Andy Grove’s Job Description (Yours Too)

When Andy Grove was running Intel, Intel rocked. Simple as that. He was a superb leader, one who (unlike too many CEO’s today) truly earned his multi-million dollar compensation package. What was the secret of his success? Many commentators have correctly pointed out his attributes of contrarian vision, non-politically correct candor, and unequivocal execution. Here was a guy who steered Intel away from its cash cow DRAM chips (which had become a low-margin commodity) towards high-growth microprocessors, who encouraged a culture of “constructive confrontation” rather than b.s. passive-aggressive politics, and who stayed personally engaged even to the point of working in an open cubicle. All true. But I came across a little tidbit which I think was instrumental in his leadership, particularly his ability to mobilize other people to strive for extraordinary goals—and this attribute is one which I think is essential for any leader today. Nearly four decades ago, Grove read a blurb which described the responsibilities of a film director. Even though directing a film and running a manufacturing company seem worlds apart, Grove glommed onto the article he read, copied the film director’s job responsibilities, and in 1969 he posted “My Job Description” on his office door. Here’s what it said: “A soother of egos, a cajoler of artistic talent…with the vision and force to make all these elements fuse into an inspired whole.” Brilliant. Even back then, Grove recognized that in running an organization, the leader who wants sustained competitive success can’t simply manage people with bureaucratic command-and-control techniques. The leader has to surround himself or herself with great talent, and then—using both imaginative vision and disciplined expectations—somehow coax and inspire those talented people to work together as a team in order to develop—and execute—cool technologies, great products, and superb services. The effective leader today is less of a mechanical “boss” and more of a conductor of a symphony or jazz band—someone who sees the big picture, points the way, integrates the talent, facilitates the work, helps people navigate the potholes, confronts the problems quickly, and revs up peoples’ excitement and commitment towards the end goals. The official job description you got when you joined your company is useful only if you want to survive. But if you want your career to thrive, Andy Grove’s job description is yours too.

The Real Clue to Innovation that Matters

Every corporate leader nowadays seems to tout the value of innovation. Some companies get innovation right—Google, Apple, Target, and FedEx come to mind--but elsewhere, many leaders have failed to garnish the kinds of returns from innovations that they hoped for. One of the reasons, I’ve found, is that the innovations have little impact. They are innovations, to be sure, but they are often so incremental (slight improvement in current products and services) or so inconsequential (they don’t matter to customers and investors enough to generate a “gotta have it” buzz) that their impact is muted, sometimes irrelevant.. Innovations must have impact to generate noticeable returns. One of the best signs of serious impact is how much an innovation (pardon my French) pisses off competitors. I don’t mean “piss off” as in making competitors “concerned, attentive, anxious, puzzled or alert”. I mean “really riled up and angry”. That’s because true innovations disrupt established industry practices and conventional wisdom. They seriously threaten the status quo of how business is conducted and how customers are dealt with, which in turn means that competitors face the possibility that their size and sunk costs suddenly become liabilities, and their usual competitive responses (continuous improvement, more marketing, cost and quality initiatives, and such) will no longer suffice.. When Apple launched its iTunes platform and iPod hardware, incumbents in the music world were ticked off because they could no longer ignore the disruptive realities of online music and peer-to-peer file sharing. When Southwest Airlines launched its point-to-point, low-priced, employee-involved airline, the company was vilified by entrenched legacy players in the field. Plywood producer Columbia Forest Products is beginning to ramp up production, distribution and promotion of its new Pure Bond product line, and that really ticks off its competitors. Pure Bond reflects a truly disruptive patented technology. It is a formaldehyde-free product line in a market place where the plywood in buildings (including your home) has been manufactured (and still contains) formaldehyde—a.k.a. poison. As part of its move to become a “green” forest products company, Columbia is banking on the fact that demand can be spiked up by selecting distributors who “get it”, and when necessary, going straight to the end user (homeowner, architects, builders and such) with the simple message that unlike competitors’ wares, Columbia’s plywood is not soaked with a dangerous chemical. Would you pay a little more for that sort of product? If the example of Whole Foods Market is any benchmark, a lot of customers will. How do you think other players in the forest products space are reacting? How do you think Columbia is viewed in industry publications? How do you think Columbia people are treated in professional association meetings? (Hint: from what they’ve told me, not very nicely). My prediction is twofold: First, Pure Bond will take off just like the iPod and Southwest services took off—because at the end of the day, it doesn’t matter how competitors react, it’s how customers react. Two, like what happened in the wake of iPod and Southwest, competitors who manage to survive will try to copy Columbia. The challenge for Columbia is not to fear their competitors’ current wrath, but to fear the danger of complacency when formaldehyde-free wood eventually becomes conventional industry practice.

