Today, I’m honored to introduce
our guest speaker and my dear friend Dominic Barton. Dominic is currently
the managing director of McKinsey and Company, that
means the CEO and Chairman worldwide. We served on the
board of McKinsey together, and actually
in many crazy places all over the world. I was thinking back on all the
places we did either client service or firms service,
and we found ourselves together in places like
Moscow, the United Arab Emirates, Japan, Korea, Belgium,
Silicon Valley, basically all over the world. And Dominic is a person who
actually has changed my life. And I want to
publicly acknowledge that he’s done that. He’s done many things for
me, including mentoring me. But he also did
two things that he didn’t need to do that
made a difference to me. One was that he appointed me to
the role of leading McKinsey’s leadership development
and learning in what I called McKinsey University. And that was a role
that actually touched me so strongly that it
made me convinced that I wanted to pursue a
second career, which led me here to Darden. And he made that appointment. And the second thing he
did without asking anything is he wrote my recommendation
for my doctoral program at U Penn, at a time when
we were both on the board together. And I think I might have put him
in a difficult position doing that. But I appreciated that
he did what he thought was the right thing for me. And I’m very grateful
for that, Dominic. In his 30 years with McKinsey,
he has basically served clients all over the world in just about
any industry you can think of, whether it’s banking, whether
it’s consumer goods, telecom, industry. He led McKinsey’s
South Korea office. Then he became the Chairman
of McKinsey in Asia. Then he became the Chairman of
McKinsey and Company worldwide. He’s a very prolific author. One count has him at
well over 80 articles. I thought it’d be at 100 by now. But he’s writes very
prolifically and interestingly on the topics of
business and society, leadership, and issues facing
capital markets worldwide. Dominic is also a very
interesting person. He grew up– although
he’s Canadian– he grew up in Uganda, and
even had his house taken over by Idi Amin when he was a kid. He’s a Rhodes Scholar, and a
truly, truly global person. In fact, I don’t
believe I’ve ever met somebody that has
traveled more frequent flyer miles in my life. But it means that he really
has an incredible view on what’s going on in
the world and what’s on the mind of the CEO. He also– I could share a number
of interesting stories that happened over late
night wine and partying, but just one I will
share is that we do– after one very, very late
night at my home in Belgium, we both discovered that our
favorite song in the world was Comfortably
Numb by Pink Floyd. And that led to me
being invited to sing in front of the entire
McKinsey Partnership Group, which was another
first at McKinsey. I hope we didn’t
embarrass him too much. But we still share that
passion and many others. Today he’s going to speak
to you on leadership in the 21st century
and global forces. And time permitting,
around 2:45, we’ll also take some questions. If you want to get
a job at McKinsey, and I think maybe a
few of you do, please listen very carefully. McKinsey’s the kind of place
that values global thought leadership. And they’re are also a fantastic
partner with the University of Virginia. They recruit all
over this campus, not just at Darden
and MacIntyre, in the engineering
school and otherwise. So thank you very much Dominic. Please, give him a warm welcome. Thank you very much, Scott
it’s a real honor to be here. I’m glad Scott didn’t tell too
many stories, because there’s a thing called mutual
assured destruction. So if you do want to ask
any questions about him in the question time, I’d be
happy to take some of those. But it’s a great
pleasure to be here, not only because this school
is such an important leadership factory, for not only the
United States, but the world. And I’m embarrassed to say
this is my first visit, even though I’ve been in this
role for seven years. So shame on me for such
a distinguished school. So I’m just
delighted to be here. I’ve already been
taking notes from Scott. He’s been rattling off
all the entrepreneurship and all the activities that
occur currently at the school, but also in Charlottesville,
and so forth. But it’s also, again,
because of Scott– it’s not that we’re going to
have a love-in here on it, but we worked extremely
closely together, saw many really exciting
things, many bad things, through many ups and downs. But when– I think
when anyone’s leading, and we’re all leading,
and Scott’s leading, resilience and
partnership are actually some of the most
fundamental factors of I think being able
to be effective. And that is a
partnership that we’ve had for well over two decades. And again, in McKinsey
we’re very, very proud of what you’re doing here. So what I wanted to do
over the next 30 minutes, and I in a typical McKinsey way,
I’ve got way too many slides. So I apologize, but
I’m going to just– they’re kind of like background
narrative while I talk. So I’m just going to
flash through them. But as Scott said, I wanted to
talk really about leadership. But I don’t think you can talk
about leadership unless you know the context in
which you’re leading. So this is the global
forces are ready to put the context in place
to understand what leaders are going need to do. And the basic message,
I would just say, is a lot of what we were taught
about leadership in the last 10 years I don’t believe is
relevant, or as relevant, as what we’re going to need
to be taught and think about as we think about the
next 10 to 15 years. Because a lot of what we are
taught which is important is what leaders do, you know
how you align an organization, what sort of ambition
you sat, all of the KPIs, understanding the functions
of how organizations work and so forth. But I’m increasingly of the
view that as we look ahead, the most important factor
or muscle in leadership will be the character
of the leader, who you are versus what you do. So you can go to sleep now. That’s the main message
I wanted to give. It’s not what you
do, it’s who you are. And the who you are is– there’s muscles there
that can be developed. You’re not born with it or not. And so I’m going to talk
a little bit about that. But let me quickly go
through the global forces. There are basically four
forces that are underway, at least that we
see, that are going to make this next 10 to 15 years
an extraordinarily unique time in history. Again, I would view–
when I say that, I’m thinking in a 300 year time
frame, not the last 50 years. In 300 years, I
believe that historians will look at this
next 10 to 15 years as one of the most vital,
dynamic, volatile, dangerous, optimistic times
that we’ve seen. And it’s because of these
four forces that are underway. We’ve got a massive
shift in economic power towards Asia and Africa that
