Panel Sponsored by:

The Power of Impossible Thinking:A Prerequisite for Profitable Growth

• Orin SmithPresident and CEO, Starbucks Corporation

• Eyal OferChairman and CEO, Carlyle M.G. Limited UK

• Alfred WestChairman and CEO, SEI Investments

• Jami MiscikDeputy Director for Intelligence, CIA

• Colin CrookSenior Advisor, Wharton Fellows

Moderator: Jerry Wind, The Lauder Professor, Wharton

Premise

Given the magnitude and nature of the changing business environment, most efforts to achieve significant profitable growth require a meaningful change in strategy. Creating and implementing innovative new strategies often require, however, changing ones mental models and engaging in impossible thinking.

The Case for Challenging Ones Mental Models• The post 9/11 environment…• Changing consumer behavior…• Technological and scientific developments• Economic turbulences…• Virtual/network corporation and outsourcing…• Real time enterprises…

• New business and revenue models …• Globalization…• Public confidence in business…• Business – Government Relationships…• Other forces and their interdependencies

Objectives1. Briefly explore the importance of challenging ones

mental models in making sense of the changing business environment and acting upon it to generate impossible thinking and capture opportunities.

2. Explore the perspectives of innovative and courageous leaders who were able to challenge the mental models of their industries and create innovative growth engines/solutions.

3. Provide insights and specific take aways for you–our audience – as to the required actions in challenging ones mental models as a prerequisite to successfully creating sustainable profitable growth.

A Brief Introduction to Mental Models and the Power of Impossible Thinking

And let us start with the lessons of a few studies

– The ball players– The 4 minute mile

And let’s continue with the power and constraints of our mental models

– Inventory: Asset or Liability– People: Expense or Asset

A Brief Introduction to Mental Models and the Power of Impossible Thinking

And let’s consider the power of the mental models implied in our language

– Inner city vs. emerging markets– Alternative vs. complementary medicine

A Brief Introduction to Mental Models and the Power of Impossible Thinking

Reflecting, on these studies and findings, what are the implications to your personal and business life?

– Are you constrained by the limits of the 4 minute mile?

– Are you missing the gorillas in your environment?

A Brief Introduction to Mental Models and the Power of Impossible Thinking

To help us explore these implications let us turn now to our panel

• Orin SmithPresident and CEO, Starbucks Corporation

• Eyal OferChairman and CEO, Carlyle M.G. Limited UK

• Alfred WestChairman and CEO, SEI Investments

• Jami MiscikDeputy Director for Intelligence, CIA

• Colin CrookSenior Advisor, Wharton Fellows

SEI:A Quick Look

Serving two related Markets:

Investors•Individuals•Institutions

Investment Firms•Distributors•Manufacturers

SEI:A Quick Look

SEI offers:

IntegratedInvestmentSolutions

IntegratedInvestment

BusinessSolutions

SEI:A Quick Look

• Recurring Revenues

• Long Term Client Relationships

SEI:Creating a New Category

Differentiated Unlike any competing or substitutable product, service, or process.

Proprietary SEI can create and maintain a sustainable competitive edge.

Creates a new industry The service, product or process changes the basis of competition. It redefines an industry, market area, or product category.It changes client behavior.

Potentially Large When successful, makes SEI much more profitable.

SEI: Recurring RevenuesMoving up the value chain

Products

Solutions

Services

Completeness

Value Add

SEI:Long-term Client Relationships

1978 2003

$ RevenueSingle Large Client25 years$250 million in revenue$100 million in profits

SEI:Creating a New Category

• Driven by Emerging• Client Needs

SEI: The push and pull

•The push: Creeping commoditization

•The pull: New unmet needs of individualsThe new pension problemStraight through security processing

