A C-Suite interview with Dr. Ram Charan, co-author of “Execution”, which was a #1 Wall Street Journal bestseller and spent more than 150 weeks on the New York Times bestseller list, and Jay Galeota, President of G&W Laboratories and the former Chief Strategy & Business Development Officer at Merck and Co., Inc.
Preface: According to the World Economic Forum, “Developments in genetics, artificial intelligence, robotics, nanotechnology, 3D printing and biotechnology…are all building on and amplifying one another. This will lay the foundation for a revolution more comprehensive and all-encompassing than anything we have ever seen”. [1] As companies struggle to quickly transform their businesses from analog to digital operating models, what is the role for CEOs?
Q. As a trusted consultant to CEOs for the past 35+ years, what’s different today for executives who are leading Fortune 500 firms versus the challenges of the past?
A. (Ram Charan) Digital transformation is now an imperative and not just a spectator sport. The continued decrease in the cost of computing has now made digital transformation available to not only Fortune 500 firms but also smaller companies as well. As such, the leaders of companies have a choice; they can be reactive and defensive or proactive and offensive. The first option is high risk.
Q. So, what’s the secret sauce for CEOs to consider as they lead their teams through these uncertain times?
A. (Ram Charan) Today’s market place provides an exciting, once-in-a-life-time opportunity to create the future by leading teams through digital transformation. Based upon my experiences and observations of the market place, there are five crucial play-book elements for success:
- First, a CEO must learn the basics of digitalization. If a CEO is not familiar with concepts like Artificial Intelligence, he or she must seek out such understanding as lacking such knowledge can be dangerous.
- Second, no individual alone can lead such a digital transformation. Leaders need a team of four or five key people who bring new learnings and insights. These are needed to develop the innovative business models that will replace outdated older ones.
- Third, CEOs have to understand and learn the behaviors of their consumers. One needs to start with the needs of the consumer and then work back to the processes within their organizations to see if they are indeed linked to the consumer experience.
- Fourth, CEOs have to recognize that many old rules of the past which worked well for decades are no longer relevant in today’s digital arena. They need to determine their new operating model, KPIs, and resources for the path forward.
- Fifth, a successful digital transformation is predicated on having the right ecosystem of customers and partners in place. And it’s up to CEOs to have the courage and determination to help shape this successful ecosystem.
Q. Jay, some readers might believe that tech companies like Alphabet, Amazon, and Apple already have innovative-DNA built into their daily operating models and feel that other industries (such as financial services, CPG, healthcare, and media to name a few) are at a disadvantage when it comes to transforming from an analog to digital entity; what are your thoughts?
A. (Jay Galeota) While I can see how people might have this perception, the reality is that some firms that are not “officially” tech companies often have as much or more technology assets. For instance, I recall an article that pointed to how Goldman Sachs has more programmers and engineers working on tech matters than Facebook.[2] Building upon Ram’s point around leading with courage, it’s this leadership aspect that I believe will make or break many companies’ transitions from analog to digital operating models.
Successful leaders in this technology state will need non-traditional development paths to be able to build the right teams and deeply understand and learn the behaviors of their firm’s consumers, as Ram talked about. They will need to know the details of the multiple aspects of execution involved in their business, in new ways that go beyond just their company’s role; since the interconnectedness of technology blurs the lines between roles in the traditional buying process.
Consider the human capital operating model that was around for decades at successful companies like our prior employer, Merck as well as firms like GE, P&G, and others. Building stable, long-term careers, like 25+ years with the same firm, was seen as a badge of honor and securing new experiences might mean a rotation within another functional area or geographical location, but within the same company. Still, the explosion of new technologies and their impact on every company’s operating model really up-ends this historical talent development model since even the smartest, hardest working individuals can’t acquire experiences from any one organization that can enable them to lead teams through such complexity. Instead, I believe more and more that digital-savvy leaders need to seek out new environments and situations that are outside of their current comfort zones to learn the basics of the digitally-enabled future. Smart firms will create and embrace a development model that forces talented leaders to make connections with new eco-systems and partners and exposes them to different operating models, KPIs and resourcing structures. Novel ideas like sabbaticals with key customers or suppliers (current or potential future), deliberate out-of-company experiences (with a path back) or key talent exchanges will help enable new levels of execution awareness, creativity and innovation that future leaders will need to succeed.
I’ve read recently that even the US military (DOD, Navy, Army and Air Force) recognize that the traditional “Career Officer” path to develop potential future senior leaders is insufficient in this new technology age. They have instituted programs like what I mentioned above. One example is the DoD Corporate Fellows program, where high potential senior officers leave their military roles for a year to work at top Fortune 100 companies. They return back to more traditional military command assignments with unique, differentiated knowledge of how other large enterprises approach strategic and executional challenges, including digitization. I believe the military is placing some big bets on talent management strategies that can help them develop broad-based leaders, with different experiences, to lead them through their digital transformations. In turn, I believe Fortune 500 CEOs should consider similar development approaches for their current bench of high-potential leaders with an emphasis on the ongoing connections to bring them back into the fold; better enabled to lead for profitable growth.
Ram Charan is a world-renowned business advisor, author and speaker. Execution, which he coauthored with former Honeywell CEO Larry Bossidy in 2002, was a #1 Wall Street Journal bestseller and spent more than 150 weeks on the New York Times bestseller list. Dr. Charan earned MBA and doctorate degrees from Harvard Business School, where he graduated with high distinction and was a Baker Scholar. He earned his undergraduate degree from the Indian Institute of Technology (BHU) Varanasi.
Jay Galeota joined G&W Laboratories in 2016 as President and Chief Operating Officer. Most recently, Jay was Chief Strategy & Business Development Officer and President, Emerging Businesses at Merck. Prior to that he was President of Hospital & Specialty Care, which represented more than $10 billion in worldwide revenues for the company. Jay holds a Bachelor of Science degree in biology from Villanova University and is a graduate of Harvard Business School’s Advanced Management Program.
[1] Klaus Schwab and Richard Samans, World Economic Forum, The Future of Jobs, January 2016, http://www3.weforum.org/docs/WEF_Future_of_Jobs.pdf
[2] Jonathan Marino, April 12, 2015, http://www.businessinsider.com/goldman-sachs-has-more-engineers-than-facebook-2015-4