we’re well on the way into. We’ve got technological
change, which Larry Summers would say we’re
only in chapter one of a 100 chapter book. And we know already
what that’s doing in terms of changing our lives. We’ve got an aging population. The world will never
be older than it is in the next 20 years. I’ll go through a little bit. That has big implications
on how societies work, how productivity
occurs, how growth occurs. And I think as a
result of those forces, but also independent
to them, there’s a system wide
transformation going on. A lot of leaders
think that we operate in a box that says things
like free trade is good, capital markets work
well, democracy is good. There’s just fundamental
beliefs that we have. Those boxes, or those views of
the world are being challenged. And they need to be modernized,
all those different elements of them. And the problem is
there’s not really any one to modernize them. There’s not a institution
that’s there to improve and fix our capital markets. There’s not an institution
out there to ensure that when free trade occurs, that the
people that are dislocated in the jobs get new jobs. These are– and you
know this– this is to me the Trump, the
Brexit, and the fractioning that’s going on in pretty well
every society in the world. So that’s a different realm
that we’re operating in. And it’s where geopolitics
is also coming into play. When I started at McKinsey
in 1986, all the way up until about 1992,
the real message was that countries or nations
don’t matter too much. What matters is the
capital markets. And the epitome of that
was when George Soros took on the Bank of England
in 1992 as an entrepreneur, as a hedge fund manager. One person forced the Bank
of England to devalue. Its just kind of this is the
message, capital markets, you better listen to them. That’s a very different
world than what we’re living in today, where
geopolitics is a major force, and it’s an issue that a lot
of leaders are struggling with. I’ll come on to
that in a second. So those are the forces. I’m just going to
flash through some of the illustrations of that. The biggest driver of the
change in economic power is urbanization. We’re going to see $2.4 billion
new middle class consumers in the next 15 to 20 years. That is extraordinary
just in itself. That to me would make the 10
to 15 years coming forward be unique. We’ve never had
anything of that scale. It’s about 1,000 times bigger
than the Industrial Revolution, and it’s happening quickly. And again, it’s primarily
Asia and Africa. I might say, particularly for
students, as you look at this, and you think about– I noticed, one of the things
that I admire about Darden, as well as the international
makeup of the class, which is important, but I think as you
look at your own next 10 to 15 years, think about
relationships that you’re building or understanding
in these parts of the world because they’re going to matter
big time in your time frame. And that’s important. And it’s very important to do,
I think, in the next 10 years, not in the next 20 years. One example of this– I like to show this
through pictures– this is Shenzhen where
Deng Xiaoping did his famous experiment. That’s where the phrase
he came up with– he said, “I don’t care if the cat’s
a black cat or a white cat, I don’t care if it’s a communist
cat or a capitalist cat, if it catches the
mouse, I like it.” He said, “That’s where
the cats played.” That’s Shenzhen 1980. That same piece of dirt
is what it looks like now. And that’s happening in
over 200 cities across Asia. It’s just happening. And it doesn’t matter
about SARS, or H1N1, or the great financial crisis,
the urbanization continues. This is just a force of
gravity, is what I would say, as we look at it. We’re going to see more of
the most significant companies in the world come from
this part of the world. By 2025, roughly half of the
most significant companies– and we know who
they are right now. You can see them growing
like grass in the system. I mentioned cities
are going to be the big driver of what that is. And so thinking– when we
think about for our clients, they think about a
China entry strategy, we don’t think
about it that way. Because we think about China as
a cluster of 22 different types of cities. So we don’t say go into China. Think about the city clusters,
because they’re very different. Some clusters of
cities in China have more in common with some of the
clusters of cities in Vietnam than they do with
other parts of China. So you need to think about
this in a more granular way. Africa– Africa in
my view, and I’m obviously biased because I
did I did grow up in Uganda, but I think it’s
a place that has been deeply underappreciated. And it’s on the move. We’re just going to be
releasing a report called Lions on the Move 2.0,
and while Africa has declined in growth
in the last five years, it’s still the second fastest
growing region in the world. And there are 11 major
economies in there that have actually
increased their growth rates over the last five years. There’s lots of opportunity. Also, you just look
at the size of it. And this is at a
very basic level. Because we’re all brought up
with a Mercator presentation of the world. Greenland actually looks
bigger than Africa. But when you actually– we
can fit China, Western Europe, India, Argentina, and the
US with lots of space. It just gives you the
sense of what’s happening. And it’s moving. Africa looks to me like
Asia looked to me in 1991. There wasn’t much trade. One of my Japanese
mentors, in fact, told me that Asia is
a Western invention. This is in 1991. You think there’s an Asia. That’s a time zone. We actually don’t
have a lot in common. That’s very different today when
you look at the trade routes. And I think we’re going
to see that in Africa. Huge need for infrastructure. If you think about the
many, many businesses that need to be built,
and what governments need to do, a huge agenda. Infrastructure is
one of the biggest. We’re going to see it in food. Ag food, which
is, again, I think an underappreciated
industry, I think will be one of the most exciting
industries in the future. It’s a high tech industry. One picture I took. This is just a picture from
a grocery store in Melbourne, which I took earlier this year. Basically, if you think
about milk, dairy, and you think about
baby infant formula, in China because
of safety issues, people are very worried
about where they buy it. And so, Australia
is a place where if you go to a duty free
store, you won’t just see whisky and alcohol,
you’ll see infant baby formula that’s there, because there are
so many Chinese families that fly, literally, from Shanghai
to Melbourne to buy milk powder and then bring it up. And you can see on the shelf,
there’s actually a limit. It’s a ration of
what they can do. And that’s just a group of the
customers that are coming in. So don’t underestimate
the demand that those 2.4
billion people have for commodities, and ag
food, and products like that. I think it’s going to be– it’s
