Phoenix Rising: Quality of Life Drives Kudelski’s HQ Location Decision
May 22, 2017
(Episode 18 of “The Project: Inside Corporate Location Decisions”)
This week we bring you the story of the Kudelski Group, a Swiss company that was looking to open its first corporate headquarters in North America. The company looked at three regions in the Western United States – Denver, San Francisco and Phoenix – and, in the tradition of amazing Swiss efficiency, they made the decision in just 90 days.
Quality of life, according to Rich Fennessy, President & CEO of Kudelski Security, was the single most important factor in the decision—a first for “The Project.” Chris Camacho, President and CEO of the Greater Phoenix Economic Council (GPEC), weighs in on the decision process from the economic development perspective.
Andy Levine (DCI): If you’ve ever relocated for a job, you know the many details and potential roadblocks that go into moving and acclimating to a new environment. Often, it’s done on very, very short notice. The process of moving to a new city is almost always challenging, but imagine what it’s like to move to a new country or in the case of today’s episode, a new continent.
Patience Fairbrother (DCI): Today’s story focuses on a Swiss company that was watching its business grow dramatically in North America, and they decided it was time to set up a second headquarters. They would hire new employees in the U.S., but they would also be moving a large number of Swiss employees to America. And so they needed a location that would be favorable from a business perspective but just as importantly, it had to be the kind of place where their employees would want to raise their families, and that led them to Phoenix, Arizona.
Andy: So welcome to episode 18 of The Project, Inside Corporate Location Decisions. I’m Andy Levine of Development Counsellors International.
Patience: And I’m Patience Fairbrother, also a DCI and Andy’s cohost of The Project.
Andy: So this week, we bring you the story of the Kudelski Group, a Swiss company that was looking to open its first corporate headquarters in North America. Now, the company looked at three different regions in the western U.S., Denver, San Francisco and Phoenix. And in the tradition of amazing Swiss efficiency, they made the decision in just 90 days.
Patience: So to learn about this swift decision-making process, we talk to Rich Fennessy who joined Kudelski in October 2015, right around the time the company started seriously looking for its new headquarters. The Kudelski Group is comprised of nearly 4,000 employees in 33 countries. Rich is president and CEO of Kudelski Security, one of the group’s three major divisions. Rich and his group focus on cyber security.
Rich Fennessy (Kudelsky Security): This decision was really driven by the desire to be closer to our North American clients across each of the three businesses, especially cyber security. In the business that I run, the global market for cyber security is about \$80 billion in terms of products and services acquired by companies on an annual basis of which over 50% of that is spent here in the U.S. market. So it’s obviously important to be as close as you can to the market, as close as you can to each of your clients and the U.S., from a cyber security perspective, obviously made a lot of sense.
Andy: So Kudelski decided to keep its primary headquarters in Switzerland but would establish a second international headquarters in North America. So to answer the question of where, Kudelski put together a cross functional team that quickly honed in on three markets. Once again, Silicon Valley or San Francisco, Denver and Phoenix.
Rich: So we looked at both kind of that Silicon Valley area, San Francisco area. We already have quite a strong presence there. We have several hundred employees already working in that area, and then we also looked at Denver because we have a strong presence there as well in addition to Phoenix. And across all three of those, eventually, the decision was made that Phoenix, Arizona would be a great place for our second headquarters.
Patience: So as always, we wanted to hone in on the specific factors that drew Kudelski to Phoenix. So we asked Rich to pinpoint the top factors the company considered in the location process.
Rich: Well, number one was really…I mean, it’s the quality of life for our employees.
Andy: Quality of life?
Patience: That’s what Rich put as his number one factor.
Andy: So this is the 18th episode of The Project and this is the first time any executive has led with quality of life as the most important location factor. We asked Rich to expand.
Rich: The first thing is the employee themselves. I mean, is this gonna be a place where we can attract talent, where we can go provide a great place for them to live, a safe place for them to live, great access to schools, great access to a quality of life, things of that nature? So that was clearly probably number one and two in our list. Is this a good place for our employees as they move to this new facility and this new headquarters?
Patience: After quality of life came talent and then accessibility.
Rich: Number two is talent. I mean, being an R&D focused company, a very engineering focused company, innovation focused company, engineering talent was a very important topic for us. So we spent some good time looking at the talent pools that exist here in this market, and specifically looking at ASU, which is obviously one of the largest universities in the country, if not the world.
And you look at the engineering program, the computer science program that they have, and the quantity and the quality of engineers that they are graduating and bringing into the workplace, that was a very positive check on our checklist in terms of why Arizona matched up from a skill perspective to the kind of talent we wanted to go attract.
And then three was just the proximity to other parts of the United States, the ease of getting in and out. I mean, our business is very global, we do business with companies across pretty much all the states in the United States as well as obviously globally, doing business in 33 countries around the world. So having access from an airport perspective, a transportation perspective, easy hops to Europe, easy hops to major cities across the United States was also a big factor for us.
