ownership and leadership sometimesstarts in childhood. Attributes such as workethic, leadership and entrepreneurshipare valued most highly by family businessleaders, and prospective successorshave normally had a sound education,gone through personal development andhad some work experience outside thefamily business.2. They welcome female leaders.Family businesses are well ahead of thecurve in working toward gender parity.Companies with women on the boardoutperform those without in terms ofreturn on equity, net income growth andprice-to-book value, and they tend tofocus more sharply on governance andreducing risk. Globally, family businessesaverage five women in the C-suite,and 70% of the world’s largest familybusinesses are considering a womanfor their next CEO. And they are notonly family members: these companiesaveraged 1.14 female family membersin leadership and 3.5 women who arenot family members. With female rolemodels in place, these companies are alsobecoming more attractive workplaces forthe next generation of women: 41% ofthose surveyed report that female familymembers have grown moreinterested in joining the businessin the past three years.3. In terms of governance, they putfamily first.Nearly all (90%) of the world’s largestfamily businesses have a functioningboard of directors, and on most of thoseboards, family members make up themajority. Family members are consideredby far the most trusted advisors for theworld’s largest family businesses, withparents heading the list, followed byspouses. A strong board reduces therisk of internal conflict, inequitableallocation of ownership shares andsuccession woes. “There is much benefitderived by staying close to your family[in business],” says Richard Boyce, EY’sOceania Head of Family Office Services,but he advises companies to “set groundrules to avoid collisions.”4. They concentrate on communicationand conflict resolution.Family businesses report they care deeplyabout one another (81%) and spendtime and effort developing cohesivenessamong family members. Of course, conflict30

is inevitable in business andfamily, but a degree of conflict canbe a good sign, as long as familiesare addressing and resolving the issuesbehind it. Those that do so are consideredhealthier than those that either ignore orsimply do not recognize their conflicts. Oneway to tease out potential conflicts beforecrises hit is by developing a common pointof view, such as a governance documentlike a mission statement.5. They build on trust.The world’s largest family businessesare proud of their companies and theirfamilies — and 76% say they would referto themselves as family businesses. It allcomes back to cohesion: they identifydeeply with the company and see it as anessential part of what defines their family.Their core values are another importantcomponent of that definition; the trustthat employees, customers and othercompanies put in family businesses isvalidated by those values.6. They prepare for cyber risks.The majority (75%) of the familybusinesses EY surveyed say they areconfident or very confident that theirbusinesses are effectively addressingcyber risks. Cybersecurity needs tobe at the top of the agenda for familybusinesses, as they face some particulardangers and increased risks beyondhacking, including personal safety, socialmedia and reputation risks. EY AmericasCybersecurity Leader Bob Sydow pointsout that avoiding cyber breaches is “a newreality of doing business.” However, due toconcentrated ownership, family businessesare able to make and implement decisionsabout such issues quickly.7. They use the family legacy to builda better future.More than 50% of survey respondentsreport a high commitment to corporateMore informationEY will be releasing a series ofin-depth explorations of the keytopics covered by this survey. Thesebriefs will delve more deeply into thedata and will explore the differencesbetween countries, regions anddeveloped and emerging markets.social responsibility (CSR) practices, andan impressive 81% say they are engagingin philanthropy. In addition, 85% have acode of ethics, compared with only 57% ofthe world’s largest companies overall. Plus,they’re not just a public relations exercise;CSR leads to business pride, cohesivenessand better performance. As EY’s GlobalCorporate Sustainability Leader NickyMajor says, “A mindset of shared valuemeans all stakeholders benefit — doing wellby doing good.”Long-term growth potential, a cohesivefamily and a proud legacy are the goals fornearly all family businesses. And learninghow these firms balance stability andgrowth through good times and bad canhelp all companies to flourish.Download the executive summary andfuture reports at ey.com/stayingpower.Visit ey.com/familybusiness for moreon EY’s family business services.Follow us on Twitter: @EY_FamilyBiz,#EYFambizExceptional July–December January–June 2015 2013 31

Profile: LinamarHow to keep thewheels turningLinda Hasenfratz is a passionate advocate for Canadianmanufacturing. The CEO of automotive machinerycompany Linamar tells us what’s needed to succeed inthat sector, the challenges of running a family businessand her vision for the company.words Michelle Morra-Carlisle_ photography Finn O’Hara32

She may have a sunny disposition, but LindaHasenfratz gets fierce when defending herindustry sector. It troubles her that in mediaand business, there is a pervasive negativeview of Canadian manufacturing. “Nothing ismore dangerous than a trend or an average,” she says.She puts pen to paper. “You could draw an upwardline like this, which tells a pretty positive story, and adownward line like this, which tells a negative story. Ifthe average of the two is flat or downward, unfortunatelythat’s what people focus on.”Linamar Corp., based in Guelph, Ontario, falls firmlyinto the positive story camp, and Hasenfratz, its CEO,sees no reason for others in the sector not to do justas well. “If we’re all going down, OK, that’s a problem,”she says. “But if somebody’s going up and somebody’sgoing down, don’t draw the conclusion that Canadianmanufacturing isn’t competitive — because somebodyis pretty darned competitive.”From her early years as a youngscience graduate at the machineryfirm founded by her father, FrankHasenfratz, she aspired to occupy aleadership role. She set out to learnall facets of the business, startingas a machine operator on the shopfloor in 1990 and later movingon to quality control, engineering, production control,accounting and estimating.She became Chief Operating Officer in 1997, whenLinamar was about to reach C$1b in sales and neededa new target. Meanwhile, the company had started togrow beyond Canadian borders and was encounteringchallenges in perpetuating the company culture in plantslocated in different countries, such as Mexico or Hungary.At the time, the executive team included Linda’s father,then CEO, and Linda herself, who had become Presidentin 1999. With a group of their colleagues representingseveral Linamar facilities and disciplines, they identifiedthe company’s core values, set a new goal of C$10b insales and outlined a three-part strategy to diversify,globalize and “green” the business.Vision of the futureThe company was on its way to achieving these loftyobjectives by the time Hasenfratz took over as CEO in2002. To diversify, Linamar first looked at its product lineand later at the markets it served. In 2001 and 2002, itventured beyond automotive when it acquired Skyjack, amanufacturer of self-propelled,scissor-type elevating workplatforms, but there was logicto the purchase.“ We need to focuson the positive –always – to inspiremomentum.”Linamar’s plants now producecomponents for commercial,marine and recreational vehicles.“It’s still metallic and still a vehicle,” Hasenfratz says.“We felt we knew enough about the product that wecould bring something to the table in terms of moreefficient manufacturing.”Products powered by Linamar now include commercial,marine and recreational vehicles. The company that oncespecialized in machining and assembly has branchedout into the areas of forging and casting to gain moreflexibility around product design.With Hasenfratz at the helm, sales have morethan quadrupled to C$4.2b in 2014, and Linamar’sgeography has vastly expanded from 28 facilities in 1999(including the US, Hungary and Mexico) to its current48 manufacturing locations, 5 R&D centers and 15 salesoffices in 14 countries in the Americas, Europe and Asia.These locations are staffed by 20,000 employees.In the midst of this growth, Hasenfratz recognized themarket shift to more fuel-efficient, smaller or alternativelypowered vehicles and is keeping a foothold in theseareas for both environmentaland competitive reasons. Forexample, with more customerswanting V6 or inline-four engines,Linamar is spending sales pursuitand product development timeprimarily on these, rather thanV8s or V10s. Linamar technologyis also used in the energy market for power-generationproducts, wind turbine components and more. “These arecompletely different markets that also use engines andtransmissions,” Hasenfratz says. “At the top of a windmillis essentially a transmission, with many of the same partsas in automotive vehicles, just a lot bigger.”The benefits of familyFamily heritage is an important part of the company’sculture and brand. That aspect of the business appeals tolong-term investors and employees, who feel like they’repart of a family. When Linamar set out to acquire a coupleof family companies in Europe, its family heritageExceptional July–December 201533

Profile: Linamarmattered to the sellers. “I actually think our beinga family-influenced company was instrumental in thoseacquisitions,” Hasenfratz says. “Those companies hadbeen in family hands for 150 years and cared aboutwhere they ended up.”One drawback Hasenfratz has tackled as a familybusiness leader is a common prejudice that thesecond generation isn’t always up to the task. Whenshe encountered people who assumed being Frank’sdaughter was her main job credential, it only made herwork harder. She worked long hours like anyone else,earned an executive MBA in the late 1990s and hasnever stopped seeking opportunities to learn.She’s also developed her own style of leadershipfrom qualities she has admired in others — an eye foropportunity, communication and negotiation skills,creativity, common sense — combined with her ownnatural talent for analysis and critical thinking.An example of her methodical approach is her team’sredefinition of a spreadsheet exercise every plant hadlong used to quote on projects. One of several companywidesystems that Hasenfratz’s team developed, thespreadsheet evolved into a two-part exercise that reviewsboth the technical process and the expected financialreturn. “To me, this is a really important part of oursuccess,” she says. “We’re making sure that we havethe right equipment for the right operation and that wehave optimized that, as well as the financial return, andunderstood the risks.”Linamar has 23 plants inGuelph, Ontario, alone, withfacilities in 13 other countries.Hasenfratz is equallyadept at operating asan engaged leader,contributing to a companyculture where even largescaleexpansion does notcompromise the familyatmosphere. Of her manyCEO duties, one of herfavorites is getting out andvisiting Linamar plants.Rather than having onegiant headquarters inGuelph, Linamar has 23plants there. Hasenfratzsays keeping each plantat a maximum of 500employees brings moreof a team focus andbetter interaction.The large andthe small of itC$4.2bLinamar’s 2014 sales — fourtimes the figure when LindaHasenfratz became CEO500The maximum numberof employees at each ofLinamar’s plantsLooking outwardMuch of her learning andnetworking takes placeoutside of the company.Hasenfratz sits on twopublic company boards:CIBC, one of Canada’slargest banks, and theFrench-based auto partscompany Faurecia, which she says helpedher tremendously when doing business in Europe.She also devotes time to community engagement. Amongother commitments, she is on the advisory board of CatalystCanada, an organization that promotes women in business.Success, in her view, doesn’t come all by itself. It issomething she has planned, worked toward and madehappen. And while she does admit to having received a gift,it’s one she has never taken for granted: throughout hercareer, Hasenfratz was always given the opportunity to takethe next step. “But I never expected a job to be handed tome,” she says. “My dad and I were always conscious thatit wouldn’t help us to just blindly promote me if I wasn’tinterested or capable.”Before long, Hasenfratzmight have a chance topay it forward. She lightsup when asked aboutsuccession, saying,“It would be fantastic tokeep it in the family if mykids were so inclined.”So far, they do exhibitentrepreneurial tendencies.“ If your business isfalling off, it meansyou’ve stoppedbeing innovative.”34