a huge opportunity for North American companies,
for European companies, and also African companies. We’re going to see it in cars. We’re going to see it in
the airplane manufacturing business. But we’re also going to see
it is where the climate change implications are
very significant. And I think what
Xi Jinping’s saying in terms of making commitments
is a very significant issue. Because again, the 2.4 billion
people want a middle class, want to live and
eat like we all do. And from work we’ve
done, if that 2.4 billion do it the way we’ve
done it, we’re going to have some severe
resource constraints. Water, we think, will be the
new oil as we look ahead. So that’s just one of the
forces that’s going on. That in itself to me would
say this 15 to 20 years are going to be a
very dynamic period. The second one, which I think
now is even more important– I say this with some
trepidation because Scott, this is an area where he
spent a lot of his time. So he’ll probably laugh at
some of my comments here. But there’s really
three forces that are driving this
technological revolution. Again independent
from anything to do with what the economic
environment is doing, it’s the computing power,
it’s the connectedness of us and devices, and it’s data. Those are the three
drivers as we look at it. One way I try to look
at it in my simple mind is the average higher
washing machine, you know the Chinese
washing machine, that machine has more
computing power than NASA had in 1969 in its
entirety in terms of power to send someone to the moon. That’s the kind of scale
we’re talking about. And this is going to continue. This is the Singularity
University folks. Basically a computer today can
mimic an insect brain, which doesn’t sound that
sophisticated but insects are quite complex creatures. We’re heading to a mouse
brain, probably a human brain sometime in the mid 2020s. And then the
Singularity point is when do you do all human brains,
and what are the implications. This isn’t science fiction. This is why– public knowledge–
we’re doing work with the Pope, because the Pope has had
to establish a technology committee, because
as he says himself, there was nothing
in the Bible written about artificial intelligence. So he has a group of
people trying to advise him on what does this
mean, how do we interpret this, how do
we think about ethics and how that moves. So everyone’s being affected by
this, every single institution. The connectedness of
devices now is far more than humans and that creates
a lot of opportunity. And it’s not just the sort
of the power of computers and the connectedness. It’s also the
innovations going on in many other different areas, from
energy storage, what batteries can actually do, materials
science, graphene, which is being
developed in Manchester. Blockchain– there’s
just a whole range. And I’m sure in five years,
you’ll chuckle at this chart and say I can’t believe
these guys didn’t think about X, Y, zed,
and A. It’s just it’s hard to keep up with these. And they’re all transformative. It’s obviously affected all
of us at a very human level, or on the consumer side,
but it’s also affected us on the business side. And just two seconds
on this chart. This is– GE made
a very major pivot from being basically an
advanced manufacturing company, a well-known advanced
manufacturing company, to saying they want to
be a software company. It wasn’t a gimmick. The reason they did that–
this is from Jeff Immelt– was if you take a
locomotive, which is one of the many
products they produce, they spend a lot of money
focusing on the metal that’s used in the wheels,
the power input, output ratio, the
manufacturing, the power, the resiliency of that vehicle. And the way you measure the
asset value of that vehicle is its average speed. That’s the value to a company,
like a railroad company. And this may be a weird sort
of piece of information, but the average speed of a
locomotive in the United States is about 22 miles an
hour, every hour, per day. If you can increase
that by one mile an hour on average, for someone
like Burlington Northern, that’s a $250 million
profit opportunity. So what Jeff Immelt
said is I don’t want an Uber coming in here,
working off our machines and figuring out the analytics
of how that locomotive can move through it. We need to own the
analytics, and the software, and the sensors that
go on that side. And that’s why you
see the internet of things becoming such a huge
transformation in industry. We know about cars. The only thing I’d
say with this one, this is again how we’re going
to see a lot of competition coming from other sectors. We used to, at least I
was taught at McKinsey, when you think about
competitive strategy, you think about the companies
that are in your sector. If I’m a banker, I’m not going
spend a lot of time thinking about the automotive industry. Well, today you better
think about what’s going on in other industries. One example I’ll
give you here is if you think about
cardiac surgeons, which is a very important profession. It’s actually, it’s
a big business. If you’re one of the best
cardiac surgeons in New York, you probably don’t think
too much about the automated vehicle, but you should. Because, unfortunately,
and this isn’t a good topic to talk about after
lunch, but most of the hearts that come
for the heart transplants are supplied by car
accident victims. So you’re going to see a sudden
change in your supply chain, if I might use those phrase,
if you’re a cardiac physician. So these are things that
you need to think about. It’s changing views
about– again, I was taught that if you are
going to build a business, you have to own some assets. Well, some people have
showed us you actually don’t have to own assets. How you think
about distribution, whether you own
it or not, or you build a company based on
distribution rather than products. There’s a lot of
orthodoxies that are being challenged in how
businesses, and companies, and organizations are set up. And there are some very
big implications for jobs. Think about the big
three employers, back in the early 1990s, it
was the automotive companies. The only thing I’d say
here is you look at their– just look at their revenues,
$250 billion for the big three, and then you look at the
revenues of Google, Facebook, and Apple, and we probably
need to update it, but you see about a tenth
of the jobs being created. And this is again
something that we’re going to have to
grapple with, because I don’t think our educational
institutions are keeping up with the pace of the
change as we go through it. We’re seeing a lot more
automation that’s happening, of work. We’re doing some work
right now in Canada– it’s pro bono– with
the Prime Minister to try and increase
the growth rate by 200 basis points in Canada. One of the things
we’re looking at is for the 18.1 million jobs,
we think that half of them have a high risk of being
automated in the next 10 years. And again, that
