Author: Eric Hellweg

Colorado Governor John Hickenlooper got his start in public service thanks to a bartender. Hickenlooper had spent 15 years building a brew pub business up from scratch, eventually expending it to three states. In 2003, after a conversation with customers about the plan to change the name of Mile High Stadium, one of his bartenders told him he should run for mayor of Denver. So he did, won, and pledged to bring his entrepreneurial approach to the public office.

In 2010, he was elected governor and is now bringing that approach to this broader role. We caught up with Governor Hickenlooper at the World Economic Forum’s Annual Meeting in Davos to check in on how that approach has fared and hear what lessons he’s learned along the way. An edited transcript of our conversation appears below.

Give our readers a sense of your experience in the private sector and how it shaped your approach to government.

I actually came to Colorado as a geologist. Loved the job, but I got laid off. I was out of work for two years and had the idea of launching a brew pub — this was before they were a common concept, in 1986. I spent two years honing the idea and raising money and we opened in 1988. We were the first brew pub in the Rocky Mountain region and we opened in an area known as lower downtown that was a bunch of abandoned warehouses. Not a lot of people went down there. So one of the first things we did was collaborate with the other businesses in the area to try and raise awareness. We bought ads together, we had a brewers’ fest to bring people down and spend time in the neighborhood.

In 2003, all my customers were complaining about the renaming of Mile High Stadium. And a bartender of mine said: “You should run for mayor.” So I talked to a lot of mayors around the country to understand the job — could you make a difference, was it fun, would I be good at it? And so I decided to run. Our whole campaign was about bringing an entrepreneurial style of government to the office.

So what did that mean?

We tried to hire a lot of people from business. That was the first thing. Most people, when they get elected, they hire the people that helped get them elected because they think they’ll help cover their back. But they aren’t managers. They’ve never been trained. They don’t have the experience, so you have risk adverse people who grew up where there’s no benefit to taking a risk. There’s only downside. So we brought in a talented group of people from all walks of life — not just business — but not one was a political appointee. I had only met 10 percent of the team before the transition process happened and we had a transition of 450 people.

So you found success with that approach at the city level. How has it done at the state level? Have you had to change your approach?

Oh man. In government they love to attack each other. People get so dug in with their positions and they end up with a self-interest that is about protecting that position no matter what. To get business done, you have to get people to expand their sense of self-interest and then get those self-interests to overlap. That’s when you get a transaction. Then you get progress.

Have you been able to get people to come together to find commonality?

Sometimes. Here’s an example. In Colorado we have a lot of shale gas and with hydraulic fracturing we can drop the price dramatically. But there’s been a lot of concern over safety and what’s in the fracking liquid. And the fracking companies weren’t disclosing. So I called the CEO of Halliburton and said you’re getting killed over here on this. You have to find a way to let people know what’s in there while still protecting your intellectual property. I told him even Coca-Cola puts its list of ingredients on the can. So he came over and we brought in the regional head of the Environmental Defense Fund and we got to see where there was some common ground. We ended up having a press conference where the regional head of the EDF and the regional head of Halliburton both claimed victory. That’s where transactions happen — defending your old turf isn’t going to bring about progress.

You mentioned hiring before. What’s your approach there? What do you look for in a candidate?

I really [want] to see how well can they bring people together. How well they empathize. How they listen to people. That’s the best way to persuade someone: listen to them. Geoff Smart, the author of a book called “Who,” helped us with our transition to the governor role. He really trained me on this — before you hire anyone for a really senior position, spend a lot of time and write down what skills you need in the role, what the objectives are, what kind of person you really want. Sounds obvious but if you talk to CEOs and ask them how much time they spend on this, it isn’t a lot. Writing a job description is one thing but really looking at the characteristics, the traits, the kind of experiences you want is so key.

What’s one of the most important lessons you’ve learned as a leader, either in the public or private sector?

The single biggest thing came from when I was running the brew pub. I learned how contagious your own mood is. That’s the single thing. If you’re in a bad mood, within a half hour, everyone on the staff is. When you go through that door it’s show time. Kurt Vonnegut was a friend of my dad’s at Cornell and he said something once: “You have to be very careful who you pretend to be, because that’s who you’re going to become.” We had a couple real tough years in the restaurant business and by just forcing myself to positive and optimistic and cut jokes, things went better. I was still working 60, 70 hours a week, but all the sudden we started getting breaks.

