ou hear a lot of talk these days about the need to change to keep up with global competition in business. What you don't hear often is how real companies are doing it.
      In Oklahoma City, Okla., on Sept. 16, the Industrial Asset Management Council received real-world case studies from three Oklahoma-based corporate executives at the forefront of change. They spoke candidly about the challenges they face in leading traditional firms through turbulent times.
      Addressing the globalization of the aerospace business, William L. Peacher, senior vice president and chief operating officer, NORDAM Repair Group, said that his industry crossed a threshold in 2007, when for the first time in history more than half of all business jets sold worldwide were purchased outside of the U.S.
      "Global wealth is driven by GDP growth, and that in turn is driving business jet purchases," Peacher said. "These purchases are directly linked to the growth of high-net-worth individuals around the world. Business jet sales continue to rise at a scorching pace, and deliveries are forecast to remain strong."
      Privately held NORDAM makes its money ($750 million in annual sales) by manufacturing aircraft components for Hawker Beechcraft, Cessna, Lear, Boeing and other OEMs. NORDAM employs 2,800 workers worldwide at 11 plants, including several in Tulsa, plus facilities in Wichita, the United Kingdom, Singapore, Mexico and Brazil.
      "Foreign air carriers are growing faster than U.S. carriers," he said. "But American Airlines is still larger than all carriers combined in China. However, U.S. air carriers are expected to reduce their capacity 10 to 15 percent this year. Worldwide passenger growth is currently at 5 percent a year, with cargo growth also at 5 percent."
      For NORDAM, the overarching rule is simple, he noted – where demand goes, supply must follow. "Lower cost manufacturing alternatives must be found to remain competitive," Peacher said. "This is a problem for the U.S., but it is a much larger problem for Europe. The reality right now is that demand for aerospace goods and services will continue to grow faster worldwide than in North America."       John Richels, president, Devon Energy Corp., said he has seen similar pressures in the oil and gas industry. "We are seeing a lot of international competition from non-traditional players," said the president of the largest U.S.-based oil and natural gas exploration and production company. "There has been a real change in the oil industry."
      With 5,000 employees and an enterprise value of $45 billion, Devon is Oklahoma's largest company. Still, Richels said, even a firm like his struggles to find the qualified talent it needs to remain globally competitive.
      "What we really need are smart, motivated people," he said. "Our philosophy is to hire them, get out of the way and let people do their jobs."
      The problem is finding the graduates Devon needs. In 2007, America graduated only 1,200 petroleum engineers, compared to 40,000 graduates with law degrees, said Richels. "We have to address the concerns of Generation X and Generation Y, and we have to facilitate knowledge transfer from senior employees to junior employees," he added, noting that most of Devon's workers are more than 40 years old.
      David Thompson, president, Oklahoma Publishing Co. (OPUBCO) Communications Group, said his 105-year-old company has entered an era of even more intense disruption. "The average media consumer today sends or receives 78 text messages a day, hasn't bought a CD in two years, listens to commercial-free satellite radio, DVRs his or her favorite TV shows, and only reads the newspaper during football season," he said.
      What's a newspaper publishing company to do in that environment? The answer, he says, is that "we must change as a company or we will die."
      Thompson said OPUBCO has embarked on an ambitious agenda to strengthen its core media products, serve new audiences, break more news stories online, invest in modern video and podcast studios, install flat-screen monitors throughout its facilities, create a cross-departmental incubator and hatch a lot of new ideas.
      The best opportunities, he said, lie in broadband connectivity, now reaching 56 percent of American households and pushing online revenues up 23 to 25 percent this year. "Some 66.4 million unique visitors go to newspaper Web sites in the U.S. every day," he said. "We are now up to 1.3 million unique users each month at our company, and that traffic is growing."
      That's why, he said, "we must continue to invest in our future."

he first and final speakers at the IAMC Fall 2008 Professional Forum in Oklahoma City brought similar messages to their audience: Adopt a strategic orientation or perish.
      "As a corporate real estate executive, 100 percent of my job should be doing things that create shareholder value for my company," Darin Buelow, principal of Deloitte Consulting LLP, told IAMC's Leadership Development class. "That value is created through revenue growth, operating margins, asset efficiency and expectations."
      "Wall Street is focusing on corporate real estate holdings of public companies as areas of untapped value," said Charles Commander III, corporate real estate specialist for headhunter firm Heidrick & Struggles, at the Forum's closing session. "The corporate real estate executive today must be as dynamic as the corporation's business."
      The mandate to think and act strategically is a byproduct of the many challenges confronting the CREM function in the 21st century, Buelow explained. These challenges include: Inadequate and incomplete data regarding the corporation's real estate portfolio and enterprise; unclear business strategy and uncertain headcount forecast; decentralized business organizations; isolation of the CREM function from business operations; relentless pressure from corporate headquarters to achieve short-term savings; organizational resistance to change; the fact that CREM is viewed by management as a cost center; the shortage of CREM talent; and the perception that CREM is not core to the business of the company.