will have a huge– if we don’t think again about
job relocation, training. That’s why I think
universities are not going to be places that we go to
twice or once in our lifetime, but maybe six or seven
times through it. I hope you like the places
where you’re living here, because you’re probably going
to be coming back many times. That’s why I’m here. I’m hoping I can get
a room at some point. Obviously, technology puts–
there’s significant threats. And I love this one
Eric Holder, who says, “There are only two
types of companies, those that have been
hacked and those that don’t know they’ve been hacked.” And that’s a challenge
we’ve all got to face as we go through it. So technology is
a massive force. I think we’re in the
early stages of it. It’s already disrupting us. Aging population– I’m just
going to show one page here. I think it’s pretty obvious
what the implications are, because demographics are
very, very, very difficult to try and jolt or change. You look at them
and you see them. And this has a significant
implication for productivity growth, because the biggest
driver of US productivity growth over the last 50
years has not actually been technology, it’s been
women entering the workforce in the late ’60s and 1970s. That was the single
biggest push. What we’re going to see in
many of the OECD countries is people coming out of
the workforce because of the current pension age. So we’re going to
have to work longer. It’s just not going to work. We’re going to have
to work longer. And we’re also going to– I think immigration is going to
become a very important thing to do. So much against the sort of
current political debate here, I think we are going to
want to attract more people to be in the country. That’s why in the Canadian
work that we’re doing right now is saying we should
triple the immigration rate from what it is today. And people are actually
supportive of it. We’re going to see more of that. Older people also
cost more money. As I get older, I
think it’s good to have more older people around. But we’re pretty
expensive to keep moving. I think it’s something like
75% of the costs of a human, from a medical
care point of view, occur in the last three
years of someone’s life. So we have to have
very profound changes to how health care is done or
governments are just not going to be able to work. And the system wide
transformation, I mentioned at the
beginning, there’s a lot of assumptions we have
about how the world’s moving that are changing, inequality,
polarization, increasing displacement, what trade
is doing for people, geopolitical– and again, I say
this, I’m actually an optimist. I don’t want to make
people feel worried, but there’s a hell
of a lot of change going on in here, which is going
to have to get settled out. I think some of these
facts, like this from Oxfam, that the wealthiest 62
individuals on the planet are equivalent to
the bottom half. You know, with technology,
people realize this and start to say why, is this right? And by the way, as
a good capitalist, I don’t believe that you
should have equality. I think inequality
is part of a system, but if you don’t have
equality of opportunity, you have a very bad outcome. And that’s what
we’re seeing more of. That’s what worries me. I think we are not seeing
the same level of opportunity that we had in
the last 10 years. And our data actually shows it. This is data we just
recently looked at. Just at income levels,
where roughly– you’ve got 560 million people
whose incomes have either stayed the same
or gone down in 25 of the most industrialized
countries in the world over the last 10 years. And so Brexit is not
because of ignorant people not understanding
how the system works. It’s people who
have not benefited, that they’ve not participated in
the change of what’s going on. And we’re, again,
seeing that here. We’re seeing it in Mexico. There’s not a single
country that’s not being affected by this. And unfortunately, we’re
polarizing more over time. I think a lot of this is
actually driven by the media. It used to be if you
wanted to get a television show on in the
early 1990s, you had to think about an audience
of six million people, which by definition meant you had
to be more in the middle. You couldn’t have a crazy
radical side of things. But with the internet today, I
can do a very profitable show for 10,000 people. So you’re seeing a sort
of a polarization of it. So we’re watching our own news. I’m not watching your news. And you’re not watching my news. I’m watching– we’re
watching our own. And so there’s less
social capital. We’re seeing, again, already
significant job dislocation that’s occurring. Geopolitics is now,
in most countries, for CEOs, the number one
issue that people actually worry about, as they see it. Refugees are now at
an all time high. When I did this
chart last year, we could always say it’s the
highest levels since World War II. We’ve now broken through
the World War II side. I don’t see this going
down anytime soon, with the conflicts. And it’s one of the ways we’re
globalizing, unfortunately, in a sad way, because
of the violence. Jeff Immelt gave what
I think is a very profound speech
at a commencement exercise in New York in May. And he basically–
GE, which in many ways is the epitome of the
globalizer, the free market, multinational, capitalistic
company, basically said we’re going local. We’re going local, because the
currency of the realm are jobs. We can’t just ship those
locomotives from the US to other places
because countries are saying how many jobs
are you creating for us, you need to localize
where you’re moving. That’s a very big
shift that we’re all going to have to deal with,
just as one of the implications. There’s some very interesting
books I think out there. Bremner’s is one of my favorite
about the G-Zero World. As the US played a
extraordinarily important role since World War II I think
in stabilizing with capital, with values, and so forth. The US is pulling back. China’s not ready
to play a role. And so you’ve got a G0 world,
is what he would call it. And we’re having
challenges to states, as we’re seeing in
the Middle East. What this means when you
put it all together is also the lifecycle of
organizations is shrinking. So if you were in the S&P
500 in 1935, which was not a great year to
be on the S&P 500, your average life
span was 90 years. Today it’s about 15 years. And I look at this chart
a lot because this year is McKinsey’s 90th anniversary. And I worry because we have
no god given right to be here. Unfortunately, for
me, there’s no law that says you have to
work with McKinsey, and there are many, many
superb competitors, disruptors, often again coming from
outside our traditional area that we’re going to
have to deal with. Is this speed OK? I do think there are
some encouraging signs. This is just one. I just say with the
International Space Station, it’s remarkable to
me that in times when you have
Russia in the Crimea and in Ukraine, you have