Andy: Quality of life, talent and accessibility won the day from the Kudelski Group’s perspective. Now we’re going to leave Rich Fennessy for a moment.
Patience: But don’t worry. We’ll come back to him later in the episode.
Andy: We’re gonna switch gears and we’re gonna hear from Chris Camacho, president and CEO of the Greater Phoenix Economic Council or GPEC for short. Chris led a team that included economic development professionals at the federal level, state level, regional level and local level. But the first conversation started with the Kudelski Group back in 2013, this is when Phoenix mayor, Greg Stanton, attended the World Economic Forum in Davos, Switzerland.
Chris Camacho (Greater Phoenix Economic Council): Mayor Greg Stanton participated in the World Economic Forum and in 2013, in September of 2013 and had a chance to meet with André Kudelski, the chairman of Kudelski Group, and it was one of these conversations that the mayor talked a lot about, obviously, the market, the growth, the activity, the pro-business environment, and his recap as part of this conversation was Kudelski’s one of many foreign companies looking at the United States as a growth opportunity.
Patience: So the Kudelski Group was now on the radar of the Greater Phoenix Economic Council.
Chris: And yeah, it was one of those where we followed up, followed up, followed up, and it wasn’t until 2015 that we received a call from SelectUSA, our partners, you know, at the federal level that had discussed a very high profile project from Switzerland. And we said ironically enough there is a relationship that we have with a company out of Switzerland and it ended up being Kudelski.
Patience: So an exploratory telephone call was set up between Kudelski Group and GPEC, and it was clear that the company was serious about Phoenix.
Chris: What was intended to be a half hour call turned into about a two and a half hour session on all of the various attributes of again, how they would address risk, how they would address meeting a speed [SP] to market need that the global chairman had set, and we were there to address every one of their questions or even concerns and offered up a, you know, a visit, a workshop-type format where we would allow, you know, our team to work pretty, pretty extensive due diligence on their behalf and spent a couple of days in a workshop format not necessarily recognizing that they would take us up on it so quickly.
Andy: What followed was what Chris called one of the most comprehensive fact finding missions that he’s ever been involved with.
Chris: We went back to them with a formal business case and the offer of the workshop two weeks later, so pretty comprehensive, dedicated business case. And then, you know, ultimately, you know, their visit came within a month.
And so, we had the primary workshop that occurred in 2015, which was everything from local real-estate, tours from our office space to, you know, meetings with public, charter, private school, headmasters to visiting other cyber security and related enterprises that operated in Greater Phoenix so they could understand what the labor profile was like here in the marketplace and the talent that existed. And also, interactions with our mayor of Phoenix and other leaders, like the governor of the State of Arizona, had meetings with him in October.
And so all of this commenced rather quickly whereas, you know, the normal due diligence process might take six to nine months, this was really about 45 days of pretty in-depths due diligence. And that lasted through the end of 2015.
Patience: Kudelski was looking for a wide range of information from Greater Phoenix down to the smallest details.
Chris: One of the interesting aspects was we had to find banks that offered a relocation support, and certainly, a mortgage financing for international executives which generally don’t have domestic credit lines. And so we found some, you know, different banks that provided that kind of service model on their behalf and, you know, I think as Kudelski would tell you, you know, just the willingness to address every…what was a perceived barrier or concern. You know, really, that’s what our team put together, and I think it put them at ease as they were transitioning through the process.
Andy: Rich Fennessy echoed this sentiment in our interview with him. The team in Phoenix as well as Arizona truly pulled out all the stops to get them what they needed to make a sound business decision.
Rich: I would tell you from the very first day of our first visit, the Arizona team, they really included Greater Phoenix Economic Council, GPEC, but also included Arizona Commerce Authority, also included some local political leaders including our governor, Doug Ducey. I mean, they just did an outstanding job demonstrating that Arizona was really serious about getting companies like Kudelski Group to move to Arizona.
At the end of the day, I would tell you, it really came down to attitude. I mean, we felt a very strong desire from everyone we worked with to work with us, to make the transition to the U.S. an easy one and a positive one. And it really goes a long way when a city like Phoenix or a state like Arizona goes out of its way to make you feel welcome, and to partner with you on all aspects of the potential move.
Patience: On top of the relationship Kudelski had built with GPEC and the Arizona Commerce Authority, Phoenix had another important thing going for them, Rich Fennessy and his familiarity with the Phoenix region.
Rich: No, I’ve lived in the Phoenix area for 14 years now. I’ve run several technology companies in the area, so I obviously was an advocate for Phoenix and Arizona through the site selection process, but I would tell you, the committee, I mean, took that obviously as input, took my experience as input, but the reality is, I mean, did obviously as fair, broad evaluation of all three sites. And I think I…what I was proud of at the end of the day…I mean, Phoenix really spoke for itself.