One daughter is studying engineering and business, andanother will join the same joint program in September.Focus on successGetting back to that statistical graph on Canadianmanufacturing, what about the line that curveddownward? Surely, the statistics are partly correct andsome Canadian manufacturers are struggling? Hasenfratzaddresses the question matter-of-factly: “If your businessis falling off, it means you’ve stopped being competitiveand innovative. You’ve stopped focusing on efficiency andlooking for ways to improve.”This is not said disparagingly: in Hasenfratz, Canada’smanufacturing sector has a loyal, prolific contributor. Sheconsiders her industry to be the backbone of a strongeconomy, because for every manufacturing job, severaljobs are created in other sectors.Linamar itself has won a significant amount of newwork for its Canadian plants in the past 18 months.Over the next several years, it will launch programsrepresenting about C$1b per year of sales in theseplants. The company has invested more than C$600m inits Canadian plants in the past five years and will investalmost C$500m more in the next five.So never mind the gloomy view of Canadianmanufacturing. “Let’s turn it around,” Hasenfratz says.“Isn’t it better to talk about the success stories andinspire people to say, ‘I’m going to open a manufacturingbusiness right here in Ontario, because look at how wellthese companies are doing?’ We need to focus on thepositive — always — to inspire momentum.”ViewpointCanadianmanufacturersinnovate to thriveElizabeth Maccabe, Partner, Ernst & Young LLP in CanadaIt’s no secret that the Canadianmanufacturing sector has faced enormouschallenges over the past 10 years, especiallyin the automotive industry. Between 2008and 2010, the automotive crisis led tosignificant instability in the market, andmany jobs were lost as a result.Canadian manufacturers responded to the challenges withcreativity and innovation. By supporting and encouragingcreative thinking in every employee — from the shop floorto engineering to payroll — many Canadian manufacturersrebounded from the crisis. And some came through evenstronger than before.We often expect innovation and entrepreneurial thinkingto come from the C-suite, but that’s not always the case.Who better to identify ways to improve the tasks andprocesses than the people performing them every day?Employees should be encouraged to ask better questionsand bring their ideas forward. With their help, companiescan improve customer service, refine manufacturingprocesses and ensure that the organizational cultureencourages high performance. In turn, that innovativethinking is considered valuable and is rewarded.Leaders, too, have to embody the entrepreneurial spiritand question the status quo. In response to their employees’ideas, they should consider “why not?” and embraceopportunities to introduce change. That “why not” thinkingshould also apply to exploring new markets. While there arerisks, expanding to other countries is a must in today’s globaleconomy. Entrepreneurial leaders need to learn to managethose risks and move forward.It’s this type of bold thinking that has allowed manyCanadian companies to take a significant place on theglobal stage and cement a legacy of a nimble and globallycompetitive Canadian manufacturing industry.Canadians are known for their hard work andentrepreneurial spirit. We’re now also becoming known to theworld as legacy builders — for our groundbreaking ideas andrelentless passion for innovation.Manufacturing isn’t the only industry where we stand out,and we will continue to encourage creative growth initiativesacross sectors. Canada’s leaders and entrepreneurs havemuch more in store to share with the world.More informationTo find out more about how EY can help entrepreneurs inCanada, visit ey.ca/entrepreneurs.Exceptional July–December 201535

Profile: Warby Parker36

VisionquestDave Gilboa and Neil Blumenthal, cofoundersand co-CEOs of Warby Parker, aren’t justchanging the way glasses are sold. They’redisrupting retail for everyone.words Emma Johnson_ portraits Mark HartmanNeil Blumenthal and Dave Gilboain Warby Parker’s Greene Streetstore in New York CityWhat do Jack Kerouac,unicorns and a yellowschool bus have incommon? They’re allfacets of Warby Parker, the eyewear brandbeloved by celebrities, stylists, bargainhunters and analysts alike.It’s built up such a diverse fan base bybeing that rarest of companies: a five-yearoldinternet brand that disrupted a globalindustry; achieved a reported US$1.2bvaluation figure, making it, in tech-industryparlance, a “unicorn”; and reinventedconsumers’ relationship with retail.“Customers don’t see the world as onlineor offline,” says cofounder and co-CEODave Gilboa. “Retail is no longer blackand white.”Gilboa and Neil Blumenthal met at theUniversity of Pennsylvania’s WhartonSchool. Blumenthal had been director ofVisionSpring, a nonprofit that trains lowincomepeople in third-world countries tosell eyeglasses in their local communitiesat reasonable prices, allowing them toearn a living and providing much-neededaffordable eyewear to local people.The pair got together with fellowstudents Jeff Raider and Andy Hunt.Before starting at Wharton, Gilboa hadlost his glasses on a backpacking trip,and the cost of replacing them — typicallyhundreds of dollars, even before you addthe price of lenses — led him to spendthe first semester of grad school withoutglasses. The four friends felt this had a lotto do with the fact that the global eyewearindustry is dominated by one player:Luxottica, the Italian owner of brands fromLensCrafters to Ray-Ban.The nascent Warby Parker teamenvisioned a company that would offeraffordable yet fashionable eyewear. Buthow could an upstart compete with thebrand power and financial clout of a longestablishedglobal company?They decided to rethink how an eyewearbusiness could work: they wouldExceptional July–December 201537

Profile: Warby ParkerWhy a purpose beyond profit mattersJust one year after its launch, WarbyParker became one of only 1,000companies globally to be granted B Corpcertification from the nonprofit B Lab. Thissignals that the company meets toughstandards on social and environmentalperformance, accountability andtransparency. Warby Parker’s Dave Gilboaand Neil Blumenthal say they didn’t set outto qualify for the designation, which is alengthy self-evaluating process that mustbe repeated every two years.Instead, they set out to build a company“where we never wanted to roll over andhit the snooze button in the morning,”Blumenthal says. And part of that equationwas to “have a positive impact on everyperson we interacted with. If we did that,then we knew we were doing good.”Warby Parker qualified effortlessly.While the B Corp designation does haveimage benefits, running a business in linewith ethical practices is also increasinglyimportant when trying to attract top talent,particularly among socially consciousmillennials. Recent research by consultancyGlobal Tolerance found 62% of those bornbetween 1981 and 1996 want to work fora company that makes a positive impact —and many would do it at the expense of ahigher salary.“Our social mission gives us a muchbigger impact on everyone we work with,”adds Gilboa. “Whether it’s the nonprofitswe work with or our supply chain andaccounting teams, they can feel that theimpact we have on the world is muchbroader than just making glasses.”Photography Esther HavensWarby Parker’s tightly controlledsupply chain allows it to chargeless than US$100 for its glasses.cut out the middleman and unnecessary markups bydesigning the frames in-house and sourcing raw materialsthemselves. They’d sell online directly to customers withvalid prescriptions — a channel that accounted for just 1% ofglobal eyewear sales in 2010. All this meant Warby Parkerframes and lenses could be sold at a decidedly modestprice: starting at US$95 all in.The next challenge was to appeal to a mass market whilemaintaining the company’s design integrity. The founders,who initially went without salaries, decided to invest aportion of their budget in professional public relations. Thisdecision landed them some coveted editorial coverage inVogue and GQ.“That was important, because we are a fashion product,and those two publications gave us instant credibility,”says Blumenthal. Warby Parker ended up meeting its firstyearsales goal in three weeks, sold out its inventory andamassed a 20,000-person waitlist.Despite being business school graduates, Gilboa andBlumenthal took it upon themselves to design the firstpair of glasses. “We don’t have a background in design,but we also don’t have a background in branding or retail,”Blumenthal says. “We put ourselves in our customers’shoes and asked: ‘What are the glasses we want to wear?’38

Warby Parker began as anonline-only company but hassince opened about a dozenbrick-and-mortar stores in the US.‘What price do we want to pay?’ We also wanted freeshipping and returns.”Gilboa adds, “We’ve designed the company withempathy: empathy for what all our stakeholders wantand need — customers, employees and vendors.”This philosophy has guided the company, which is stillprivate, from its desktop digital roots to its current multichanneloperation. There are now 12 retail stores in theUS, a figure that is set to grow by the end of this year.Gilboa and Blumenthal say they do have their eyes on theglobal market, but they’re concentrating on growing in theUS and Canada first.Customer experiencesCustomer-centricity is playing a key role in Warby Parker’sgrowth. A hugely popular website feature is the Home Try-On, through which customers select five frames, receivethem free of charge and have five days to pose in frontof the mirror and pick their favorite before sending themback, again with free shipping.Also critical to the customer experience is the everevolving,custom point-of-sale system that stores all ofa customer’s interactions with the company centrally —they call it the Point of Everything, or POE for short.“ Customers don’tsee the world asonline or offline.Retail is no longerblack and white.”Gilboa points out that90% of Warby Parker’scustomers visit the websitebefore transacting ina store. Though mostcustomers buy in the store,some prefer to seek theopinion of partners andfriends and buy online later.The POE system accommodates all these habits. Whentrying on glasses, customers can even choose to havea picture taken that is then emailed to them. The fullyintegrated database logs phone calls, emails, productsviewed and prescription information and is accessible toWarby Parker retail advisors and Customer Experienceassociates — allowing Warby Parker to provide seamlesssales experiences from online through in-store.It’s all very high-tech, but the brand has remained loyalto its old-school literary roots: its name comes from twocharacters, Warby Pepper and Zagg Parker, in one of JackKerouac’s journals. To this day, all new employees get acopy of Kerouac’s The Dharma Bums.Over its five-year history, the company hasexperimented with retail concepts playing on thisExceptional July–December 201539