conflict in the Middle East, you’ve actually got close to 45
different nations that continue to work together to make
that space station happen, different languages,
different measures. And it works in
what they’re doing, the number of people that visit. And so there are
many things where we can actually cooperate. There’s a new system actually in
the Middle East called Sesame, which actually has the Israelis,
the Iranians, the Saudis, and a number of other countries
working together on basically an accelerator to understand how
molecules and atoms work when you put them under high
pressure and so forth. On the science side we’re
actually seeing cooperation. We’re seeing it actually
in areas like cancer as well, across it. So there are glimpses
of where people seem to be able
to work together, but there’s not a lot of them. So the last part, I’m just going
to finish off in 10 minutes here. So what does all that
mean for leadership, given that world which is moving much
faster, has so many changes going on at the same time? This is what I
mentioned, I think we have to think as
much or even more about who we all are as leaders,
who you all are as leaders, versus what leaders do. I just want to quickly go
through a few of the elements that I think are
going to be important. One of the things,
as Scott said, in traveling around,
what I do, I have a rule, I have to see two CEOs or
government leaders a day. It’s just a rule. Because when I
joined McKinsey, I didn’t want to do internal work. I wanted to try and stay linked. But I’m not reliable or allowed
to do client work right now. So that’s my
release, if you will. And I always ask these
leaders two sets of questions. One, what do they
wish that they know now they’d learned at the
beginning of their time as a leader? If there were three things
that you wish you knew, what would those be? And then I ask them what are the
three most exciting or worrying issues that you’re facing? And so it’s more from the
first question, where I’ve just started the pull this. I think I’ve seen now about
1,700 different leaders over time and I keep
a little blue book of the comments that are made. So the first category,
which I think will always be
important in what people do is how you set an ambition. And the role model for me
is actually South Korea. This is a picture from 1970. What you have is basically, in
the middle is President Park, then you have a business person
called TJ Park and a worker. And they’re in what’s
called the POSCO Pit. Korea at that time
had a GDP per capita less than the
Philippines at the time. It was a very, very poor
country, no natural resources. The World Bank had told
South Korea you should never build a steel mill. You have no energy,
you have no resources, you have no economy, what
the hell are you doing? And I can tell you if
McKinsey was there in 1970, we would have said
it 10X, don’t do it. These guys did it. And POSCO today remains the
most productive profitable steel company in the world. These are the guys that
built it in that dirt pit. And it’s ambition. Ambition can be crazy. There’s a fine line
between bold and crazy in all of these things
as we go through it. But what I would say
is there’s been a– what I always tease my
Canadian counterparts who are doing the work,
I said imagine, let’s just do the thought
experiment, if South Korea all of a sudden owned Canada,
what do you think they’d do? And I actually got a
bunch of South Koreans together to say let’s pretend
you do, what would you do. And it’s really interesting
to see where it is. And to me it’s
around, it’s ambition. And in a world that’s changing
quickly, where a lot of it is going to be around
talent and people, that’s going to
matter so much more with what we have
with technology, what’s your ambition? Ambition, again, can have
negative connotations. This doesn’t mean greed. This is about where do you
want to take the organization to be able to be relevant,
to be able to be significant, and resilient over time. You need to think about that. I find a lot, there’s a lot of– I’ve had a lot more actually
inspirational stories from a lot of Asian leaders. This is the CEO of Higher. If you don’t know
about Higher, it’s well worth reading how
they’ve been transforming their organization. But this is one of
the boldest leaders, challenging themselves. They’ve gone from an 80,000
person pyramid organization to basically a flat organization
with 200 business units. Again, things that
McKinsey would have told them never to do. You’re going to create
chaos, this is crazy. You can’t move that many people. Well they did it,
and the performance that they’ve achieved,
and the energy that they’ve created with the
talent has been remarkable. This notion of anticipating
the second balance of the ball. Often when we think about an
action that’s going to occur, we say well therefore,
this is the next step, what you should do. Actually the most
important thing, and this came from Alex Gorsky,
who told me this, he said the thing I wish
I’d learned at the beginning was that it’s most important to
think about the second bounce of the ball, not the first. The first is kind of obvious. It’s the second and
third that you don’t know where things are going. That’s where the
opportunities and the risks are often going to be. The ability to prioritize
and compartmentalize, this I learned from
Mary Barra, but I also learned from a large insurance
company, Allianz, in Europe. And basically the view was I
was meeting the CEO of Allianz, who basically said to
me if I had seen you in my first week in my job,
I would have kicked you out of my office. I said, OK, I get the feedback. He said, no, it’s
not about you, it’s because I, in my first
week, as becoming CEO, I found out from our
legal department they were being sued for $10 billion. And he said I couldn’t– I was paralyzed. Everything I looked
at was $10 billion. The microphone, Scott,
it’s 10 billion. And he goes I
couldn’t concentrate. That’s why I would
have kicked you out. And he goes now
I’m talking to you. I have six of those things
that I’m dealing with. They’re like plates
spinning behind my head. But I’m focused on you. It gets compartmentalizing
what you need to do while crazy
stuff is going on. And that’s not– it’s a very
difficult skill to learn, and how you do it,
we talked about that. One of the places I think
that teaches this very well is West Point in the
Plebe class, where one of the exercises
I saw was you get some of the new
cadet class to come in. You have to solve an
engineering problem while you’re crawling on
the ground with barbed wire over your head and machine
gun fire going over top. So you have to compartmentalize. You can’t focus on
one or the other. You have to do both. That’s probably not a program
to put in place here at Darden. But I think the idea
of, again, thinking about how you do that, how you
can focus is very important. Telescoping– Microsoft,
Randall Stephenson, he’s a hero of mine. He’s the single largest