PricewaterhouseCoopers unveiled their annual CEO survey at this year’s meeting of the World Economic Forum at Davos. The survey offers a broad sentiment sample from over 1300 CEOs from 68 countries. The report is available online, as is a really rich interactive tool that allows you to slice the data and see how your company compares with some of the global sentiment. We caught up with PwC U.S. Chairman and Senior Partner Bob Moritz in Davos to find out what he found surprising about the report and understand how his company is using data differently itself. An edited version of the interview transcript appears below.

What do you see as the mood at this year’s Davos?

A bit of optimism but it’s definitely cautious optimism. We’re a heck of a lot better at this event than we were here over the last three or four years, and that’s probably because there’s no one catastrophic or imminent issue that’s on the table.

That correlates with what your survey reports.

Definitely. Of the CEOs surveyed, 50%-plus said things will stay the same for their companies. Last year, 50% said things would get worse. So on a year-over-year basis, that’s good. What’s really interesting is the CEO’s confidence in increasing revenue year over year is down. Why is that, when you have a more stable view? There are two reasons for this, based on our hypothesis and some of the feedback we’ve gotten here. One is we’ve got some hangover problems: European issues, the fiscal cliff issue that got kicked down the road. We haven’t really tackled some of the crosshair issues that need our attention. The second is that in a sustained low-growth environment, the pie isn’t getting any bigger, so everyone’s competing for a smaller slice of that pie. So you have to innovate, do things better, and customer service becomes more important. 82% of the CEOs in the survey said they were going to spend time changing their customer strategies in 2013.

Some of that focus on customer strategy in the survey translates into increasing use of analytics and big data.

When CEOs talk about customer strategy you have to figure out what they really mean. One thing is identifying the customer and what product offerings you want to make — there, the innovation piece is really important. Second, how do you interact with customers more effectively to get higher retention and a longer-term relationship with them? And third, how do you interact with customers both personally and enabled by technology?

One example of a client using data to change the nature of their customer relationship comes from a large mortgage insurer. They had been using their agents just to sell insurance, and typically those agents would be contacted by customers after they already selected a house and needed to buy mortgage insurance. We worked with the insurer to supply the agents with more data so they could contact clients further upstream, say three months before the purchase. Then they could provide information on the insurance, obviously, but also on the demographics of the area, comparable homes with insurance info, data on schools — that kind of thing. The data turned what had been a transaction into a service and an experience.

How are you using data in new ways at PwC?

One interesting thing we are doing now because of increasing access to data is hiring different kinds of people. We’re hiring outsiders more than ever before. As I mentioned, CEOs today need help with customer service and we’re hiring for that. We’re also hiring more doctors. If you want to go after the health care system, you need to understand what information is needed at diagnosis, how does it then go through the supply chain, etc. That’s analytics, big data, predictive data and we’re making a lot of hires there.

Let’s jump back to the survey for a second. What was most surprising to you about the report?

The lack of M&A activity was surprising, especially when you look at the cash on the balance sheets. After dissecting the issue, we expect that people will be looking at deals in 2013 but they’ll be smaller. And any M&A activity that does happen will probably be towards the end of 2013 given the uncertainties. Another big surprise was the variability by country of the confidence levels. The last surprising thing for me was the extent to which people are still focused on cost management initiatives. It was 80-something percent last year. This year it’s still in the 70s.

And what are the uncertainties — the crosshair issues you mentioned — that you don’t think people are dealing with?

When you look at political agendas, there’s increased uncertainty in Europe with what Cameron said about putting the EU membership to a vote. When you look at how we are going to tackle the healthcare issue around the world, are we really focusing on it on a long-term basis with a long-term plan? No we’re not. The reality is you need all parties — politicians, local communities, and business — and you need more leadership. You can’t allow people to manage by the numbers and the demographics and social media to see what the next big ideas we should follow. It’s definitely important to engage and dissect that info, but it’s more important to take it, step back, and then say this is what we’re doing and explain it to those constituencies and move the ball forward.

There’s nothing like being alone on a highly experimental 75-foot boat five days from anywhere to make you realize some pretty profound things. For Ellen MacArthur, who twice solo circumnavigated the globe on said sailboat — the second time setting the world record for speed in doing so (71 days, 14 hours) — her realization came when she considered the finite resources she had to pack with her for those two-plus months alone. Seeing the world as she did through her trip, she began to appreciate the finite resources of the planet.