Andy: So we shared with you Rich’s comments about Phoenix and its quality of life earlier in this podcast. Chris Camacho had a different take on this that we’ve not heard in other podcasts.
Chris: I would say the third element that’s probably not on any top 10 site selection factor, but in feedback, I would say is absolutely certain is that this is one of the easiest places to be new and easiest places to integrate and, you know, most executives come from somewhere else as they enter a relocation experience and quickly being integrated into the metro Phoenix market with other business leaders who care about the community and where you can elevate yourself and your company expeditiously.
Andy: That is the first time anyone has mentioned easiest place to be new. Is that something, you know, that’s unique to Phoenix, or is it just something that GPEC works to promote and to build on?
Chris: Well, I certainly feel that this is a new phenomenon, particularly in Sun Belt markets where you have just immense growth, you have 100,000 people, plus moving to metro Phoenix every year. But the culture here is, it’s very much a meritocracy where those that are willing to roll up their sleeves, get engaged, participate and be activists for the community garner immediate respect.
So difference, you know, say, from other markets where, you know, generally, its founding families that have legacy interests in the community, it matters where in some markets where you went to high school or where you went to college or who your father and mother was, this market is vastly different than that. It’s really based upon merit, effort and just sheer tenacity.
And the cultural elements that exist here, it’s just very different than most places, not only that I visit, but also other places I’ve worked in the past.
Andy: Kudelski is about a third of the way to hiring the 200 employees that will make up the new headquarters facility. Rich expects to see continued growth beyond that in the Arizona market. Within the next three years, he expects they’ll be expanding to accommodate about 350 employees in the Phoenix region.
Patience: So we’re up to the takeaways portion of the episode. So Andy, what stood out to you as a particularly interesting aspect of this location decision?
Andy: I think what really stood out to me was Rich’s comment about quality of life being the driver of this location decision. We’ve interviewed over a dozen corporate executives, this is the first time this has come up. And I think it really had to do with the fact that it was a headquarters location decision. They were moving key and very important people from their headquarters in Switzerland, setting them up in Arizona, and they needed to know that they’d be happy there.
Patience: Yeah, and as we mentioned earlier, you know, an international move is bigger even than moving across state lines, so they really needed to take all of those factors into consideration.
Andy: This, you know, it just…it so surprised I think both of us when we heard him say the number one factor was quality of life, and in this case, it really was.
Patience: I’m gonna take it in a little bit of a different direction. I think the other clear thing about this project that was unique is just how fast they were able to make this decision. So this is their second, it’s an international headquarters. This is the kinda process that usually takes multiple years and they were able to squeeze this down into just 90 days, which I think is pretty remarkable.
And obviously, that has a lot to do with the company and their kind of drive to get the decision made, but it also had a lot to do with GPEC and their local partners just in their ability to respond to all the questions that they needed answered in a timely manner, and it sounds like they were really working around the clock to make it happen.
Andy: And what did we call this? Remarkable Swiss Efficiency?
Andy: So yes, yes. And finally, we just wanna share with everyone here, there was one really amusing moment in our interview with Rich Fennessy, which we just…it’s too good not to share. So we do send our guests, those doing an interview for The Project. We send them a headset to use in the course of our interview with them, which they plug into their computers and put on, they sort of look like an airline pilot.
Patience: So there was a point in the interview when Rich got so excited describing the company’s growth that he actually knocked the headset off his head. Take a listen.
Rich: Sure. I mean, Kudelski Group did over about 1 billion in net sales in 2016, growing of 12% at a year to year basis.
(Background noise as headset is knocked off)
I should probably start over, I just knocked off my headphones.
Patience: Oh, no. That’s okay.
Andy: Good to see you’re passionate about your business.
Rich: I’m part Italian, so my hands work and I hit the microphone.
Patience: That’s a good image.
Rich: So we’ll start to get to your question, yeah.
Patience: So that goes on The Project blooper reel.
Andy: There is really nothing wrong with having a little passion in our business, and Rich got excited.
Patience: So that is a wrap on episode 18 of The Project, Inside Corporate Location decisions.
Andy: Our special thanks to Rich Fennessy of Kudelski Security as well as Chris Camacho of GPEC. We really appreciated them taking the time to speak with us, and we really enjoyed our conversations with them.
We also want to thank Michelle Kauk of GPEC as well as Pamela Creamer of Kudelski who were instrumental in making these interviews happen.
Patience: The Project is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions and countries. You can learn more about us at aboutdci.com.
Andy: As always, we’re working on new episodes including a couple of roundtable sessions that will dive in the specific issues in the world of corporate location decisions. Next up is a close look at data centers and what’s driving recent announcements in that cluster.
Patience: We hope you will keep listening. There are many more projects to come.