What the Best CEOs Know: 7 Exceptional Leaders and their Lessons for Transforming any Business

By Lola Obembe

This is a review of a book TOE recommended to me and which he found very inspirational when he read it many years ago as a young executive. And so it is that I seized the opportunity of the Sallah holiday to read the riveting book titled “What the Best CEOs know: 7 exceptional leaders, and their lessons for transforming any business” by Jeffrey A. Krames. It chronicles the stories of 7 business leaders who re-wrote the rules of management.

It was an excellent read and I am pleased to share some of the insights that these great leaders gave to the business world. I will preface the summary by stating that the book was written in 2002. Therefore, while some of these companies no longer hold the same standing, the strategies employed by the leaders are still quite cogent.

The book starts out by defining the criteria for the selection of the CEOs and describing 6 traits which they all had in common

1. The best CEOs put their customers first: They start with a view of the marketplace and instill and outside-in perspective into the company.
2. The best CEOs do not necessarily have charisma but they have what the author calls an “evangelical leadership gene” which meant that they had an ardent or crusading enthusiasm for their jobs – and this was infectious.
3. The best CEOs understand the critical role of culture and how difficult it is to bring about meaningful cultural change. It didn’t matter the culture, but inculcating it in the staff was critical to moving the company in the desired direction. At IBM fear of mortal external threats to the organization; at Southwest airlines it was of utmost importance to infuse fun and good humour into their day – to – day operations; at Walmart, Sam Walton wanted every employee to feel like family and take a personal interest in the well-being of the company – he wanted  them to “own” it so to speak. Jack Welsh at GE was all about learning, and created a system where the workers had a say in how businesses were run.
4. The best CEOs create or adapt next-generation products, processes or solutions. They have a vision and anticipate the future of their industries. They also move quickly to adapt to the anticipated change. GE sold-off its fledgling Housewares business realizing that the future lay elsewhere once Jack Welsh took the reins of the company.
5. The best CEOs implemented the best ideas, regardless of their origin. Sam Walton was known to flat out copy his competitors tweaking their processes and improving on them. Jack Welsh formalized this into a learning culture at GE.
6. The best CEOs have advanced the leadership body of knowledge in some meaningful fashion over the years.

The subsequent chapters dig a little deeper into each individual CEO and what made them stand out.
Michael Dell, the entrepreneur who founded Dell Computers at the age of 19 in his college dormitory.  The secret to Dell’s success was in putting the customer first. He spent an exceeding amount of time with his customers, invited them in to speak with his key staff and left an open channel of communication between the company and the staff. Some of you may remember Dell. The company beat out its competitors by building its products with specifications laid out by the customer. In the mid -2000’s you simply went online and with a few clicks of your mouse, built your own custom made laptop which was delivered to you in 2 weeks or less. They not only knew exactly what their customers wanted, but they kept costs down by cutting out middle-men retailers. Dell stock had staying power even during the NASDAQ meltdown of the early 2000’s as the company brought in $60 -70 million on a daily basis from sales. The first pivotal strategy of exceptional leaders we learn from Michael Dell is to place the customer at the epicenter of your business model
After the advent of Apple and the mobile phone revolution, Dell, whose specialty lay in laptop computing found itself falling behind. In 2014, Michael Dell took his company private in order to be able to re-focus the business on its founding values which was to cater first to the customer’s needs.

2. Second, Kramer shares the case of Jack Welsh, the management Guru who turned Thomas Edison’s home appliances company into a multinational conglomerate worth 280 billion dollars.  Jack Welsh strategy was multipronged but what has set him apart from his contemporaries, and GE even till this day, was that he created an authentic learning organization. Welsh sought out the best way to do everything, from any source and he built an organization which was infinitely curious, seeking improvements in everything, all the time. Jack’s philosophy was that the hero is the one with the ideas and he was unashamed to give credit where the credit was due. Staff with the best ideas were celebrated and rewarded. Six Sigma, a management tool for process efficiency, was adopted from Motorola. But Welsh inculcated this tool with fervency and doggedness so much so that GE staff are known for their use of this tool today. Welsh was also highly competitive and employed a strategy that excised any business within the group which was not ranked no. 1 or no. 2 in its industry.

The characters of a learning organization detailed by Kramer are:

1. Information is shared and accessible. Learning is emphasized and valued
2. Mistakes or failures are not punished
3. People are expected to learn constantly

By the time Welsh left GE in 2001, the company was investing $1billion annually on training and training related activities and he had grown the stock of the company by an astounding 4,000%.

Some executives in the group recently returned from a training at GE’s famed Crotonville Campus and the knowledge they gained will be cascaded through all levels of the organization in the near future.

When Lou Gerstner joined IBM in 1993, the company had just suffered one of the biggest losses on public record – a whopping $8 billion. IBM, which invented the personal computer was hemorrhaging money from sales of an unprofitable Operating Sytems software and proliferation of PC competitors. Lou changed the company’s focusing on finding solutions. Within the first few months he had met with every major stakeholder in the business and was able to pin point not only where the problems lay but where the solutions lay as well. Lou decided not to split IBM but to transform it into an integrated IT services company which posted a profit of $5billion in just 5 years after he took over. The lessons from Gerstner is to put a customer in the CEOs office. Allow your customers to identify your Achilles heel and use every weapon in your arsenal to fix this with speed, marketplace obsession and team work. Lou’s experience also teaches that genuine culture change is hard and may even take years. Most importantly, anticipate the future of your industry and position yourself to take advantage of the future by investing in research and development.

Over a career spanning 36 years, Andy Grove would face and overcome two major inflection points in the microprocessor industry. A pioneer staff of the company Intel, Grove literally wrote the book on semiconductors and memory chips. In 1980, Japanese manufacturers flooded the market with cheaper microchips and forced management at Intel to pivot. The story told is one of legends: Gordon Moore, founder of Intel asked Andy what he would do if he was a newly brought in CEO. His answer was that they would get out of the memories business. It was a tough call, but had to be done. The company moved into producing microprocessors, the thinking part of the computer rather than just storage. Andy Grove’s memoir which details this period of his life was aptly titled “Only the Paranoid Survive” where he shares his experiences:

1. Develop an outsiders perspective
2. Never insulate the company so much that it cannot believe in its own undoing.

The second inflection point in Grove’s career was so because of the magnitude of the potential effect on the business. An Intel microprocessor registered what should have been a minor error occurring once in every 25,000 chips. Microsoft however stopped shipment of all the chip based computers until they were replaced at a cost to Intel of $500million in 1994. The impact of this was huge but Grove learned that not all such incidents spell disaster for the company. In order to prepare the organization for drastic change, one must listen to “alarmists” with discernment, encourage rigorous debate and discussion within the company and examine data while listening to your gut.

The Story of the founding of Microsoft is the stuff of Legends. Bill Gates’ dream, and the company’s mission at a point was to have a computer on every desk and in every home. But what sets Gates apart is his belief that smart people anywhere in the company should have the power to drive an initiative. He believed in harnessing the intellect of every employee at Microsoft and to create a faster and more decisive organization primarily through technology. Gates’ ideals can be reached by digitizing the company’s most vital information and making them readily available to the managers and employees who need them.

In the mid 1990’s Microsoft was slow to catch on to the internet revolution that was taking place. This all changed because of a memo written by an employee who witnessed what students were doing with the web at Cornell University. This memo eventually got to Bill Gates and the company went from one without an internet strategy to being obsessed with it. This would not have been possible if Microsoft did not have a culture that fostered ideas from everyone, not just the resident guru. Gates also led several company retreats to devise the turnaround strategy.

Another important point to note is that Gates’ encouraged knowledge sharing and because of the internet this became exceedingly easy. Employees were empowered because of the knowledge that they had of the company and he wanted to hear from them, particularly the bad news. For Gates, bad news had to travel fast. Gates’ encouraged staff to email him directly. He also encouraged the use of IT in improving process efficiency.

Key takeaways from this case study which we can learn from as an organization:

1. Make sure that your customers and suppliers have the same access to information as your employees.
2. Make sure that it takes no more than 60 seconds to retrieve any document or file.

Herb Kelleher in his own way, created and perfected a performance driven culture at South West Airlines. In one example, Kramer describes how during a crisis where the budget airline was faced with tripled fuel costs, Kelleher wrote a heartfelt letter to employees asking them to find ways to save just $5 a day. If they could do that then the company would save over $50million a year. The staff jumped to answer this call saving more than $2million in just the first 2 weeks. Kelleher hired first and foremost for culture. While fun was embedded in the corporate culture, only 4% of applicants successfully made it through the interview process. Kramer’s advice to achieve this at your own organization is to first of all understand that intangibles are often more important than the tangibles, like attitude for example. Each company must develop their own list of hiring criteria which are important to them and make sure candidates meet up.

For Kelleher, profit was a by-product of customer service. He believed that if the environment is created where people truly participate, staff know what needs to be done and don’t need to be controlled. The more people devote themselves voluntarily, the fewer hierarchies and control mechanisms are needed. Consequently, despite its size, South West runs a relatively lean structure, with only four layers of management. This has encouraged self-starters to shine at the company.

At SouthWest, employees are the primary customer. Here are Herb Kelleher’s steps to infusing the corporate culture for

1. Hire for good attitudes in preference to bad attitudes (even over bad attitudes with superior degrees, experience and expertise)
2. Train people in two things: Leadership and Customer Service
3. Have a Customer Representative at your highest officer level who is kept informed of all deliberations and proposals on all subjects affecting your internal and external customers
4. Let your people be themselves at work; manifest their true personalities and not have to put on a work mask
5. Celebrate the achievements of your people, often and spontaneously
6. Clearly delineate what your company is doing and why
7. Address employee concerns individually, promptly and specifically
8. Through role models, celebrations and communications, honor excellence in spirit as well as performance
9. Title and position are unimportant; leadership qualities are all important
10. Communication from the heart is more important than communication from the head and informal communication is just as important as formal communication
11. If you are not on fire about what you’re doing why you’re doing it and the people who do it with you then you can’t kindle their minds, hearts and devotion to a cause.

“There is only one boss. The customer. And he can fire everybody from the chairman on down, simply by spending his money somewhere else” – Sam Walton

At the time this book was written, Walmart had just been pronounced the largest company in the world at the top of the Fortune 500 and the largest civilian employer in the world with more than 1.2million employees. The reason for this was the fact that the company never lost track of its founder’s principles:Learn from competitors, but remain faithful to the vision.  Sam Walton never let an opportunity to learn something new pass him by, spending lots of time at competitor stores and travelling long distances to observe new methods in the discounting business. He also believed that those who interacted with customers had the best insights about the business and how to do things better. Kramer distills Walton’s playbook

1. Never stop learning – from competitors, customers and employees
2. Assume that there is something you can learn from even your worst competitors
3. Consider weekend meetings with managers to get a jump on the competition

Walton also understood early, the importance of IT to the future of his company. Time magazine made the case that he may have in fact been the first information age CEO. By 1992, Walmart had spent $700 million on its IT system which was pivotal to allowing the company work more closely with its suppliers and track its inventory, a competitive advantage which the company still enjoys today.

There are many more lessons from these great men and businesses to be learned but the essence has been captured in my summary. Pick up this book in your spare time and others like it. I will be presenting it at the HH Lectures in the near future.