Profile: Warby Parkerliterary theme, including a pop-up, 1960s-inspirednewsstand dubbed the Readery in New York’s trendyStandard Hotel, where guests could try on and buyWarby Parker sunglasses. Three years ago, the WarbyParker Class Trip dispatched a vintage yellow school bustricked out to look like a professor’s library. The Class Triptraveled to nine cities, where it invited video submissionsfrom locals who could win free eyewear and party on thebus with their friends.Photograph Esther HavensOn their three-year anniversary,employees have the opportunity totravel together and see the work oftheir nonprofit partners firsthand.“ We were motivatedto build anorganization howwe thought acompany shouldbe built.”Brand beliefStep into Warby Parker’s flagship store in New York’sSoHo, and you’re met with the essence of the company:friendly employees and a carefully edited selection ofproducts in an airy, brightly lit space that is both classicand contemporary — just like the eyewear on display. Booksfrom small presses are for sale on library shelves, completewith a rolling ladder.This strong, quirky brand identity isn’t only forcustomers. Warby Parker’s 500 employees enjoy perkslike flexible vacation time, themed lunch-and-learns andcross-training between departments.And at the heart of Warby Parker is acommitment to social good. The framesare manufactured in China to keep costslow, but the company works with Verité,a nonprofit labor-rights organization, toassure that those factories support fairand safe working conditions.The most notable of thecompany’s social efforts isits Buy a Pair, Give a Pairprogram. Every month,Warby Parker tallies upthe number of eyeglasses it has sold andmakes a donation to its nonprofit partners(including VisionSpring and CommunityEnterprise Solutions, among others) thatis equivalent to the cost of sourcing thesame number of glasses.In addition, on their three-yearanniversary, employees are offered theopportunity to take a trip together tosee the work of Warby Parker’s nonprofitpartners firsthand. “We’ve had a strong40

ViewpointBehind the unicornphenomenonKenneth Egan, Assurance Partner, Ernst & Young LLPsocial mission from day one,” Blumenthal says. “We weremotivated to build an organization how we thought acompany should be built.”The company’s unique operational approach is evidentright at the very top, with Blumenthal and Gilboasharing the role of CEO. To manage this effectively,they established a structure that maximizes eachother’s strengths and gives the rest of the team a clearunderstanding of how reporting should work.And while Raider and Hunt may have gone on topastures new — as cofounder of men’s grooming brandHarry’s and cofounder of technology venture capital fundElephant, respectively — they remain on the board.At the beginning of their journey, the four cofounderspromised to always remain friends, which they have: theyrecently took a Caribbean vacation together with theirsignificant others.In the first couple of years, they all met monthly andtook turns scrutinizing each other’s performance, whethergood, bad or ugly. “That way, you don’t send a 10-pageemail at 2:00 a.m. when you’re upset and want to stranglethe other person,” Blumenthal says.Today, he and Gilboa insist that they never make amajor decision unless they are aligned.“So few people can relate to what you go throughbuilding a company,” Gilboa says. “It can be a lonelyjourney to be an entrepreneur. Working with yourfriend is so much more fun.”A unicorn is a company with an exit orprivate valuation of more than US$1b.In January, Forbes estimated the numberof unicorns at 80, and that numberis growing.What do these unicorns have incommon? They were started byentrepreneurs with vision and enoughaudacity to think they could either disrupt complacentindustries or create entirely new ones.There isn’t one specific driver of the phenomenon.Technological advances are helping create companiesthat couldn’t have existed 10 years ago, and this type ofinnovation appeals to consumers. Investors are interestedin businesses that have created a lot of value in a relativelyshort period of time. These companies are taking longer tostart the process of going public, if they go public at all, soinvestors are making early investments instead of waiting tobuy shares.The unicorn designation does have many upsides. It’san attention-grabbing status that attracts customers andbusiness partners. Founders, early investors and earlyemployees have the potential to do very well financially, andpeople love working for cutting-edge companies.There are downsides too. Investors in unicorns are lookingfor a 2x to 3x return on exit. In a private sale, the numberof suitors is limited, as there are few companies that canmake a US$2b+ acquisition. If the company is going togo public, bankers and investors will want to see a path toprofitability. And in some cases, the cash windfall from thesehigh valuations can contribute to a lack of focus on operatingexpenses and cash flow. This could hurt them if the economyturns against them.Another consideration is attracting and retaining the righttalent. This is critical for any company, but especially foryoung ones because they operate in such rapidly changingenvironments. They must continue to grow, or employees’upside from an exit could be limited. Preferred shareholdershave liquidation preferences and will get paid before commonshareholders, including employees, so if a company sells forless than its valuation in the last round, employees with stockoptions or stock could be left out in the cold.In spite of the current proliferation of unicorns, this is still ahard status to achieve. It takes timing, the right investors andthe ability to execute a well-defined plan. Not all will succeed,and only time will tell which will.More informationTo watch Jeff Grabow, EY’s US Venture Capital Leader, talkingabout Angels, Unicorns and the Future of US Venture Capital,go to bitly.com/unicornvc.Exceptional July–December 201541

Analysis: EntrepreneurshipEntrepreneurshiprisingHigh-impact entrepreneurship has become an essentialdriver of economic expansion in rapid-growth markets,while the nature of entrepreneurs themselves, and theenterprises they start, is changing. We look at the latesttrends in entrepreneurship around the world.words Uschi Schreiber, Global Vice Chair — Markets, and Chair — Global Accounts Committee, EYWhere are they, and why?Distribution: from necessity to opportunityExpect to see more innovative start-ups in rapid-growth markets(RGMs) driven by opportunity rather than necessity. 1NorthAmerica11%EuropeanUnion8%Funding: alternatives aboundNew funding options available include:crowdfunding and microfinance; creditguarantee schemes; government start-upprograms; corporate venturing. 2x19.2Predicted growth in thecrowdfunding marketfor developing countriesby 202596US$b1008060LatinAmerica19%Sub-SaharanAfrica27%Asia-Pacific12%Average total early-stage entrepreneurial activity rate in 201352013 20254020042

Sources: 1, 6: José Ernesto Amorós and Niels Bosma, Global Entrepreneurship Monitor: 2013 Global Report, Babson College, Universidad del Desarrollo, and Universiti Tun Abdul Razak, 2014.2: Crowdfunding’s Potential for the Developing World, The World Bank, 2013. 3: Adapting and evolving: Global venture capital insights and trends 2014, EY, 2014. 4: Global EntrepreneurshipMonitor: 2012 Women’s Report, Babson College, Universidad del Desarrollo, Universiti Tun Abdul Razak and London Business School 2013. 5: World BankSupport: entrepreneurial culture neededFive pillars in the ideal entrepreneurial environment5•Access to funding• Entrepreneurial culture• Supportive regulatoryand tax regimesThe developedeconomies are aheadof emerging marketsin these areas, butRGMs are beginning+0.9%to address this.in amount invested(16% of all jobs). 5 of 25 and 44.Age: bright sparksThe number of young entrepreneurs is growing. 6In the US, womenownedSMEs are25–34-Causes?expanding atyear-oldsmore than doublethe rate of all other firms.show the highest ratesof entrepreneurialactivity.They are contributing nearlyUS$3t to the US$16t USeconomy (19%) and directlydelivering 23 million jobsNearly 50% of theworld’s entrepreneursare between the ages• Educational systems thatsupport entrepreneurialmindsets• A coordinated approach thatlinks the public, private andvoluntary sectorsWhat do they look like?Gender balance: the female factorThe number of female-run SMEs is growing globally. 4How are they doing?Disruptive influences: making an impactIn mature markets, numerous start–ups arescaling and taking off, disrupting industriesor creating new ones — think Google,Facebook, Virgin Airlines and GoPro.DevelopedEmergingEY World Entrepreneur Of The Year2015 contenders employ more than334,000 people around the world.revenuegrowth over a threeyearperiod 42%Combined(2011–14)48%Increased number ofworkforce between2011 and 201412%Average annualrevenue growth ratedeliveredThe US leads the worldin venture capitalinvested, but thelandscape is relativelyflat compared withdeveloping countrieslike India.US$33b in invested capital in 2013-4.6%in deals• Continuing high rates ofyouth unemployment• Decaying social contractbetween employers andemployees• Changing work andlifestyle preferences• The boom inentrepreneurial educationRGMs are now startingto see high-impactentrepreneurs dueto growing consumerpower and opportunitiesfor innovation.More informationTo read more about entrepreneurshiprising and the five other megatrendsfor 2015 that EY has identified, go toey.com/megatrends.Exceptional July–December 201543