Not long after she reached shore, she decided to do something about it. She started an eponymous foundation focused on understanding a better way for the economy to manage its resources. Her investigation led to a concept now known as the “circular economy” — a phrase I heard quite a bit at the World Economic Forum’s Annual Meeting in Davos this year. If some of the buzz is any indication — and I believe it will be — it’s a concept that will gain a lot of traction this year as more companies look for ways to better manage dwindling natural resources and more consumers demand action on environmental issues.

I had a chance to meet with Ellen in Davos to learn more about the concept of a circular economy. Below is an edited transcript of our conversation.

So talk to me about how you became interested in finite resources.

When you’re out there on the ocean, 2,500 miles from the nearest town, when it would take someone five days to reach you by boat — helicopters can’t reach you — you have to have everything you need with you on the boat. It’s very concrete and finite. And you begin to understand what finite means. When I reached the finish line, I translated that into the global economy. Our economy today is built around taking something out of the ground, building something with it, selling it, and then ultimately it’s thrown away. We have three billion new middle class consumers coming into the world and there’s more and more pressure to find out how to manage these resources. So in 2006, I started talking with people to understand more. I talked with farmers, teachers, scientists. I read a lot to learn how our economy worked. I had no experience here.

When I would listen to CEOs, I heard them say things like we’re going to use five percent less materials in five years or make a product with 10 percent less material. But when you play it out, it just doesn’t work. It still doesn’t address the fundamental problem. Then I met three people — a Dutch CEO, a Welch education expert and a German scientist — who saw things in a very different way. The CEO said: “I want our products to be made again.” He said: “I want to make our carpets to come back into our factory. I want to lease them so they can be disassembled — melt down the base material so they can be rebuilt and resold and [I] want to do that by 2025.” That was totally different from any other point of view. No one else had looked at that way to design out waste. I wanted to understand the economics of this approach. So in 2010, I started this foundation and coined the “circular economy” term to help frame the concept.

When we launched we focused in three areas. First, business because they can drive change fast. Second was education, so we’ve piloted with 1,000 secondary schools in the UK, training teachers how to teach [the] circular economy idea and the results have been extraordinary. Students really understand it and support the idea. The third was around thought leadership.

The whole circular concept sounds daunting — there’s quite a bit involved with an approach like that: reverse logistics, cost incursions, consumer awareness. How do you begin to address those?

It’s a huge challenge. The product design changes. The business model changes. The marketing model changes. So we went to McKinsey in 2010 to ask them to help us and write a report, focused on the European Union, that answered three questions. Does the circular economy decouple growth from resource constraints? Is this profitable? And does it work for the wider economy? We focused on a category called medium complex goods, specifically mobile phones, smart phones, washing machines, and cotton. The report came back in the affirmative and found that across those sectors in Europe there would be $630 billion per annum of net material cost savings through adopting a circular economic approach.

That’s pretty impressive.

We were really excited. We have a new report out this week that looks at consumer goods and extends it globally and the results are similarly encouraging. We looked at the three biggest segments — packaging, food waste, and apparel.

So give me an example of how this would play out for, say, a car manufacturer.

We work with Renault. They’re one of our foundation’s five founding partner companies (along with Cisco, BT, Kingfisher, and National Grid). Renault has a 230 million Euro remanufacturing business with engines and gear boxes. The remanufactured cars leave the factory with the same warranty as a new engine. It’s fascinating. Energy costs are a huge concern for car manufacturers. An engine that leaves the remanufacturing plant will have 75 percent less energy embedded in it than a new one. So the energy costs are not there either. Renault can resell the car for half cost of a new car and make three times the profit.

I imagine in a circular economy approach, products have to be designed in a different way.

That’s right. We looked at mobile phones and thought it would be difficult given the size of the product and the complexity of the components but there are already companies doing this like Vodafone and O2. No one wants to lease a phone, if you ask them that way, but if you position it that they will get a new phone with the latest technology every year, the value proposition gets more compelling. And product designers need to think “we’re going to get 500,000 of these back in a year for remanufacturing so I need to design it in a way to facilitate that.”

So you have the new report out. What’s next to help continue the momentum with this effort?

We have a new initiative coming in February to help companies get started with adopting a circular approach. One is with executive education programs. One is to establish communities of companies so they can collaborate and share best practices. When an individual company tries this alone it can be daunting, but working together some of it gets easier.

A circular economy explainer video: