‘Free agents’ will guide the destinies of corporations

To be head of one of the biggest American corporations is a great achievement for any national and that’s what Sri Lanka’s Priyan Fernando has reached more than three decades after stepping on US soil. Mr Fernando, who occasionally returns to Sri Lanka to visit family, friends and relatives and get ‘my batteries re-charged’, in this interview in Colombo with the Business Times speaks on a range of issues that confront the global marketplace, lifestyles of the young and .....

Mr Fernando, currently Head of Global Services, American Express Travel Related Services and formerly President and Chief Operating Officer, American Express Business Travel, talks of the new terminology in business and life, about web lifesyles, ‘ideation’, ‘prosumarism’ and a new culture where ‘free agents’ will operate instead of people working full time for a company.

Excerpts of the interview:
On beginnings …
I had a normal upbringing in Sri Lanka. My father was a government servant, he was commissioner of Inland Revenue. I went to Royal College, did a lot of sports and also studies in a balanced childhood. Took to Chartered Accountancy and worked for Turquand Young which is now Ernst & Young. I was privileged to be mentored by role models like veteran accountants, the late M.T.L. Fernando and J.S. Mather who have been major influences on what I am today.

They taught us integrity and discipline and that when you become a leader the world watches you and imitates you like we imitated them. That stuck for a very long time. I did my Chartered and CIMA and went to the US in 1978, 32 years ago, to do an MBA. After two years I joined Ernst & Young where American Express (Amex) was my client. I joined Amex in finance. In the the first year they test your technical skills and as you go up the ladder, other skills too like your ability to collaborate, to lead projects and the higher you go, you are tested on your ability to drive change and create the future.

I went through those typical transition steps and after 23 years in finance ended up as one of the Chief Finance Officer of the company. I was CFO of the B2B business services. I then moved into the travel business and turned it around as the Chief Operating Officer and after five years was asked to be the President handling customer services, client management, where we went through some interesting transformations in the travel business. Very recently -- with the world changing at the pace it is and given the reality of what is called the ‘new-normal’ - the company went through some major changes and then moved all its internal operations from each of the businesses to a global services business of which I am head now. This includes all financial processes, HR processes, procurement, real estate worldwide – so its one big organization. The businesses in the organization are now all responsible for revenue and that has streamlined the way the company is being run. We have the holding company on services side, the card business, the travelers cheque business, the travel business, a bank and whole series of sub products.

Are travellers cheques viable due to the web or is it going out of vogue?

For companies like Google work is play.

Today it is all about innovation. Business models are changing overnight. Companies that succeed are those that can innovate and move at rapid speed. Innovation and speed. Products don’t mature, managers mature. The key is to stop managers from maturing and keeping them refreshed. Businesses don’t mature. You maximize the benefits from changes that’s happening around you. Today technology has changed the way the world operates. The Internet has changed things and created opportunities for the world because the infrastructure was laid out and now this part of the world can support the west. Geopolitically there is a shift to this part of the world which can support the west. Lifestyles have changed to a kind of web-lifestyles. The only thing that hasn’t changed is MANAGEMENT. Because we are still command and control. Decisions are made at the highest levels, not at the levels that are closest to the customer.

Is that changing?

That is changing in progressive companies and my initiative is creating that change because today companies are organized vertically by function – finance, marketing, sales, operations. But think of how does the process flows? It goes across functions. If you want to innovate across process, that requires collaboration. Big companies tend to be bureaucratic – so what we are doing is organizing around process so that we can collaborate around processes and make them quicker. It’s about innovation and speed. So even innovation becomes a process.

Any examples of this change that is happening?

Today it’s all about improvement and for improvement to happen it’s about how you take an idea and turn it into revenue in record time. Thanks to technology you can open out the whole world to create ideas and that’s what the new web2.0 phenomenon is all about --- collaboration, crowd-sourcing, dealing with your customers and asking them to give you ideas. You are connecting employees with each other across social networks and they are now connecting around a specific issue and they are the best brains coming up with ideas. So the company that can aggregate these ideas and implement the one that would win. That’s what businesses like ours are doing –creating these social networks to bring people together whether its our employees or our customers and drive this ‘PROSUMARISM’ where producers are consuming and producing to create new products that are launched in the market place.
That’s what happening in the world today. There is a convergence of the professional and personal lifestyle. Today people have sophisticated laptops at home but when they go to the office its old infrastructure. So they are collaborating with others at a social level having good networks, the business world has to be the same way.

Priyan Fernando

Lifestyles are very fast – you work in office, at home and on the go. What about quality time with the family, to relax. Is that intruding into one’s private space?

Absolutely. This is where the great companies can create that level of engagement where people don’t consider work, work and play, play. There is this convergence and for companies like Google work is play for them. For instance staff are allowed to spend 10 % of their time doing anything they want. If you are interested in music, go and innovate in music. The goal is to pursue their interest that has absolutely no relevance for the company but the idea is to use your brains to come up with ideas that will eventually .. so its all about engaging people in this new world order of ‘web lifestyle’

The days of balance between drawing a line between office and home is gone. So how could you make this meaningful lifestyle a pursuit of something noble? Companies that have discovered that and got people to engage with that pursuit are now aligned personally and professionally.

What about your stress, mental health and health in this new environment? Isn’t that also important?

This is competition. You compete in the business world just like an Olympics athlete does. So you need to have fitness training for corporate athletes as you were. You have to make sure that you work across three time zones, daily 24x7. You have to make sure to do whatever it takes to be physical, healthy, strong so that you have the stamina and the ability to go on and on. You have the mental health strong so that you can focus and concentrate even when you’re tired and you have to have your inner self strong because this world is very competitive. So there is a lot of disappointment. You need to be able to bounce back.

So are spiritualism, meditation and gyms the office of the future to make sure minds are alert and relaxed (to generate ideas)?

Yes. With globalization capital movement is very free. If there is a good idea, you get capital. Technology is cheap so small companies are able to compete with the big company. Processes can be replicated. What cannot me replicated is the environment you create for your people. So the company that does the best in engaging the hearts and minds of its people will be the company that will succeed. The world of tomorrow is about imagination, creating and exploiting ideas – the extent you can make your workplace stimulating where people are engaged emotionally and intellectually, that’s where the future is going to be.

Some examples of a company?

Google is one. The workplace is not the traditional office. It’s a kind of informal, Montessori type, it is unstructured, casual clothes. Generation X grew up (from the 1960s) without much structure without any distraction. But my kids grow up with TV as the background noise, Internet music and studies. They are mingling with noise. They are used to noise in the system which stimulates them. They are used to a stimulating environment. So they need their workplace to be like that, stimulation, it can’t be suddenly quiet. The workplace has to be such to capture the brilliance of these minds as they grow up with technology. Unlike us they are not afraid of it.

This is the first generation in the world where the parents are learning from the children. When we grew up our parents brought radios and taught us to use it. Today when I bring a computer my son tells me how to use it.

So in term of minds, creativity are we looking at a generation that would be far advanced than their peers?

Absolutely – there is nothing sacred in their lives, they have grown in a free and open environment because of the Internet. For them it’s all about owning something. They are branding themselves on Facebook. Its about themselves, what they create. Between branding themselves and creating and because they are intelligent collaborating and creating – this is a movement that cannot be stopped.

So how does the corporation fit into this?

It has to find a way of getting on this bandwagon because it is a irreversible bandwagon and the beauty of societies like Sri Lanka where life is a social network work where society is integrated, inter-related culture –the way ideas flow, the way contacts and relationships are made is fantastic. The velocity of an idea is huge. And in the world of tomorrow that’s the kind of competencies a society needs to have. Its very interesting times that we are in.

Where would we be in 20-30 years with this generation?