Profile: Landa GroupBorn in a panicAfter he invented digital commercial printing and sold his companyto HP, Benny Landa could have retired to a beach anywhere in theworld. But his passion for creation wouldn’t stay quiet, and he’sset on revolutionizing the printing world once again.words Nathan Jeffay_ portraits Rami ZarnegarFor Israeli start-up entrepreneurs dreamingof invention followed by a high-value exit,Benny Landa is an icon. More than a decadebefore Waze set a record with its billion-dollarsale to Google, Landa stunned his nationby selling his company to Hewlett-Packardfor US$830m.In the printing world, he’s just as much of a celebrity.Still, those from other sectors sometimes react withbemusement when he tells them he’s in printing. “You’re insteam engines,” says Landa, paraphrasing how they reactto him. ”Haven’t you heard of the iPad? Printing is dead;it’s an old thing; why would anyone be in printing?”Landa says these naysayers don’t realize the globalprinting market is worth US$900b a year, and it isn’tabout to be usurped by screens. Packaging, he points out,accounts for almost half of all printing.There’s no doubt the sector has been good to thisenergetic innovator. He invented the world’s first colordigital printing press, the E-Print 1000, turning hiscompany at the time, Indigo, into the prize HP snappedup in 2002.Now he plans to change the face of the printingindustry once more. He wants to usher in an era whenyour magazine will contain articles personalized to yourinterests, when catalog shoppers will only see clothes thatsuit them, and when every neighborhood café will have itscups and mineral water bottles branded with its own logo.The “holy grail” of the printing industry, he says, isan EPID press that can rival traditional presses. EPID isshorthand for “every page is different,” and it’s the majorbenefit of digital printing, which is used for producingitems like custom photo books and personalized directmarketing. Digital presses hit the market when Landalaunched the E-Print 1000 — but 22 years later, they arestill significantly slower and print on smaller sheets thantraditional presses. Thus, digital printing is more expensivefor all but the shortest of jobs. Landa plans to change thiswith his next revolution in digital printing: Nanography(see panel, opposite).In 2012, he took this technology to a trade show inGermany, showed seven prototype presses and left withUS$1b worth of orders. Today, the first of his US$2.5mplusmachines whirs away in a facility near his office,undergoing final tweaks, and six more are in production,ready for beta shipment by the end of 2015.“For the first time, you can print digitally at the speed oftraditional printing, at the quality of traditional and at thecost of traditional,” he says.It hasn’t all been smooth sailing, however, withsignificant delays in preparing the presses, which wereoriginally promised for delivery in early 2013. But neworders more than replaced the cancellations, and aninjection of US$135m in 2014 by the German specialtychemicals group ALTANA, in return for an unspecified“minority” holding in Landa Digital Printing, is keepingthe company’s finances intact. Famously reluctant to takeon investors, Landa says he is excited about ALTANAbecause it is a strategic partner — supplying raw materials— without also being a competitor.A natural inventorLanda has inventing in his blood. After spending his firstyears in a refugee camp in Germany with his Holocaustsurvivorparents, he moved with his family to Canada,where he stayed until he emigrated to Israel in 1974.44

The NanographydifferenceThe key to Nanography, BennyLanda’s new printing technology, isthat it uses special “nanopigmentcolorants” formed from tiny,uniformly sized particles that deliververy pure color. Instead of formingthe image on the page, Nanographycreates it on a “blanket”in the pressand transfers it to the paper as adry film image.Printing professionals will bedelighted, Landa says, because nocolor permeates the page, cuttingdown on ink wastage and eliminatingbleed, as well as speeding up theprocess. Plus, less ink meansless cost — and less harm to theenvironment.Nanography’s green credentialsgo beyond the quantity of ink used.Many printing products currently inuse contain VOCs (volatile organiccompounds), which are believedto pose health and environmentalrisks, but Nanography uses VOCfreewater-based ink.Ink will be sent to customers asa concentrate to be simply mixedwith local tap water. This willkeep haulage costs in check. Inkcontainers will also be recyclable.While Landa expects traditionalprinting to continue, he thinksNanography will allow digital to makea real market impact. And this willproduce additional green benefits, hesays, such as reducing the number ofprinting plates being made.Exceptional July–December 201545

Profile: Landa GroupWhat came beforeNanography?A brief history of printing• Pre-3000 BC: The ancientMesopotamians use round seals toroll impressions into clay tablets.• Early 2nd century AD: The oldestsurviving example of block printing,used to print words and images ontextiles, is from China in 220.• 1430s: German silversmith JohannesGutenberg creates the first Europeanpress to use moveable type.• 1796: Lithography is invented byBavarian author Aloys Senefelder.This chemical-based method is stillused today.He is convinced his father, a tinkerer who built his ownfilmless machine for taking passport photos, could havebeen a prominent inventor had he not been so poor.From that harrowing history came an educational fundrun by Landa and his wife, Patsy, that gives opportunities toothers of “privileged minds and underprivileged means.” Hehas so far spent more than US$50m to help both Jews andArabs with limited means to study in Israel’s universities.“I grew up poor, and that never leaves you,” he says.Landa delights in the out-of-the-box thinking of Israeliscientists — he employs 200 researchers at his facility inthe Rehovot Science Park — but admits to the challengeof managing many of them due to the “direct correlation”between intelligence and idiosyncrasies. The key, he says,is not trying to tackle their quirks, but building on theirstrengths. His self-styled “egalitarian capitalism” determineshis treatment of non-scientist staff, including janitors:they’re always direct employees, never contractors, and theyand their spouses/partners are included in company events,including some foreign junkets.Energy out of thin airLanda has no financial need to continue innovating, but hedoesn’t plan to stop. The Landa Group now works in a rangeof areas, from hair products to nano-metallic materials forprinted electronics.As if revolutionizing the printing market weren’t enough,Landa is also working on a project to conjure energy out ofthin air. Power stations could start shutting their doors andclimate change could be stopped in its tracks. It sounds likescience fiction, simply too good to be true. But when itsinventor holds 800 patents, you have to at least hear him out.“We’re surrounded by low-temperature heat in the air,”• 1875: Robert Barclay invents offsetprinting on tin in England.• 1901: Independently, Ira WashingtonRubel invents offset printing on paperin the US.• 1993: Benny Landa invents the firstdigital printing press, the E-Print 1000.Photography Corbis/Mondadori Press / Bloomberg/Getty ImagesAfter demonstrating hisNanography process at a tradeshow in Germany in 2012,Benny Landa left with US$1bworth of orders. Each machinecosts more than US$2.5m.46

Landa says excitedly. “If you could convert a tiny fraction ofthat low-temperature heat into useful electricity, you couldpower cars, mobile devices, homes — you could save theplanet from global warming.” He estimates his ambitiousproject, now in its 14th year, will reach fruition in a relativelyshort time frame: 5 to 10 years.Thermal energy is something Landa discusses with asmuch enthusiasm as he talks about any of his many worksin-progress.“When people have a certain drive, a passion forsomething that could be as an artist or a technologist, youhave ideas and you have to see them through,” he says. “Youhave to see them work.”But his desire to achieve goes deeper than this. “I was bornin a panic,” he says, referring to the fact that his mother gavebirth to him as a displaced person en route from Poland to“ For the first time, youcan print digitally at thespeed, quality and costof traditional printing.”a refugee camp near Munich after World War II. “My life is apanic, because the clock is ticking and I need to get so muchmore done than the time permits. I feel there’s so much I haveto do and no time to do it.” Even now, he works 15-hour days.“When you have a background like mine that shows howfragile life is, maybe this is a factor in trying to squeeze somuch out of my time,” he says. “If you work 15 hours aday instead of 10, you squeeze a lifetime-and-a-half outof one lifetime.”ViewpointThe valueof flexibilityRonen Barel, Chairman, EY IsraelBack in January 2011, people were lookingquizzically at EY Israel. What, they asked,did we want with a company of hackers?We had just acquired the consultancyarm of Hacktics, a company set up in 2004to hack systems in order to find and plugsecurity breaches.The timing was certainly right. Thiswas when non-IT specialists were startingto understand, in growing numbers, that cybersecurity shouldbe a major concern for everyone. The match of an establishedconsulting firm and people with cutting-edge hacking abilities wasa great one. At the time, we had 12 hackers. Today, we have 50.Flexibility is one of the hallmark characteristics of Israelisociety and business. This is just one example of the value offlexibility in understanding the market, thinking laterally aboutclients’ and customers’ expanding needs, and if necessary,moving to where the market is.There’s an acute awareness across the Israeli population thatthis young state has enjoyed economic success by embracingchange. A country built on agriculture and famous for its Jaffaoranges has become known as the “start-up nation” and hometo “Silicon Wadi.” The Israeli technology sector is now hardat work on challenges relevant to new media, social media,cybersecurity and crowdsourcing.Where Israelis can do better — and this is a lesson forentrepreneurs and business leaders worldwide — is inrecognizing that there’s room for innovation everywhere andthat adapting doesn’t have to mean abandoning old fields tochase after opportunities in sexy new sectors.There’s often a sense that it’s an either/or equation: stayin long-established sectors or adapt to the market by gettingcreative in new fields. When large Israeli companies weresurveyed, a staggering 57% of respondents from “basic”industries had no R&D division, while a quarter had no staffdevoted to development and one in five simply didn’t invest inR&D. Admittedly, this survey — conducted by academics andfocused mostly on companies with more than US$10m in sales —was conducted eight years ago, but sadly, no major changeshave taken place since then.However, when Israeli companies and entrepreneurs dodecide to shake up old sectors, the results can be dazzling,whether it’s an update to the printing press or the massproduction of “predator” insects that gobble up pests andmake farming both organic and efficient.As consumer and client expectations change with increasingrapidity, flexibility should make its way on to every company’s“to do” list.More informationRead about Journey 2015, Israel’s most prestigious annualbusiness conference, at journey.evolero.com/2015.Exceptional July–December 201547

Profile: 3D SystemsFrom communismto the cutting edgeBorn under Chairman Mao’s regime, Ping Fu used her intelligenceand perseverance to build a new life in the US as a successfulentrepreneur at the vanguard of the 3D printing sector.words Christa Gala_ photography Bryan Regan48