infrastructure investor in the United States. And his sense, he said
I wish if I could do it over again that I was able to
keep a microscope in one eye and a telescope in the other
and not get a headache. Now, obviously he
hadn’t done that. But you get the sense
of what that means. He said because the
world’s moving so quickly, I got to keep my eye on
what’s happening here, but at the same time there’s
these deeper, longer term trends. And if all I do is focus down
here, I’m going to wake up and we’ll be an
irrelevant organization. And how do you balance that? That’s why I think things
like a three year plan, and a one year plan,
I’m not so sure those are that valuable anymore. We are thinking now, and we
see it with our organizations, maybe it’s a three month
plan and a 20 year plan. In technology companies,
it’s an eight week plan. An eight week plan
and a 10 year plan. So just thinking how
you move our resources around your organization with
that world that we’re in now is going to have to
be done differently. Managing your energy,
not your time– Carlos Ghosn, he’s been one
of the longest standing CEOs, I think dealing with some
of the most complex issues. He’s got the French government,
who from time to time wants to own more,
wants to interfere more with what’s going on. He’s got a joint venture
between a Japanese and a French company,
highly unionized. And what he says is the
basic what I focus on now is it’s how I manage my energy. It’s very difficult
to manage my time. It’s when are the times
during the day when I’m ready to make decisions. He thinks about 90
minutes sprints. I can’t do anything for
more than 90 minutes, or I just bore myself, I just
can’t concentrate anymore. So 90 minutes. There’s a lot of
sports medicine that’s actually going into CEOs. The fastest growing CEO
advisory space today– I wish I could say
it was McKinsey– is actually sports medicine. Helping athletes
recover is actually one of the most important
parts of having a very successful athlete. So how do leaders
recover when you’re dealing with days like this. Andrew Liveris, same
thing, [? ubiquitous. ?] One of the best
people developers, this is KV Kamath from
ICICI, who single handedly– all of the women CEOs basically
in India, he mentored them. He built, he’s just phenomenal
at mentoring people, but also women in particular. And his notion was if I could
do my time over again as a CEO, I would have spent even
more time on people. I would have removed
people faster. I would have moved
people up faster. And I would have spent
more time with people. Just as we go through it. Irene Rosenfeld as well, Ed
Breen at Dupont, I think again, we’re finding that the role
of the HR officer, the CHRO, is a much, much more strategic
role than most companies think about. We think there should be
more CEOs coming from the HR position than there are today,
given the importance of where this is. Probably one of the most
purpose driven leaders that I’ve seen out
there is Paul Polman, who came in– he
would have what I call the courage of a
dead man, and I’ll come to resilience in a minute. He’s someone who– he was
at Procter and Gamble, right to the top of the chain. Didn’t become the CEO. Was hired then by Nestle. Came right up to the top of
the chain, wasn’t made CEO. And then Unilever asked
them to become the CEO. And what he’s done in terms of
rethinking what Unilever is all about, which is around the
purpose of the company. What’s the role of this
organization on the planet? He’s a big believer in
sustainability and climate change. He came out and said a couple
of things in his first week on the job. One, he said we’re going
to double the profits and half our carbon footprint. People were shocked. He said second thing is no more
quarterly earnings guidance, because we’re long
term, and if you don’t like that, investors, get out. Literally said that. And then I said,
well, how did that go? And he goes, well,
one thing I learned is it’s easier to lose
investors than to gain them. But he said, frankly, in my
first three months of my job, there’s no way that
I could be fired. So this is the time in
your early part as a leader to set the mark and the bar. And I think he’s doing
that for a lot of leaders as we go ahead. Marilyn Houston’s one
of my favorite CEOs. I’d follow her anywhere
around the world. I think what she’s doing
at Lockheed Martin, which is going through so many
changes on the technology front, you just can’t even imagine. And I think some of our
most interesting technology is in the defense industry
that we can’t see, but it’s phenomenal. And so she has a perspective,
in my view, of a world that’s changing very quickly,
dealing with the geopolitics, and also being a very,
very people driven person. So I just– someone I think
that we should study more of. Selflessness– one
of the things that I think is most
important in leadership is it’s not about you. And unfortunately, many
leaders as they spend more time in their leadership role
get more into themselves, it’s more about them. And as you’re in
the role for longer, you actually have less
people telling you what you’re not doing
right and so forth. And I think the most
effective leaders are those that are very selfless. And one of the ways
I learned about this was actually in the
US military, again in picking a five star general. The CEO of Clorox went
to see the group that’s involved in that, to learn
about CEO succession. He was moving out. He booked half a day. Thought it was going
to be a long session. Said the meeting
lasted 15 minutes. Because what he basically
learned was he said, it’s very simple, we just look
for two things, selflessness and judgment. All the rest, the
track record’s there. But it’s selflessness
and judgment. And I don’t think we
spend a lot of time thinking about what that is. Lubna Olayan, I don’t know if
people even know about her. She’s a Saudi woman. Their family manages somewhere– I don’t know, it’s a
very private company– somewhere in the order
of $35 to $40 billion. Is a woman that you never see. She’ll be in a
meeting that you have. She’s not the loudest person. She’s just quiet, listens,
effective in what she does. And to me, is a role model
of a selfless and extremely effective leader, because I
think the two go together. And I think, again, there’s
the issue of judgment, as I come through
it, and decisiveness. I think President Obama
has talked about this. And unfortunately,
the toughest decisions come up to where he is,
because they haven’t obviously been resolved. And often those decisions are
right versus right decisions. This is where many
CEOs I’ve talked to say if I could
do it over again, I actually would have read
redone part of my education. I would have taken
more philosophy. You may not know this. One of the most popular MOOCs
for CEOs is basic philosophy. And you say, well, why is that? This is the next slide. There’s not a CEO
here on this picture. But it’s basically
a picture trying to represent Fonterra,