They are briming with ideas, new things. They have very little respect for the old world order. For them the corporation is not something we revered. Its all about individual empowerment and the Internet empowers people. Twenty years from now I think it would be a mad dash for new products and new services that are coming up by the day. It is about how companies can take products and make it into a service. The auto industry has discovered that – for every dollar they make on the car, they make four dollars on the service.

Businesses would have to refresh their business models. I can see a flat structure of free agents – with new ideas coming from Generation Y that has grown that is not respectful of the bureaucracy of the corporation, I see a flat organizational structure, all bringing their skills and being given the independence to pursue their personal skills to create value. The good thing about these kids is that is all about outcomes – they know if effort doesn’t yield an outcome they don’t get rewarded.

Will money control their lives?

They are much more into idealism than money. They have a point of view that is more idealistic. Their attitude to work too is not like the baby boomers who were going up the corporate ladder to make more money. For them it is pursuing their interests. To the extent the company pursues their interests they’ll be all for it.

The corporations have realized that if you can’t rally people around a noble purpose its difficult to engage them. Because this generation is more idealistic and more into cause and interest than money the not for profit sector is a powerful value proposition for them. I know many kids who have spent hundreds of thousands of dollars on their education and are working for non profits.

On values:

These kids because of Internet make sure everything is transparent. The business world has to be more transparent as Generation Y demands transparency and whatever their beliefs are they are going to be probing.

What about ideas?

Companies realize its all about ‘ideation (process of creating new ideas)’, capturing the minds of those people. Put them quickly on the table; you may have 1000 ideas, 100 of which pass the filters – then maybe invest heavily on 10 and one becomes a blockbuster. So for that one, you need to have a thousand ideas to begin with.

Companies have to be very skillful in capturing and connecting these ideas together. Employees need to get emotionally involved in the company otherwise they are not going to get into the ideation process.
3M for example says 30% of its revenue must come from products that were not there 3-4 years ago. Today imitation is quick. Because capital and innovation can be replicated anything you have can be made by someone else. With the Internet there is space for everyone.

How do we balance store/street sales and Internet sales?

That’s scary. There are 1.3 billion people on the Internet and 1.3 billion people who don’t have clean water or access to electricity. There’s wealth at the bottom of the pyramid. Give them opportunity and there’s a strong market. New products are coming out almost by the day. You can’t control it. Its organic.

In this context, what about regulation?

As long as the Internet insists on transparency it will be self regulating. There will be plenty of good and evil on the Internet but people will gravitate towards the good where there is transparency.

On financial crises:

The recession has ended but has the recovery begun? The economy is expected to grow but as long as 15 million people in the US are unemployed (10% vs 5% earlier) unless that improves the recovery won’t be strong.

They ‘new normal’ is a new guarded optimism where corporations and consumers are going to de-leverage, clean up balance sheets, be much more liquid, That irrational exuberance that existed during the boom years made people extend themselves far beyond with individuals lending and borrowing, corporations and banks taking irrational risks and irrational lending.

There was a huge amount of compensation for taking irrational risks. All that is changing. It will be controlled growth. The US will recover, adapt. I am a strong believer of the US because of the freedom it gives and also because of its strong meritocracy. It always attracts the best from the world.

On meritocracy and opportunities (in the US):

There are very little barriers to entry. Anyone can start anything. There is a huge premium on competency and capability. If you have something to offer, there is a price for it. That is indifferent to background or anything else. It is true meritocracy where you are rewarded for performance. Having said that, there is dramatic change happening in the world today that countries like Sri Lanka can really excel. They don’t have the cost of dismantling an infrastructure that is too cost prohibitive. The western world has invested in old infrastructure that can be an impediment in this new Internet world. Sri Lanka doesn’t have that problem, it has the ability to invest in the next generation technology. I hope we will invest wisely over the next few years.

Outsourcing?

The outsourcing trend is going to be huge and Sri Lanka has a lot of opportunities to get on the bandwagon since estimates are that by 2020 it cud be US$500 billion-worth industry..