When Ping Fu first saw ChuckHull, the inventor of 3D printingand founder of 3D Systems,demonstrating his invention,inspiration struck hard.“That was the moment I found my calling,” saysFu, who was then working at the National Center forSupercomputing Applications (NCSA). “I never thoughtI was going to be an entrepreneur, but when I saw Chuckdemonstrating a 3D printer I was amazed, and also knewthere was a lot of opportunity to improve the softwareto generate prints from a 3D model. I thought, ‘That’s it.That’s what I’m going to do.’ ”In 1997, Fu cofounded Geomagic to bring to life herinnovative 3D imaging and 3D printing software, whichis now used to design state-of-the art prosthetics, heartvalves, hearing aids, turbine machinery and more. And in2013, she sold Geomagic to 3D Systems, headquarteredin Rock Hill, South Carolina. Today she serves as ChiefEntrepreneur Officer, cultivating new innovations for thefuture of 3D printing.“One of the reasons I sold Geomagic to 3D Systems wasbecause I feel like it was Chuck Hull who inspired me in thefirst place to start my business,” Fu says.American dreamAt first glance, this could be the archetypal entrepreneurialstory: inspiration, innovation, hard work and a successfulexit. But there’s more to it than that — and the story starts56 years ago in communist China.Fu was born in Nanjing but grew up in Shanghai afterher parents asked her aunt and uncle to raise her. It was ahappy and stable childhood. But in 1966, when she was 8,her cousins and uncle were sent away for “re-education” bythe Communist Party.The Red Guard next stated that Fu belonged in Nanjing.She was sent there by herself and made it just in time tosee her parents apprehended and sent off for re-education,too. The only family member left in Nanjing was her 4-yearoldsister, Hong, whom her parents had raised themselves.Fu barely knew her.For a decade, Fu and her sister lived alone in a collegedormitory, with Fu, starting at age 10, working in afactory as part of her education by workers. It latersparked her interest in the “mass customization” that 3Dprinting provides: the ability to make large quantities ofpersonalized products.After Chairman Mao died, Fu went to Suzhou Universityto study literature, but her research about China’s one-childpolicy proved controversial. She was given a choice: leaveor face possible imprisonment or hard labor. Her family,released after Mao’s death, found a place for her at theUniversity of New Mexico.“When I came to the United States, I didn’t speak muchEnglish,” says Fu. “I couldn’t continue my literature, so I went tostudy computer science. At the time, I told myself that insteadof writing essays, I was writing the future not yet imagined.”It was the beginning of her American dream.She ended up earning two degrees in computer scienceand was hired by the NCSA, where she was part of the teamthat wrote and released the first multimedia web browser,Mosaic. In 1994, the Mosaic team left the University ofIllinois at Urbana-Champaign to start a company calledNetscape that went public in 1995, earning a market valueof US$2.9b at the end of its first day.Observing her success, people kept asking Fu ifshe planned to start her own company. The answer“ Instead of writing essays,I was writing the futurenot yet imagined.”was always no. Then came her eureka moment, andeverything changed.She founded Geomagic with her then-husband, HerbertEdelsbrunner, and the two set to work on Geomagic’sflagship product: 3D imaging software that would enablecustomized 3D printing.Although a computer scientist at heart, Fu took onthe role of CEO in Geomagic’s early days. But she didn’tconform to the stereotypical image of a business leader —and not just because she is a Chinese-American womanin a sector dominated by white men.For one thing, she is happy to admit she doesn’t knoweverything. That candor saved Geomagic in 2001 afterthe CEO she’d hired as her successor two years earlierlost US$4m and left her with just three months’ worth ofoperating capital. “I was a learning CEO at that point, soI needed collective wisdom,” she says.She called a staff meeting and said, “I may have strongopinions, but I’m going to try to be clear, rather than right,and I need you all to help me. Because with your help, wewill make more right decisions than wrong ones, and wewill survive.” Every single person agreed to stay with Fuand Geomagic, even though the company’s future wasfar from certain.High value, high volumeFrom 2001 to 2003, sales tripled under her leadership.“The strategy was to look for high-value and high-volumeindustries where people will pay thousands of dollars forone product, not a few hundred,” says Fu. “There were notvery many. Dental and medical was one. Turbine machinerywas one. We zoomed into those markets, and itExceptional July–December 2015 49

Profile: 3D Systemsworked. I didn’t need a very large sales team to sell[our products], and I didn’t have to sell many to makeenough money to support the company.”Geomagic’s success caught the eye of 3D Systems,which was cofounded by Chuck Hull, the man whoinspired Fu all those years ago. There began a decade ofcollaboration, culminating in Geomagic’s sale in 2013.For Fu, it was the right time to sell and join 3D Systems. “Iwas able to come to this company and not only contributebut learn a whole lot of new things I did not know before,”she says. “I didn’t know hardware, I didn’t know material,I didn’t know services, I didn’t know a lot of things. That’ssomething I really love: to continue learning.“Climbing is the metaphor of success, but I think it’s thejourney, not the peak, that’s interesting,” she adds. “Inbusiness, people often ask where you want to be in fiveyears: ‘What’s your exit strategy?’ But it’s not aboutwhere I want to be — it’s about how I travel.”It’s an attitude particularly suited to science generallyand to the 3D printing industry specifically, which started30 years ago and continues to expand exponentially withnew technologies, materials and applications. Today,3D Systems has seven core print technologies and morethan 120 materials, ranging from plastics and metals toceramics and even sugar. The applications for 3D printingare endless — from engine prototypes to flight-readyaerospace parts, from a surgical trial run to medicalimplants, from a designer dress to intricate confections.Transformational powerThe transformational power of 3D printing and the impacton lives is perhaps most evident in health care. 3D Systemsis shaping the industry with an end-to-end digital thread,from surgical simulation and training to virtual surgicalplanning and 3D printing of anatomical models, surgicalinstruments, implants and medical devices.Fu describes one example of using 3D printing andscanning to make devices like scoliosis braces morecomfortable and attractive. The technology in prostheticsdevelopment and production is evolving, too; advancedscanning is improving the final printed product. “Thepatient’s good leg is scanned and then a mirror-imageis created, so the prosthetic can be printed in theindividual’s own shape and symmetry,” Fu says. “Customdesigns can also be created, providing a prosthetic withfunctionality, symmetry and beauty.”Another frontier is food: printing a customizable bar ofchocolate or an intricate cake topper printed in sugar. 3DSystems is working with the Hershey Company and theCulinary Institute of America to do just that.Fu’s experience with 3D scanning and design toolscontinues to advance 3D Systems’ portfolio beyondPing Fu says 3Dprinting can beused for applicationsfrom health care tofood products.50

3D printers to full design to fabrication solutions. Shespearheaded the development of several scanningtechnologies for 3D Systems, including a handheldconsumer scanner and the iSense scanner device for theiPhone and iPad, which bring new image capture tools tothe consumer. She also led 3D Systems’ partnership withIntel to bring its 3DMe application to the Intel RealSense3D camera.For Fu herself, it’s been a remarkable journey so far, andpeople often comment that she is the embodiment of theAmerican dream. She agrees.“I am the American dream,” she says. “In some ways,3D printing can take your idea and make it real. And I feel“ I was able to come to thiscompany and not onlycontribute but learn.”like I’m kind of that object — that the American dream isa concept and my story makes it real.“I think some people who grew up here don’t reallyrealize how lucky we are in this country — the freedom wehave, the opportunity, the diversity,” she adds. “I don’tthink any country in the world has the kind of soil thatwe have here.“How many times do people have the opportunity towork for a leading company in a fast-growing market andalso be in a space where you truly believe this technologywill change everyone’s life?” she says. “It’s a once-in-alifetimeopportunity.”ViewpointPlanning makesperfectPat Hyek, EY Global Technology Sector LeaderThe technology sector rarely stands still, andtoday’s market is being fueled by unrelentingchange and innovation. Divestment activityfrom both fledgling companies looking to fundexpansion and established corporates lookingto rationalize their operations has reachedpre-downturn levels and looks set to continueon an upward trajectory.The possibilities offered by this fluid market may be heartening,but realizing the true potential of a valuable asset can be easiersaid than done, as a recent survey of divestment strategiesreveals. The EY Global Corporate Divestment Study looked at ninedifferent industry sectors, but it was technology respondents whowere among the most likely to reveal that their latest divestmentprojects were running behind schedule and, more tellingly, wouldin all likelihood fall short of value expectations.Perhaps it is the dynamic nature of the sector or the breadthof the businesses involved, but technology firms clearly need topolish their pre-sales routines if they are to take advantage of thecontinuing pace of activity (56% of respondents said they expectto see the number of strategic sellers rise again this year). Add ingrowing investor interest as the market continues to heat up, andadopting a proactive approach seems a sensible way of preparingfor the inevitable.Periodic portfolio reviews, for instance, provide the idealopportunity to collate the necessary information to shore upsale strategies, address operational deficiencies and identifyunderperforming or non-strategic assets. This pre-emptiveapproach also addresses the often complicated nature oftechnology asset sales, which stems from the interdependentnature of the different parts of the business. Put bluntly, startingthe pre-sales process as early as possible will aid the planningneeded to achieve a successful separation. For instance,technology firms often face the significant challenge of balancingthe divestment, including the transferred intellectual property(IP), against the future needs for that IP in other parts of thebusiness. This can result in complicated IP licensing agreementsbetween buyer and seller.The objective is to allow ample time to prepare and present anasset to the market, but of equal importance is communicating astory that will attract interest from a range of sources. Although55% of technology respondents identified private equity firms asthe most likely buyers, strategic acquirers shouldn’t be overlooked.No stone should be left unturned in the quest to find the ideal suitor.Ultimately, technology companies need to prepare their assetsfor sale well in advance of any announcement. This includescommunicating the asset’s benefits persuasively — not only topotential buyers, but also to shareholders.More informationYou can download the EY Global Corporate Divestment Study2015 at ey.com/divest.Exceptional July–December 2015 51