which is the largest dairy company in the world. I remember meeting the CEO,
and I said what did you learn? And he said, the hardest
thing that I’ve had to learn is how to deal with right
versus right decisions. I said, well, I’m
not a philosopher. Tell me what does that mean. He said, OK, I get a decision
like this once a week. Let me tell you what
last week’s was. One of my researchers,
research scientists, came to me and said, we can increase
the production of one of our average dairy
cows by 25% if we abort the fetus three weeks
before the calf should be born. So one lens could be it’s an
animal, we’re making milk. We’ve got to produce milk. We’re going to do it. You could to have that view. The second view is you could
say I could have that view, but worry about what my
consumers might think, because they may
not think that way, and say that seems a
little bit unethical. Or you may just not believe
that that’s the right thing to do in treating an animal. Because there’s no
guidebook for that. I can’t go to a
business school that’s going to tell me how
to make that trade off. It’s a judgment. But you have to make a call. And he said I get one
of those types of things a week as we go through it. So again, I think thinking
of that is important. The notion of being
destructive, and challenging your orthodoxies, I
think is fundamental. Klaus Kleinfeld is
someone I think who’s done that very well, at Alcoa. Willing to completely break
up the company for the company to be more successful Ed Breen also did that at Tyco. And then resilience, this is the
last one I want to talk about. We all we all understand
what Jack Ma has done. It’s very interesting when
you look at his background. You know KFC came to China. 24 people went for the job. 23 people accepted. I was the guy who wasn’t. Who’s there? Incredible resilience
in what he did. And I think this is one of
the most important muscles that we need to have. And some of the work that
Scott did in McKinsey when we were looking at
leadership development, one of the areas we looked at
was why are some people more fulfilled than others. And we looked at everything
over a 30-year time frame. We looked at what
schools they went to, what nationalities they had,
what type of projects they did, which sectors were they in,
how many mentors did they have. You know what the one single
differentiating feature between those who
felt more fulfilled, and this included people
10 years after their time in McKinsey, the one
differentiating feature was the more fulfilled
people had more failure than the less fulfilled. I said that must be– you got
it backwards, something’s wrong. They said no, that’s what it is. And it’s this notion of taking
risk, but getting yourself back up again to move forward. And I think that is extremely
important when you see leaders. And I’ve seen leaders blow up,
who’ve had wondrous golden boy or golden girl
careers, and then they hit an issue which
may not be fair, it may not be because
of what they did, but they can’t handle
it, and then it blows up. One CEO, I remember
from a company that’s generated a lot
of leaders, and I asked what was your learning
after the financial crisis, said I learned about
character and leadership. I said well, what
do you mean by that? He said well, two
of my top 10 leaders cracked like glass when
the temperature went up to 1,400 degrees. They literally–
they were paralyzed. And these are people
that had built businesses, turned
around businesses, lived in different countries. And I said what do
you do about it? He goes well, I
can’t cook them up. I can’t take my leaders and
stress them out to the hilt and see where it is. So I said what do you do? He goes, I asked them to
stay overnight at my house. I said why do you do that? He said because I want to
get a sense of the character, the informal side more,
and where they are, and what’s happening. I said your new model
is a sleep over, is that your development path. But this resilience is key. The last one I just show is
you look at Abraham Lincoln. Just look just look at that
list of failures and issues that he had to deal with as
he is he went through it. So again, this is not a
cry to go out and fail like a mad man on it. But I’m just saying–
but it is a cry to take risk and try different
things as we go through it. So anyhow, I’m going to shut up. I’ve talked for too long. I hope that’s just
given you a picture of a world that is like
we’ve never seen it before. I think an exciting time. it’s going to take
a lot of leadership. I’m jealous of you
because you are all going to lead I think in one
of the most exciting times that are there. But I think we’re going
to have to focus more on the who leaders are as
much as what leaders do. Well, thank you very much. Do you see yourself having to
take on more government clients in order to really
affect the sort of change or grapple with
issues that are going to be at the forefront
in the next 20 years? Yeah, that’s a great– I think that we have to act now. I think if we don’t
change fundamentally in some of the things
that we’re doing now, I think we could end
up in a very bad place. And so I think one
of the things we– I think business
leaders are going to have to be much more involved
in the society in which they operate. You have to be thinking about
the jobs that you’re creating or not, or dislocating. What you’re doing to build
the community or not, and there are companies that
are doing this very well. And if you don’t, you’re
going to be villainized. I think that’s going
to be– and you won’t have the license to operate. So I think business
leaders are going to have to– they have to do it
now, not five years from now, or 10. They have to get involved. And I’m seeing it. Coca-Cola is actually doing
a lot on the societal front. If I look at what
they’re doing in Mexico, they’re doing a
lot on resources. I’m just picking
them as one example. There are number of others. But we’re going to have
more of that happening now. I think in government,
on the political side, I don’t know what- I’m not a– I just don’t know
what to do there, other than say we want– we need
more leadership, which is not a very helpful thing to say. But what I do think we’re
going to have to have is to also have– we’re going to have
to have an invention and innovation in policy. So the last, in my view,
one of the last big policy inventions that was done
in, let’s say 100 years, was pensions. Bismarck came up with
pensions in 1881. We don’t have– there’s been
health care reforms of sorts, in different parts
of the world, but I think one of the biggest
reforms we’re going to need now is job dislocation. And we need it fast. People talk about Pittsburgh
being an amazing story because it was a steel town. The steel workers
lost their jobs. Now it’s become a health center. Well, the problem is those
steel workers are not the health workers. They’re still unemployed. And we’re going to have to have
an innovation in policy now to deal with that. Or we’re not going to