It Wasn’t Nardelli’s Fault

So how can we make sense of the fact that Bob Nardelli—who doubled Home Depot’s revenues and earnings during his six- year tenure as CEO—was fired by the Board, and then given a $210 million goodbye kiss as he went out the door? There’s actually a rational explanation for this seemingly bizarre set of facts, but you wouldn’t know it from reading most analyses. Most explanations of Nardelli’s abrupt exit revolve around his leadership persona (imperial, distant, controlling) and his annual compensation package (obscenely large and seemingly uncorrelated to Home Depot’s stubbornly flat market cap during his reign). Undoubtedly these are important considerations, but they’re not sufficient explanations. After all, when it comes to critical financial metrics like revenues and earnings, Nardelli did well. And most of that $200 million severance package was built into his employment contract six years ago, so nobody should have been surprised. Here’s my take on what happened. From the very beginning, Home Depot’s Board of Directors screwed up big-time. First of all, Nardelli should never have been hired, regardless of the pay package. The Board got mesmerized by his stellar performance at GE, which was irrelevant. Nardelli ran GE Power Systems. He was a nuts and bolts manufacturing guy, an operations and processes guy, a B2B (business-to-business) guy who understood institutional customers like utility plants and factories. Home Depot is a retailer with customers like individual homeowners and small contractors. What’s retailing about? Ask the best retailers, like Bob Ulrich at Target, or Howard Schultz at Starbucks, or Hal Rosenbluth at the old Rosenbluth International travel empire. They’ll talk about things like customer service, design and colors, cool products, the look and feel of the physical facilities, and a vision of the intangibly great experience that the customer can always count on. They’ll go further and talk about highly-trained and committed employees, a culture that emphasizes innovative care on behalf of the customer, and information systems that permit faster and more personalized responses to the customer. Nardelli understood next to zero about that. He understood centralized controls to squeeze out low-hanging fruit of excess costs, he understood corporate-imposed systems like Six Sigma to improve quality and operational efficiencies, he understood high-level strategic planning to enter new markets like building supplies even as Home Depot’s big core business was fraying. Operational efficiency and cost reduction are excellent goals in any business, but the soul of retailing (and for that matter, most businesses) is about things like service, design, experiences, employees, unique vision and such. Under Nardelli, the health of all of those factors deteriorated, which is why same-store sales suffered, why so many customers defected, why so many front-line people were alienated, why many of the best managers left, and why competitors like Loew’s were able to capitalize at Home Depot’s expense. And that’s why Home Depot’s stock value stayed stagnant (in fact, declined) over Nardelli’s tenure, even as the S & P 500 rose 16% during that same time period. It’s not because he was autocratic or hard-ass; great leaders like Jack Welch and Steve Jobs have occasionally been described using those same labels, and besides, investors don’t care all that much about leaders’ personas. Investors are interested in one thing: future performance, and with cold, dispassionate eyes, they reckoned that even though Nardelli was able to squeeze out some laudable hard financials today, his persistent failure on the critical “soft” variables was setting up Home Depot for a big fall in the near future. I don’t blame Nardelli. He did what he’s capable of doing and what he’s always done. You don’t hire a Hall-of-Fame defensive lineman and ask him to dance ballet. I blame the board. They hired the wrong person, and compounded their error by offering him a ridiculous contract. Nardelli will now cry all the way to the bank, and then he’ll most likely supplement his golf outings with a lucrative position at a private equity firm which will properly channel his operational, distribution and manufacturing skills to the right venues. And hopefully, in seeking a new CEO, the Home Depot board won’t blow it a second time.

Built Right Into DNA

Ten years ago I heard a banker say that the difference between someone who’s over 50 years old and someone who’s under 50 is that the former want the bank to mail them their cashed checks, and the latter just want fax or e-mail verification. Way before that, it was the older crowd that would bypass the ATM machines in order to stand in line for a “real” teller, while the younger crowd thought that it was pretty cool to just get cash real time. In today’s marketplace, youth drives the process, especially when it comes to technology. As I’ve pointed out in prior blogs, for the over-45 set the Web and related hardware is a fantastic add-on to our lives. For young people, especially those under 30, it’s not an add-on; it’s built into their DNA.My eleven year old received a Nintendo Wii for Christmas. Very cool product, filled with (for me) terrifying assembly instructions. My son relieved me of duty. He took the box downstairs, unloaded and assembled the contents, hooked the whole thing into a TV monitor, found some glitches, called tech support, worked it out with them, and now has a great theatre. He did it in half the time and one tenth the angst that I would have. I’m impressed. No, actually I’m in awe. But for him, no big deal. Readers of some of my prior blogs have chimed in. One wrote: "My oldest is 19 and I am 47. I read the Wall St. Journal almost daily. Occasionally I find articles that I think would interest him so, like most old folks, I hand him the article - usually I find the section of the paper on his bed room floor and I suspect unread. As an experiment I started sending him links to the same articles. Lo and behold these articles became the source of dinner conversation".Another reader wrote, in response to my (November 9, 2006) blog that explained why young people prefer Instant Messaging (IM) to old, stately e-mail: "It is easier for me to IM 3-5 people with the same question than scrubbing through a research report, weekly trade news, or my email box for an answer. I can present an easy or difficult question and immediately receive 5 high quality responses. You are exactly right in pointing out that the younger gen is accustomed to immediate feedback. It is a very collaborative dynamic that involves the diverse, fast-paced, and multi-tasking characteristics you identified."I experience information overload everyday and it is a serious problem. You should definitely understand this. The scale at which information is available now compared to 15 years ago is insane. IM-ing is a necessary and efficient supplement to achieving daily progress in the work environment".Big implications for marketing? Product development? Management? Life? You bet! 2007 is definitely a new world. Happy New Year!