Analysis: Internet of ThingsEverything’s connectedThe Internet of Things has the potential to change the way we live – andthis global network of billions of connected devices is being powered bypartnerships between entrepreneurial tech companies and bigger investors.words Adam OxfordYou may not have heard ofthe Chinese semiconductormanufacturer Rockchip, butit could be instrumental inmaking your next business a success. It’sjust unveiled a new Wi-Fi transceiver that itclaims uses so little power to communicatethat it could work for 35 years on a singleAAA battery.Assuming you could find a battery thatlasted for 35 years without leaking, youmight still be puzzled as to why this isimportant. The reason is that Rockchip’stransceiver is a breakthrough for thetechnologies that will enable the nextstage of the Internet of Things (IoT).The IoT is a term used to describe theplethora of connected devices that monitorand talk to each other. From air-qualitysensors to blood oxygen meters mounted insmart watches, the IoT is everywhere andgrowing every day.According to Gartner’s latest estimates,there will be almost 5 billion connecteddevices by the end of 2015 and 25 billionby the end of the decade. IDC pegs the IoT’smarket value at US$655b, rising to US$1.7tby 2020. Innovations like Rockchip’s will fuelthis growth by reducing costs and improvingthe efficiency of IoT devices.The good news is that you don’t haveto be a large Chinese chip designer or amultinational smartphone giant to be anIoT innovator. Gartner also says that atleast half of all IoT solutions will come fromsmall firms and entrepreneurs, who areideally positioned to take advantage of theopportunities the IoT presents.“Small firms don’t have the burden oflarge organizations,” says Paul van Kessel,EY’s Global Risk Leader, Digital Practice.“Big firms have to deliver an end-to-endsolution. They need the whole ecosystem tobe in place before they can go to market.”Many large organizations have developedstrategies relying on nimble start-ups thatthey can partner with, invest in or acquireto address a particular niche.52

Photography Getty Images“The big advantage for entrepreneurs inworking with these organizations is accessto markets and the client bases these bigcompanies have,” van Kessel says. “Moststart-ups are struggling [to get] a soundidea into the hands of customers. How doesa company of four people, for example,market to the world?”Ben Mann, Product Manager at IBM,agrees. He works with IoT start-ups acrossAfrica from his office in Kenya. IBM is alwayslooking for small companies to invest in andnurture, he says, because they are closer tothe problems they are trying to solve andare therefore more innovative.“Entrepreneurs solve problems that theysee as individuals,” Mann says. “You need anIBM to build a smarter planet, but you needan entrepreneur to build a smarter room.”Van Kessel believes every area of life isripe for innovation and disruption throughIoT technologies.“Home health care is especiallyinteresting,” he says. “For older people whoare alone at home, for example, there arelots of devices to monitor their heartbeat ormeasure whether or not they’re moving andsound remote alarms [if not].”While most IoT businesses revolvearound new forms of data collection or“ You need an IBM to builda smarter planet, but youneed an entrepreneur tobuild a smarter room.”Ben Mann, Product Manager, IBMbig data analysis, the opportunities in IoTaren’t just service-based. For example,Relayr, a German start-up, won the IoTthemedCODE_n award, sponsored byEY, at the CeBIT trade show in 2014 withits WunderBar platform. WunderBar is ahardware prototyping kit designed to makeIoT development simpler and more costeffective.A WunderBar kit features sixBluetooth-enabled sensors that monitorlight, color, proximity, temperature andhumidity. It communicates directly withRelayr’s cloud and analytics platforms tomanage and interpret the data it creates.“The potential in the IoT is vast, andwe are just starting to see some of thefirst applications,” explains Will Andrews,Content Manager at Relayr. “Our role isto provide those entrepreneurs with theeasy tools they need to discover theserevolutionary new applications.”It’s this kind of partnership that van Kesselsays will rapidly expand the IoT: small,innovative businesses feeding off eachother to create ever more interesting anddisruptive applications.“IoT is not a thing on its own — it’s part ofa digital revolution along with mobile, social,cloud and big data,” he says. “It’s impossiblefor a start-up to have its hands on all thosecomponents, so my advice is, don’t developin isolation. Make sure you have a hugeecosystem and network with companies inother areas.”And with that kind of ecosystem, maybea battery that lasts 35 years isn’t such animprobable thing after all.How secure is the IoT?While connected devices offer hugeopportunities, they also pose hugesecurity risks. Take smart meters, whichwill change the way we consume andstore power by adding intelligence to thegrid and allow us to monitor and controlpower consumption at a household levelfor maximum efficiency.Smart meters are considered essentialif large populations are to weanthemselves off traditional fuel typesand adopt renewables at a city ornational level.However, a recently discovered flawin the industry-standard encryptiontechniques developed for electricitysmart meters, the Open Smart Grid70%of the most commonlyused IoT devicescontain vulnerabilities.HP study reveals 70% of Internet of Things devices vulnerableto attack. (n.d.) Retrieved from http://h30499.www3.hp.com/t5/Fortify-Application-Security/HP-Study-Reveals-70-Percentof-Internet-of-Things-Devices/ba-p/6556284#.VHMpw4uUfVcProtocol, threatens the deployment ofsmart meters everywhere. Not only doesit leave customer data unprotected — ifa criminal can hack into a smart meter,he or she can work out when you’re awayfrom home — it also severely damagesthe technology’s reputation and maymake it harder to roll out in the future.EY’s Paul van Kessel explainsthat security is another area whereentrepreneurs can benefit frompartnering with larger organizations.“A lot of start-ups forget securitywhen they develop IoT applications,”he says. “If you have a solution withoutsecurity, you’re missing the point.”More informationGo to ey.com/cybersecurity todownload our report Cybersecurityand the Internet of Things.Exceptional July–December 2015 53

Profile: Eduardo PaesAgent ofchangeAs Mayor of Rio de Janeiro,Eduardo Paes is overseeingthe preparations for the2016 Olympic Games. Thestraight-talking politician saysthat, while the city faces veryreal challenges, the Gamesare also an opportunity totransform Rio’s fortunes.words Richard MurphyEduardo Paes has high hopes for 2016 andbeyond. Rio de Janeiro’s mayor — combative,persuasive and bursting with energy — saysthe Olympic Games will transform the cityof 6.4 million people both physically andin spirit. He says Rio has found hope and ambition, aperspective on the future absent since Rio lost its statusas Brazil’s capital in 1960.“The success of Rio is [that it has] managed to reinventitself,” Paes says. “We are using the Olympics to do manythings, much less than the Olympics is using us to dothings. The Olympic Games helps you to call attention tothe city — to its qualities and its defects. Which is not abad thing in either case.”Along with staging the main event, Rio is undertaking27 legacy projects designed to improve areas such astransportation, education and infrastructure. Responsibilityis split between city, state and federal governments, andmany projects will be ready next year.Some of the biggest changes will be felt in the upmarketwestern suburbs around Barra da Tijuca, where theOlympic Park and Olympic Village are being built beside alagoon. Seventy-six miles of new bus rapid transit (BRT)lanes alongside 10 miles of new metro will connect to thesewestern areas, a real estate hotspot whose populationhas rocketed in recent years as Rio spreads west.While this has sparked criticism from some urbanspecialists, who say the big Olympics winners are propertydevelopers likely to benefit from these new transportationlinks, Paes says these projects have cut hours off the traveltime of those who live in poorer, more distant suburbsand work in Barra’s big commercial centers. The BRT lines54

Did you know?Rio de Janeiro will be the firstcity in South America to hostthe Olympic Games.Photography TDemotix/Corbis / Andre Vieira / Rio Mayor’s officealso link northern andwestern suburbs previouslyaccessible only by bus orovercrowded train. “It isa big employment hub. Itis very important to havetransport there,” he says.In central Rio, whatwas for decades anabandoned port area isbeing completely renovatedthrough a public–privatepartnership (PPP). A newVLT, or light rail system, will link the Porto Maravilha —“Wonderful Port” — to the center and the domestic airport.New businesses, hotels and housing will bring more jobsand income. “You take a degraded area of 5 million m 2[nearly 2 square miles] and transform it into a place of bigcommercial and residential enterprises,” Paes says.“It is a change in the urban logic of Rio.”The mayor admits the city faces a hard task inovercoming some of its historical challenges, such assecurity, inequality and education. “Brazil has a defect:people are always coming up with an excuse to not dothings,” he says. “But nobody is perfect. London hadproblems. Any city, any country, has problems.” For Paes, itis time for Brazil to stop making excuses and get on with it.Tackling crimeCrime has long been one of Rio’s biggestchallenges. In 2008, a year before the citywon its Olympic bid, Rio’s state governmentbegan pacifying some of the many gang-runfavelas (slums) by installing armed policebases called UPPs.After this, Rio’s homicide rate of 31.6 per100,000 inhabitants in 2009 fell to 21.5by 2012, the last year for which full figuresare available, according to the Violence Mapproduced annually by the Latin AmericanFaculty of Social Sciences using governmentfigures. In contrast, Brazilian state capitalsas a whole saw a slight increase in thesame period.Initially, the change in Rio was dramatic.Pacified favelas nearest to tourist areas andOlympic sites were no longer no-go areas.Some have even seen real estateThe Main Press Center andInternational BroadcastingCenter, currently taking shapeat Rio’s Olympic Park, will housethe world’s mediaduring the Olympic Games.Joining the pantheon of smart citiesUnder Eduardo Paes’ leadership, Riohas made strides to embrace smarttechnology and sustainability. Astate-of-the-art operations center setup in 2010 with IBM technology allowsthe monitoring of weather, traffic andemergencies via hundreds of cameras.It helped Rio win the World Smart CityAward in 2013.That same year, Paes took over fromformer New York mayor Michael Bloombergas the chair of C40 Cities, a global networkworking together to fight climate change.“We live in the century of the city,” he says.Paes has good relationships with othercurrent and former mayors like Bloomberg.“We exchange experiences,” he says. “Theproblems repeat themselves, in differentproportions and dimensions.”He also sought advice early in theOlympics tender process from PasqualMaragall, who was mayor of Barcelonaduring the 1992 Games that transformedthe city and its relationship with the restof Europe. “He was a very inspiringsubject for me, because he had lived theexperience,” Paes says.It is a message he takes every opportunityto repeat. “The reason Rio won the Olympicswas this opportunity to transform our cityand make the necessary changes,” he said ata recent event in Rio. “The Olympics is muchmore than just a sports event. The Olympicsis a geopolitical opportunity.”Exceptional July–December 201555