be able to move it. So I think there’s a huge
agenda to deal with now. And I think it’s
important for a business to get involved in that. And I think also
for people that are in the civil
service, if you will, to also be innovative and
creative, because it’s just not going to work otherwise. And I think my hero
there is, as I look, Angela Merkel is one of my– she’s a bold leader, has a
view of what she’s trying to do, and be able to drive it. I think the Canadian Prime
Minister is of that ilk too, trying to make it work. But there are not
a lot of leaders to look to who are long term
in what they do in dealing with fundamental issues. Thanks so much to
you coming to VA. My name’s Shawn, undergraduate. I study politics and commerce. I have a question for
you as what worries you the most as a
leader from McKinsey and the global
business community? I have quite a lot of worries. I have. I think one I actually
worry quite a lot about is cyber security. Because we do a
lot of confidential work for about 2,500
institutions around the world. Some of them are governments,
that are companies that are working in technology. And I worry about that
Eric Holder comment, about being hacked. And that affects our trust. So that’s at one
level I worry, there. I also worry about– and this
probably is not a very good comment to make when I’d be keen
on trying to recruit as many of you as I possibly
can to McKinsey– but one of the
things I worry about is at McKinsey we work
with the CEOs, leaders of organizations in
building businesses globally, restructuring. We’re at the tip of the
spear of all this disruption. And so we are elites, we’re
the group, this quiet group, doing this stuff. We’re benefiting
from globalization. And I worry about who are
these people from McKinsey and who gave them
the right to do this. We’re private. We’re not regulated. And I think we have to be
very thoughtful about what it is we’re doing
in the countries that we’re operating in,
what’s the role we’re playing, in terms of are we
building businesses that will create jobs,
like the mix of our work? I never used to have
to think about that. But I do, because you look at
what’s happened to Apple just on the tax issue. You know, a company
that’s extraordinarily popular and revered because
of their innovation, but I can tell you
in Europe, on the tax side, it’s kind of like what
the hell’s going on here? How come they’re not
doing that, if you will? And those things can
turn very quickly. So it’s the short-term
cyber stuff I worry about. And then it’s the what’s
our role and how are we perceived by the
steelworkers in Pittsburgh, or people who’ve
been dislocated? You talked a lot about the
changing evolution in time periods, and how
short-term and long-term are fluid definitions. But I’d be curious as
aspiring leaders, what is your perspective on the
amount of energy and attention from leadership that should
be focused on the tactical, and the short-term decision
making on a quarterly basis, versus some of
those longer trends and kind of emerging
vision of the organization? And how do you
divide, and how do successful leaders divide their
energy towards those pursuits? Well, it’s a great question. I mean, I think that there’s
too much microscope, not enough telescope going on, or
too much focusing on the three months or the quarterly. And I would especially
say that with, if I could, Anglo-Saxon leaders. It’s very– I don’t
want to stereotype Asia versus– but one of
the reasons I got interested in this whole area is when I
moved from Shanghai to London, and I do the two CEO
leader visits a day, I was shocked at how
short-term leaders were. And these are people
that are good leaders, but they are forced
by the market, by activist
investors, and others that they will deal with that. We’ve got statistics on it too. That 55% of CFOs in
publicly listed companies will not make a net present
value positive investment if it means missing their
quarterly earnings by 0.01 cent. And we don’t have enough
investment going on. And that’s short–
that’s not capitalism. That’s short-termism. And you can see it, that
moving through the system. Whereas, if I look at
someone like Samsung, or I look at Higher, or
some of these organizations there that are– I’ll never forget, doing work– this was in Korea. And we were doing it actually
with the President of Korea. And he said, we’re going
to do a 60-year strategy. And I couldn’t understand
the translation. I said, it must be six, not 60. And he understood English. It was President Lee. And he said to me,
he goes, I said 60. I went OK, I got the message. And he said, no, but
for you, white boy– he literally called me that–
he goes, you, white boy, he goes we normally
think 100 years, but I don’t think
you can handle it. So 60. I’ve never forgotten it. I think the time–
and I do think there are these– that’s
why I think, again, you will you will see, for many
multinationals right now, the future leaders, in my view,
are being groomed in Africa. They’re spending
time in Africa now. It’s not the most
relevant market right now. But it will be. And you saw that
happening in Asia. So I think it’s very important,
especially on the people dimension, who you’re
recruiting, how you’re developing people, where
you’re entering markets, where you’re doing R&D. We’ve
got to have more long view. We’ve got, I think, too much
focused on the short now. One more. OK. Maybe two. You mentioned very
early on in your talk increasing societal division. And you mentioned Trumpism
and Brexit specifically. Can you talk a little
bit more about that and how business leaders
should be thinking about in grappling that, in terms
of threats, or possibly opportunities? Well, I think, my
own personal view is I think business leaders
have to be involved. It’s like the question
that was asked about are these long-term issues. I think we have to
speak up and talk to people in our organizations
at the very minimum. A lot of people
in Brexit wouldn’t do that, that’s not our role. It’s politics, so
we shouldn’t do it. But I actually think we
should, as business leaders, should go even
further than that. I think they should
get much more involved in their community. What are the issues? Minneapolis is actually
a role model for me. There’s a thing called
the Itasca Forum, I think it is, where you’ve got
a group of business leaders. You’ve got– is there anyone
here from Minnesota by the way? You’ve got a group– correct me if I’m wrong on
that– but a group of business leaders with the governor
and with the mayor that are actually working on
issues like education. How do we improve our
education system here? How do we make it
easier for immigrants to be able to get jobs, because
there’s a lot that actually came into that. They work on cross-sector
issues to move things forward. And I think we’ve
you’ve got to do that. Thank you very much.

Author Since: Mar 11, 2019

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