      Against this backdrop, said Buelow, the contemporary corporate real estate executive must move from task manager to business partner to strategist, and ultimately to visionary leader within his or her corporation. To do that, the executive must focus on enterprise value, he said. Any task that does not create shareholder value must, in the long term, be eliminated or at least greatly scaled back.
      Buelow said CREM executives must understand their company's value drivers and then deliver them through the CREM function. This can include aligning resources with strategies, improving business processes, honing strategic capabilities, managing tax impacts and opportunities, controlling and reducing risk, and doing a better job of satisfying customers and stakeholders.       For manufacturing companies, Commander said the CREM executive must be proficient in several key areas:
      • Adaptive re-use of existing facilities as manufacturing is outsourced to low-cost countries and third-party firms.
      • Environmental risk management.
      • Speed in delivery of new facilities.
      • Disposition or redevelopment of existing real estate to maximize value or income.
      "CRE executives today must have substantial skills and experience outside of real estate," noted Commander. "They must be proficient in finance, marketing, manufacturing and other key areas."
      Both speakers also emphasized the importance of allowing technology to help you do your job.
      "Technology allows us to improve and track our performance," said Buelow. "This can include ERP, IWMS, point solutions and customized solutions."
      Commander described the DNA of the "next generation" CREM executive as one having sophisticated "street savvy" with strong strategic and analytical skills; one who is perfectly comfortable reporting the CEO, CFO and board of directors; and one who understands how to create value and revenue from proper use and adaptive re-use of corporate real estate. This new CRE executive must also be accustomed to heightened public scrutiny and shareholder pressure; doing business with other languages and cultures; and speaking openly and knowledgeably about marketing, brand management and Six Sigma.
      "Most companies overlook the embedded value in corporate real estate," he said. "Most companies do not see CRE executives as contributing strategic value to the C-suite."
      But if you can do that, he noted, the best jobs in corporate real estate will be yours, and they will come at a handsome price. ick Wilkerson, recently elected chair and president of Michelin North America, riveted the IAMC audience in Oklahoma City with a earnest, straightforward talk that conveyed his passion for his company and colleagues.
      "I love this company," said the 25-year Michelin veteran, whose responsibilities have ranged from personnel to manufacturing to environment and prevention, and have taken him to positions based in France and Scotland as well as the U.S. He said Michelin invites recruits to "come to work at Michelin and have fun." Doing so has helped the company maintain its status as the world's leading tire manufacturer, and earn accolades such as recently winning all 11 categories in the J.D. Power awards.
      All the success comes at a hard time though: Automotive sales are down, driving is down and, therefore, tire use is down. How does a company keep its edge when all indicators point to a dulled reward? Wilkerson presented three ideas:
      First, he said, make sure you have a value-add proposition. "Don't sell anything as a commodity that should be bought at the lowest price," he said.
      Second, you have to have a plan, and that plan "must be based on business reality." He also counseled listeners that a personal, individual development plan is also key, and must be managed by metrics just like a corporate department would do.
      That personal focus led Wilkerson to his third compelling thought: Manage according to values.
      "Michelin has five values," he said. "Respect for employees – this is the only asset that appreciates with time. Respect for customers, respect for shareholders, respect for the truth and respect for the environment."
      Employees are the ones who help Michelin improve, he said, and give the company that sustainable advantage everyone craves. How do you measure it? Companies in the top quartile of employee engagement, he said, beat the shareholder value of companies in the second quartile by 18 percent. What's more, he said, "I see that 18 percent most of all during difficult economic times."
      Manager training is at the center of sustaining such an advantage, he said.
      "Managing to values is easy at the top of the organization," he said. "The tough part is how the shop floor folks respect the values."
      Wilkerson suggested that this kind of spirited engagement, what he called "the spirit of Jamestown," is a cultural advantage for the U.S. as it seeks the competitive upper hand in a global marketplace.

his fall has seen the publication of the Industrial Asset Management Council Lease Handbook by the American Law Institute | American Bar Association. Co-authored by IAMC members Robert F. Duncan, Jr., J.D., managing principal of Structured Equity Advisors, and Philip E. Hammel, Ph.D., director, real estate development, for Honeywell International, the 118-page guide visits such topics as assignments and subleases, alterations, environmental clauses, insurance and others, presenting extreme cases and the typical middle ground achieved via negotiations. The book comes with a companion CD-ROM containing the book's text in editable RTF and searchable PDF formats. To purchase the book at an IAMC members-only discounted price of $99, visit www.ali-aba.org.