Profile: Eduardo Paes“ The Rio we are delivering in2016 is a better Rio. A city thatis looking forward.”booms, with restaurants and hotels popping up toserve tourists. And while there has been a recent increasein violence in pacified favelas and attacks on the UPPs,Paes says this does not invalidate the policy. For now, hisadministration is funding upgrades to the police bases,many of which are housed in basic containers.As another challenge, Paes volunteers the “19thcentury”sewage problem in Guanabara Bay. Rio sits nearthe mouth of the bay, wheresome Olympic sailing eventswill take place. Its sewageis a Rio state government responsibility. “Why can’t this beresolved?” he asks. And he offers an answer. In west Rio,where the main Olympic centers are situated and wherepopulations have grown rapidly in recent years, leavinginfrastructure lagging, his government took over sanitation— and outsourced it.“It is possible. Follow the right model. Concede, privatize,do a PPP,” says Paes, who “adores” PPPs. Indeed, of the24.6b reals (US$7.9b) being spent on the 27 legacyprojects, 43% is private money.Political talentThe mayor’s energy is palpable, and it has been evidentthroughout his rapid rise to power. Married with twochildren, Paes grew up in an upper-middle-class Rio family.His father was a lawyer and his mother a teacher. Hebecame interested in politicsin his teens during Brazil’stransition to democracyafter two decades ofdictatorship and graduatedwith a law degree fromRio’s prestigious PontificalCatholic University.Paes helped Cesar Maiawin the Rio mayoral race in1992 and in 1993 becamesub-mayor for the west Riosuburb of Jacarepaguá. HePhotography Getty Images / Rio Mayor’s office56

The three Carioca Arenas atthe Olympic Park will be thevenues for sports such asbasketball, judo and fencing.was 23. “My mother and father wanted to expel me fromhome; they didn’t want me to accept,” he says. “Here inBrazil, you have a certain criminalization of politics.”But Paes won his parents over, and they recognized histalent for the political realm. In 1996, at just 27, he waselected city councilor and served two terms as a federaldeputy. In 2000, he became Rio’s environment secretary.And in 2007, the year Rio staged the Pan-AmericanGames, he became the Rio state secretary for tourism,sport and leisure. He was elected to his current positionin 2008 at just 39 and was re-elected four years later.Paes has shown himself to be a deft political operator. In2013, when protests filled Brazilian streets, he avoided theworst of the vitriolic attacks that protestors aimed at StateGovernor Sérgio Cabral, who is from the same politicalparty. While Cabral came over as aloof and autocratic asprotestors camped at the end of his street, Paes gave a liveinternet interview to a media collective seen as siding withthe demonstrators. Today, Cabral has all but disappearedpolitically, whereas Paes is being touted as a potentialpresidential candidate for 2018. For now, though, heinsists he just wants “vacations.”But there’s plenty of work to do between now and then.If you compare today’s Rio not to London or Barcelona butto the Rio that won the Olympic bid in 2009, the changesare already palpable. “The Rio we are delivering in 2016is a better Rio,” Paes says. “It is a more integrated city,a more just city, a city in which people seem to me moreintegrated socially. A city that is looking forward.”A sustainable legacyThe 2016 Olympic Games in Rio de Janeiro will be alandmark event: the first time the Games will be held ina Latin American country. For any host nation, the aimis to keep the cost of the Olympic Games to a minimumand limit their environmental impact. For the city of Rio,this emphasis on sustainability is as much about thesocial aspect as it is about the environmental one.It is apparent that the Rio organizing committeehas been working hard to build a sustainable supplychain. Suppliers must be compliant in terms oflabor conditions, organizational structure and therelationship with their stakeholders. Special attention isbeing paid to ensuring that the local part of the supplychain is provided by Rio-based companies, boostingthe city’s economy.The Rio Olympic organizing committee has alsolaunched an interesting project called Transforma.This program aims to bring Olympic values, suchas commitment to performance and discipline, intopublic schools, engaging students and teachers withthe Olympic movement in a positive way. It alsoconveys messages about, and training in, other sportsthat may not be as popular in Brazil, such as rugbyor badminton.One of the challenges in a city such as Rio (whichdoes not lead the world in accessibility initiatives)is ensuring accessibility for people with disabilities.Hotels in the city are receiving visits from a professionalwho gives them information about how to adapt theirfacilities and services for disabled people in anticipationof the Games.According to the local organizing committee, afterthe Olympic Games, the Olympic Park and the athletes’village will be turned into a training center for highperformanceathletes. In addition to serving sports,this innovative space will be equipped with schools andareas of social interaction and entertainment answeringthe needs of communities in the region.These sustainability-oriented programs will helpensure not only the success of the Olympic Games, butalso that this major global event will have a positive,long-term economic, environmental and social impacton the city of Rio de Janeiro and its people.Exceptional July–December 201557

Profile: EatalyFrom Italy with loveOscar Farinetti, the founder of upscale Italian food market Eataly, iscrisscrossing the globe on a mission to make Italy’s culinary delightsavailable at accessible prices, while simultaneously celebrating localproduce and culture. It’s proved to be a winning formula.words Heather O’Brian_ photography Virginia Rollison58

The cheese and cold meatcounter at Eataly New Yorkdisplays hundreds of Italianregional specialties. Above:founder Oscar FarinettiTo help explain why Italy is blessedwith such agricultural biodiversityand why its food is so popular aroundthe world, Oscar Farinetti sketches adrawing of the Italian peninsula witharrows pointing every which way.They represent the winds that strikethis Mediterranean country from all directions, creatingmicroclimates that have encouraged the development oflocal specialties and allowed small producers to thrive.The Eataly retail chain, which Farinetti founded in 2005,sells the wares of thousands of these producers, from pastaand olive oil to bread, meat, fish and fresh produce. Asyou might imagine, building relationships with this manysuppliers took some time. Indeed, the first Eataly store, in aformer Carpano vermouth factory in Turin, didn’t open untilJanuary 2007. But with much of the legwork done, otherEataly outlets followed in ever more rapid succession.Today, Eataly has 16 retail outlets in Italy and is a favoritedestination for Italian food and wine lovers in a growingnumber of cities around the world. It has eight stores inJapan — which, like Italy, boasts a refined and storied foodculture — and is present in Istanbul, Dubai, Chicago andNew York, where The New York Times has described itas a “megastore” that “combines elements of a bustlingEuropean open market, a Whole Foods-style supermarket,a high-end food court and a New Age learning center.”“Italy is the country in the world that is most appreciatedfor food and wine,” explains Farinetti, who is preparing tohead off to São Paulo in Brazil, where the latest Eataly storeopened in spring 2015.Stores with soulThe seemingly tireless Farinetti will be traveling a lot in thenear future. Eataly is coming to Seoul, Moscow and Munichthis year, followed by London, Paris, Madrid and a secondlocation in New York in 2016. This will be at 4 World TradeCenter, part of the redevelopment that has sprung up onthe site formerly known as Ground Zero. The new store willbe dedicated to peace.Portrait Michele DíOttavio/Pho-to.itExceptional July–December 201559

Profile: EatalyAll Eataly stores are dedicated to different themes — suchas peace, harmony, beauty, courage and music — and each isunique in other ways. Many stores, like the Carpano factorylocation in Turin or the one in Milan’s Smeraldo Theater,are industrial or cultural landmarks in their own right. Theyare also huge: the original in Turin is 30,000 sq. ft. and theChicago branch is 63,000 sq. ft.The product mix changes from store to store. In Italy,producers from the respective surrounding regions are moreheavily represented, while Eataly sites abroad also use a fairshare of local — but rigorously high-quality — raw materials.That said, there is no substitute for San Marzano tomatoes,San Daniele prosciutto or Italy’s famed extra virgin olive oil.“I’m opposed to a free-for-all approach, but I’m also againsta radical kilometer-zero philosophy,” Farinetti explains.As he brings Italy’s culinary magic to new destinations,Farinetti is frequently accompanied onhis travels by Carlo Petrini, the founderof Italy’s Slow Food movement and alongtime friend. Slow Food promotessustainability and biodiversity and hasserved as Eataly’s strategic consultant fromthe start, participating in the painstakingtask of identifying potential futuresuppliers and helping develop classes andother educational activities, which are afundamental part of the Eataly experience.“When they come to Eataly, I want peopleto say, ‘This is a great place where I cansatisfy all my desires,’” Farinetti explains.“But I also want people to see that this is60nations taking145 part in theUniversal Exposition,sharing ideas on thetheme “Feeding thePlanet, Energy for Life”23m peopleexpectedto visit the Expo overits six-month life“ I want people to say, ‘Thisis a great place where I cansatisfy all my desires.’ ”a different sort of place that also wantsto educate.”Even when he’s in Italy, Farinetti is alwayson the move. The success of Eataly and hisdirect, approachable manner have madehim a popular speaker at corporate strategyevents. And Expo 2015, the World’s Fair that opened inMilan on 1 May and continues until 31 October, features 20Eataly restaurants, one for each of Italy’s regions and theirvaried culinary traditions. Aside from bringing the best ofItalian food to Expo, Farinetti is happy that Eataly’s pavilionis hosting the “Treasures of Italy” exhibition, featuringhundreds of artworks produced by Italian masters over thecenturies and an example of what he calls the country’s“artistic biodiversity.”Eataly is more thanjust a retail outlet;every store includesrestaurants too.Deep family rootsMeanwhile, Eataly is warming up for a listing on theMilan stock exchange, which Farinetti sees as a naturaldevelopment for Italy’s only global food retailer. TamburiInvestment Partners, which acquired a 20% stake in Eatalyfor €120m (US$133m) in 2014, will oversee the group’sEataly at Milan Expo 2015sq. ft.86,000 spacethat houses the Eatalypavilion, called “TheAnswer is Blowing inthe Wind”2 permanentrestaurants inthe pavilion20 revolvingrestaurants, withthe restaurateur changingeach monthcafés and numerous6 food counters100+ regionalvarietiesof Italian wine on offer

