December 15, 2011

Rock Star CEOs Aren't Good for a Company

In February 2010, when Jim Hagemann Snabe and Bill McDermott took over as co-CEOs at SAP, the Walldorf-based ERP (Enterprise Resource Planning ) company was facing a huge crisis. Leo Apotheker, a company veteran, had unexpectedly resigned as the CEO after being with the company for more than two decades. The company’s revenue was down 28 percent, employee morale was extremely low and innovation had stalled. Analysts had begun asking if the 39-year-old company was well past its prime and wondered if SAP’s board had made a mistake by not selling the company to Microsoft when they had the offer. But since taking over, Snabe and McDermott have managed to steady a rocking boat, even announcing the biggest ever acquisition (Sybase which was acquired for $5.8 billion last year). 

Snabe, who looks after strategy and innovation, was recently in Bangalore, where SAP’s second largest R&D centre is based. He took time out, in between addressing SAP engineers and meeting N. Chandrasekaran, CEO of TCS, to talk to Forbes India on the advantages of the co-CEO model, SAP’s next big idea and the future of software companies. Edited excerpts:

You took over as co-CEO at a very difficult time for the company. How did you both prepare for taking on that responsibility?

We both felt very good about the co-CEO model, we knew each other since ages, there was fundamental trust and we complemented each other.

The task was big, the industry was consolidating rapidly and we had not done a good enough job in our customer relationship and I also felt that we could do much more with our people who are our biggest asset.

As we stepped back, we found a world where there was a lot of need for growth, there was a constrained resource situation, and we felt that this was an opportunity for us to increase the purpose of SAP beyond just being the software company for business. We felt we could help run the world better. It sounds big and fluffy, but we had spent 39 years optimising the world’s companies.

We had defined resources as currency, materials and people. But if you can manage currencies, which fluctuate wildly, why can’t you manage scarce resources like water or energy and instead of looking at software for companies alone, why can’t we start looking wider? We also saw a trend of whole new technologies that could change the way people work and live. We articulated a strategy around these three.

There are few companies that have been successful with a co-CEO model. What is your ritual for working together?

In classical hierarchical models, the assumption is that you need one [person] to decide. And we challenge that it is the right model for the future. The world has become very multi-dimensional and you have to do many things like create innovation and growth, become more efficient, globalise and find talent in India. How do I scale my business, build partnerships and do this in a sustainable, responsible way? All of this is very hard for one person to grasp and I believe, and Bill feels the same, that if you want to be holistic in your approach, then why not divide and conquer?

When a company becomes only about a person, a rock star, then it’s not good for the company. The real power of this model is that you have four hands to ensure execution, which means you can go deeper into the business and not look at spreadsheets. I visit customers, look at software and developers, do testing, reviews of user experiences, and all of this is impossible as a lone CEO.

Before coming to SAP, I was this lonely mathematician who solved difficult mathematical problems, and I thought I was the best at that. My professor brought me in touch with more people who had a different way of thinking and together we solved bigger problems. It was the first time I realised that maybe I am not the smartest person in the world and the outcome is bigger when we team up.

Normally, when you are the lone CEO, you are very alone with the tough calls. We acquired Sybase for $5.8 billion. It was a big acquisition and we were only few months into our roles, but we rapidly made that decision and executed fast.

No comments:

Post a Comment