SEI:Creating A New Category

Financial Wellness

Easier to show than to tell…

Think Mayo Clinic…

SEI’s Financial Wellness Example:HNW Individual Client Experience

$2 million investment pool$10 million net worthLarge retirement lump-sum pending

Value to Client:Enhanced control of life

Peace of mindFinancially better off

NEWNEWLife Goals

Wealth Plan$2 million investment portfolio

$30 million term life policy$1 million mortgage

OLDOLDInvestment Objectives

Investment Plan$2 million investment portfolio

SEI:Creating New Categories

• Produced by a Growth Culture

SEI: Recurring RevenuesCreating New Categories

Typical new productor service

New category productor service

SEI: Creating Sustainable GrowthFollowing a familiar pattern

1993Open ArchitectureManager of managers

1983MainframeLiquidity FundsMFS

2003FinancialWellness

SEI Investments CompanyFinancial Overview, Dec. 2003

Fiscal Year-End 2003Sales, ($, Mil.) 636.21-Year Sales Growth, (%) 2.5Net Income, ($, Mil.) 1431-Year Net Income Growth, (%) 1.8Employees 19151-Year Employee Growth, (%) 1.3

SEI Investments CompanyFinancial Overview

2000 2001 2002 2003Annual Sales, ($, Mil.) 598.8 658.0 620.8 636.2Annual Net Income, ($, Mil.) 99.0 124.9 140.5 143.0

Five Myths about EntrepreneursThe Risk-Taking Myth: Most successful entrepreneurs take wild, uncalculated risks in starting their companies“Only a very few individuals like Sam Walton will have the ambiguity tolerance needed to start an uncertain business and the risk tolerance needed to build it.” – Amar Bhide’ quoted by the National Commission on Entrepreneurship, 2001

Five Myths about EntrepreneursThe High-Tech Invention Myth: Most successful entrepreneurs start their companies with a break-through invention – usually technological nature

“Revolutionary ventures are relatively rare among successful growth companies.… You can’t get a Starbucks latte on the Internet” - Amar Bhide’ quoted by the National Commission on Entrepreneurship, 2001

Five Myths about Entrepreneurs The Expert Myth: Most successful entrepreneurs have strong track records and years of experience in their industries

“40% of Inc. 500 founders had no prior experience in the industry they were entering”, according to Amar Bhide’ quoted by the National Commission on Entrepreneurship, 2001

Five Myths about Entrepreneurs The Strategic Vision Myth: Most successful entrepreneurs have a well-considered business plan

“The process of starting a new business is like jumping from rock to rock up a stream rather than constructing the Golden gate Bridge from a detailed blueprint.” -Amar Bhide’ quoted by the National Commission on Entrepreneurship, 2001

Five Myths about Entrepreneurs The Venture Capital Myth: Most successful entrepreneurs start their companies with millions in venture capital to develop their idea.

“More than 80 % of the Inc. founders I studied bootstrapped their ventures with modest funds derived from personal savings, credit cards, second mortgages, and so on” - Amar Bhide’quoted by the National Commission on Entrepreneurship, 2001

Entrepreneurial Growth Companies

“Each year, at least 700,000 new businesses are started in the United States, and a small portion turn out to be the fast-growth companies that propel the economy forward”-National Commission on Entrepreneurship, 2001

Royal Caribbean Cruises Ltd.Company Details

The world’s second largest cruise line operates 28 ships.

The two cruise brands of the company, Celebrity Cruises (10 ships) and Royal Caribbean International (18 ships), carry over 2 Mil. passengers a year to about 160 destinations. Destinations include Alaska, the Caribbean, and Europe

Royal Caribbean Cruises Ltd.Financial Overview, Dec. 2003

Fiscal Year-End 2003Sales, ($, Mil.) 3784.21-Year Sales Growth, (%) 10.2Net Income, ($, Mil.) 2811-Year Net Income Growth, (%) 20.1Employees 363501-Year Employee Growth, (%) 30.8

Central Intelligence AgencyVision

“To be the keystone of a U.S. Intelligence Community that is pre-eminent in the world, known for both the high quality of our work and the excellence of our people”

-Central Intelligence Agency, Director of Central Intelligence, 2004

Central Intelligence AgencyCore Belief and Values

• Personal and organizational integrity• Teamwork throughout the Agency• Total participation of an excellent and

diverse work force• Innovating and taking risks• Adapting to both a changing world

environment & evolving customer needs-Central Intelligence Agency, Director of Central Intelligence, 2004

Transforming Education

“I realized there is more that I have to change than I ever thought. I have to unlearn a lot more and change my thinking. The biggest value for me is realizing that e-transformation is possible and adaptable to any way of business – if you do it intelligently.”

- Wharton Fellow Claudio Engel

MatureDemise

PrimeYoung

Capabilities – can do things – integrated - coherent

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The Journey of Learning & Doing!