initial public offering, in which a 33% stake is expected to besold. Even after going public, however, the Farinetti familywill maintain control of Eataly.Family-owned businesses remain a feature of Italy’sbusiness environment, and while this has helped providestability to many firms, Farinetti argues that longevity isn’talways a good thing. “You can’t stay on until you’re 105 yearsold, breathing down your son’s neck,” he says, arguing thatthe second and third generations may have more to bring toa company. “My children speak several languages and have amuch more modern concept of the world than I do.”Indeed, while Farinetti remains the public face of Eataly,the family’s stake is now in the hands of his children; histwo oldest sons, Francesco and Nicola, have taken on seniormanagement roles in the company.This is not Farinetti’s first experience of working in afamily business: his father, Paolo, founded UniEuro in Albain 1967. When Farinetti joined in the late 1970s, UniEurowas a supermarket chain that bore little resemblance to theelectronics retailing powerhouse it would become.“There was a small non-food department, and my fathertold me to sell household appliances,” Farinetti recalls. “Thefirst color televisions and frost-free refrigerators had justcome onto the market. SoI decided I would dispensequality of life and lighten theworkload of women, and Istarted to sell appliances.”By 1989, UniEuro hadbecome Italy’s largestelectronics retailer. Farinetti,now CEO, sold it to UKelectronics retailing giantDixon’s in 2002, a disposalthat yielded €500m (US$553m) and provided the initialcapital for Eataly.While Eataly has done well, Farinetti doesn’t expect thisto be his last entrepreneurial adventure. He’s already hardat work on a new project called Green Pea, a retailer ofsustainable vehicles, clothing and furnishings. The firstenvironmentally friendly store is scheduled to open in Turinin 2017. “I want to transform a sense of respect and dutyinto something that is seen as pleasing and cool,” he says.In the meantime, the potential for Eataly — and forpromoting high-quality Italian food, both domestically andabroad — remains strong. Farinetti says that, while Italyonly has approximately 34.6 million acres of cultivatedland, it has the potential to increase this by 20% to 25%.He says there’s even more room for expanding agriculturalproduction dedicated to high-quality products, which todayaccounts for only about 20% of the total output.“Italy needs to concentrate even more on quality,”he insists, adding with a smile: “Eataly has a 10-yearhead start.”ViewpointDo IPOs fit the DNAof family business?Dr. Martin Steinbach, EY EMEIA IPO LeaderSufficient funds are a prerequisitefor every growing business. It takesa considerable amount of money todevelop new products, tap into newmarkets and sectors and expandresources. That is why family businessesmust think about their strategic optionsfor accessing funding.For such businesses, an IPO is oneof the five main options for raising capital, along with M&A,private equity, management buy-in (or buy-out) and selffinancingthrough the family or the business. When seekingaccess to increased capital, family businesses must carefullyconsider each of these options to see how they match upwith the goals of the family and business. Although specificconditions at each family business differ widely, IPOs havea number of benefits they should seriously consider.An IPO can “improve” a family business’s DNA by helpingit to improve its management of the areas that are crucial tosuccess. IPOs achieve this by helping family businesses carryout a number of vital tasks:• Recruiting senior executives as part of managementsuccession planning• Formalizing relationships between the management board,supervisory board and (family) shareholders• Professionalizing structures• Acquiring and retaining talent via employee share andoption schemes• Diversifying the family’s assets• Preserving the corporate culture• Tapping into new, long-term sources of finance• Gaining greater entrepreneurial freedom througha diversified shareholder structureIf the family decides to carry out an IPO, new structures andprocesses will need to be developed to comply with regulatoryrequirements. Managers with experience in capital marketsmay need to be appointed from outside the family. And afamily charter should be drawn up for family members tosit alongside the corporate governance codes.To make the transition from private to listed company inthe public spotlight, family businesses will need to undergoa serious transformation process. The scope of the requiredchange is usually best assessed in collaboration with trustedadvisors in an IPO and strategic options readiness assessment.By working with experts and following best practices,family businesses can give themselves every chance ofconducting a successful IPO. However, whether this fundingroute is the right choice for a specific family business willdepend on its own DNA and will need to be assessed carefully.More informationVisit ey.com/IPO-leaders-insights to find out more.Exceptional July–December 201561

Family Business Center of ExcellenceApril 2015 | ey.com/ccb | 12th editionIntelligenceIn the knowStaying power:how do familybusinessescreate lastingsuccess?Global survey of the world’slargest family businessesStaying power: how do familybusinesses create lastingsuccess?To secure their legacy and passon thriving enterprises from onegeneration to the next, familybusinesses must focus on sevenoperational areas specific to theirneeds. Building and sustaining alegacy takes top priority in EY’slatest report. Read more atey.com/stayingpower.GlobalCapitalConfidenceBarometerInnovation, complexityand disruption define thenew M&A market12th GlobalCapitalConfidenceBarometerInnovation,complexity anddisruption arethe names of thegame when we define M&A markettrends for the year ahead. Theproof is there: 61% of US companiesare planning deals in the next 12months, the highest number everrecorded by our semiannual report.You can access the full report viaey.com/ccb.BoostingEY global job creation and employment,youth entrepreneurshipsurvey 2015Boosting employment,inspiring youth inspiring youthEY’s annual globaljob creationand youthentrepreneurshipsurvey providesa striking snapshot of what theworld’s leading entrepreneurs arethinking, planning and doing forthe year ahead. More than 2,000entrepreneurs and business leadersshare insights into the pivotallifeline between young people andentrepreneurs. Read the full reportat ey.com/jobs2015.Women inWomen in leadershipleadership: theThe family business advantageSpecial report based on a global surveyof the world’s largest family businessesfamily businessadvantageGlobally, 55% offamily businesseshave at least onewoman on theirboard — and 70% are consideringa woman for their next CEO. Ourlatest report explores why theworld’s largest family businesses areembracing women in leadershipand what other businesses canlearn from them. Read more atey.com/womenfamilybusiness.GlobalgenerationsA global study on work-lifechallenges across generationsDetailed findingsGlobal study:work-lifechallengesacrossgenerationsOne-third of fulltimeworkers ineight countriessay managing work-life balance hasbecome more difficult, with youngergenerations and parents hit hardest.With millennials expected to make up75% of the global workforce, how docompanies attract and retain the nextgeneration and help maximize theirworkplace performance? Learn moreat ey.com/globalgenerations.Download the Exceptional app EY_Exceptional from iTunes or Google Play, or follow us on Twitter @EY_Press, @EY_Growth.62

“Women deserved a smart,simple business thatworked; that democratizedentrepreneurship.”Jessica Herrin (page 6)9%The boost to US GDP ifas many women workedas men (page 12)In the diaryKnow what ittakes to be atop high-growthcompany?Visit Forbes EYVoiceWhere will your growthaccelerate next?Attend our StrategicGrowth Forums and otherCEO conferences to hearinspirational speakers, learngrowth strategies and makevaluable connections.• Mexico — Mexico City,7–8 October• US — Palm Springs, California,12–16 NovemberSeeking innovation inemerging markets?Consider BrazilGather with Brazilian companyleaders and entrepreneursto learn what’s driving theeconomy, the future ofentrepreneurship and theexpansion into strategicgrowth markets.• 2015 CEO Summit Brazil,18 NovemberIsrael: the epicenterof high-techAttend Israel’s most prestigiousannual business conference,convening leading technology;health care and start-upcompanies; venture capitalistsand other private investorsfrom around the world.• Journey 2015, 15 OctoberStay up to date withfresh insights providedby EY professionals inour Forbes.com series,EYVoice. You can learnabout trending issues ininnovation, start-ups, IPOs,financing, entrepreneurshipamong women, familybusiness, leadershipstrategies and more atforbes.com/sites/ey.ContactsStrategic Growth MarketsLeader Herb Engert+1 212 773 6202herb.engert@ey.comStrategic Growth MarketsTax Leader James Markham+1 916 218 1904james.markham@ey.comEY Entrepreneur Of The YearAmericas Program DirectorMike Kacsmar+1 732 516 4128michael.kacsmar@ey.comUS Venture Capital AdvisoryGroup Leader Jeff Grabow+1 408 947 5607jeffrey.grabow@ey.comAmericas Family BusinessLeader Carrie Hall+1 404 817 5740carrie.hall@ey.comIPO and Advisory LeaderJackie Kelley+1 949 437 0237jacqueline.kelley@ey.comExceptional July–December 201563

Regular: The back pageQuote/unquoteInsight and opinion from this issue’s personalities“Bureaucracyis the curseof growth.”Benny Landa, LandaGroup (page 44)“To sustain yourself asa venture capitalist, youhave to invest throughdownturns. That’s whensome of the best, mostsustainable ideas emerge.”J.B. Pritzker, Pritzker Group (page 16)“Don’t be afraidof taking achance, startinga new business,taking a new jobor promotion orstriving for an opportunity, evenif you’re not 100% ready for it.”Linda Hasenfratz, Linamar (page 32)“It’s better to be morecurious than pretendyou know everything,because you generallydon’t. If you’re veryrigid, you’re likelyto break.”Ping Fu, 3D Systems (page 48)“I committed tomyself very early onthat I would neverbe too tired to notclimb over the nextwall. I would justpace myself, knowingthere’s another wall.”Jessica Herrin, Stella & Dot (page 6)“The key is to figure outhow to do something reallywell and expand from asolid foundation.”Neil Blumenthal, Warby Parker (page 36)“The argument that we used to win theOlympics was that this was a city full ofchallenges and full of problems. If theOlympics can change places, can transformrealities, what are you going to do inChicago, Madrid or Tokyo? Come to Rio.”Eduardo Paes, Mayor of Rio de Janeiro (page 54)Photography Rami Zarnegar / Matthew Gilson / Finn O’Hara / Winni Wintermeyer /Bryan Regan / Andre Vieira / Mark Hartman64Exceptional July–December 2015

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ExceptionalEntrepreneurship + Innovation = GrowthCould you bea unicorn?From tax planning to sourcing venturecapital, EY helps ambitious companiesgrow from millions to billions.ey.com/acceleratinggrowth© 2015 EYGM Limited. All Rights Reserved. EDNONEThe better the question. The better the answer. The better the world works.