That requires effort, experimentation and an ongoing search for new sources of wisdom. JL
Harvard Business Review interviews Andrew Liveris:
The cycle of disruption has picked up because the amplification of connectivity, the digital age, the technology revolution is amplifying everything. It’s really amplification by connectivity. The digital disruption is creating a sense of ongoing crisis. I call it the new abnormal. You can’t be the same leader all the time. You have to have a wide bandwidth, to be able to get wide, as well as deep. To create contextual leadership, you have to find sources of factual information versus opinion. The leader of that enterprise, publicly owned, isn’t the best allocator of capital if all you’re doing is looking at your sector.Change is never easy, especially if what you’re doing now seems to work just fine. “Changing yourself in the job, especially if you’re doing well, is one of the hardest things to do,” says Andrew Liveris, former CEO and chairman of Dow Chemical.
This applies to both organizations and individuals. When Liveris took over Dow in 2004, he was tempted to follow his predecessors’ footsteps. “We were making a lot of money and so the people in Dow…I won’t say got complacent, but knew what success looked like.” But success is fragile, he discovered, especially for a formerly innovative company that had grown a large bureaucracy that often hindered innovation. As strange as it sounded then, Dow had to disrupt itself, or risk losing to a smaller, faster rival. That starts with a leader who is always in learning mode.
For this episode of our video series “The New World of Work”, HBR editor in chief Adi Ignatius sat down with Liveris, who shares his experiences at Dow in his new book, Leading through Disruption: A Changemaker’s Guide to Twenty-First Century Leadership, to discuss:
- Maintaining a critical entrepreneurial spirit, even within large, inflexible organizations
- How companies can strike a balance between short term profits and long term responsibilities to all stakeholders, including their communities and the planet
- His work overseeing the planning of the 2032 Olympics, to be held in his home country of Australia
“The New World of Work” explores how top-tier executives see the future and how their companies are trying to set themselves up for success. Each week, Ignatius talks to a top leader on LinkedIn Live — previous interviews included Microsoft CEO Satya Nadella and former PepsiCo CEO Indra Nooyi. He also shares an inside look at these conversations —and solicits questions for future discussions — in a newsletter just for HBR subscribers. If you’re a subscriber, you can sign up here.
ADI IGNATIUS:
Andrew, welcome.
ANDREW LIVERIS:
Thank you, and nice to see you Adi.
ADI IGNATIUS:
I hope you don’t mind, but I would love for you to give our viewers a quick sense of your own life journey from the Australian Outback to leading a Fortune 100 company. It’s not the typical CEO arc.
ANDREW LIVERIS:
No. And given the differences in continents, Australia and the US, we’re often considered the new US in Australia. And the Outback was always considered the part of Australia that Americans almost had a dream about the original America, the Wild West.
Australia is definitely an American lookalike, but not the same. I grew up in an immigrant family, like an American immigrant family, first to go to university, did chemical engineering, which my poor Greek-speaking mother I don’t think understood until the day she died, what a chemical engineer did. I was just the prodigal son, first in the family to go to school. And then Dow hired me saying, “If you join us, we’ll show you the world.” And they did. Forty-three years later, I retired from this great American institution.
I tried to bring my Australian attributes to my job at all times. We’re a fun, loving, passionate society. We love our sports. We can probably get back to that when I talk about Olympics, but we also like adventurism and taking risks and are very forthright and candid. Marrying that with the American entrepreneurial spirit and this great country’s value system was a great combination.
I did most of that in Asia where I also learned the power of relationships. Along the way, I never thought I’d be CEO. I guess that’s one of the tricks, don’t work to the next job, work really well in the job you’re in. People noticed in me the ability I had to create change and then deal with change. This book is written because my time as CEO was just constant change.
ADI IGNATIUS:
The very title of the book suggests that we’re in a moment where disruption has become the norm. And I want to pressure test that a little. Are we truly in a more volatile world, or is it possible that our media consumption is giving us a distorted impression that change is more volatile, is happening more quickly than before?
ANDREW LIVERIS:
Your question frames the difference. I mean, 100 years ago, there was volatility, and 100 years ago there were world wars, and humanity is constantly being disrupted. But the cycle of disruption has just picked up because the amplification of connectivity, the digital age, the big technology revolution that we’re all experiencing is amplifying everything.
It’s the old Chinese adage, a butterfly flapping its wings in one part of China leads to a typhoon in another part of China. It’s really amplification by connectivity. The digital disruption, which is well and truly upon us, is creating a sense of ongoing crisis. I call it the new abnormal. It’s constant uncertainty. And the new paradigm, in the 21st century, our 20th century institutions were not billed for that constant state of flux and uncertainty.
And fundamentally, the new disease of short-termism, everyone wants an answer now. Everything has to be satiated now. Social media is making gratification instant. Everyone’s expecting the new reality shows to show how to get to the end point without the hard work that we all had to learn in the 20th century. This is a very different model that we have to adjust to, and it’s a new reality.
As the book has addressed is how to work away from divergence, where constant uncertainty is the new paradigm, to convergence, which is solution space. How do you begin overcoming these leadership vacuums that are appearing everywhere?
ADI IGNATIUS:
Let’s assume we can’t put the toothpaste back in the tube, this is the new reality and we can’t wish it away. What’s some advice for managers and executives to try to succeed, stay ahead of the waves of change, to try to manage effectively in this volatile world?
ANDREW LIVERIS:
The book is written with this question in mind. What I would love for the book to be is the foundation for the beginnings of some new solution sets, including new leadership models, a new contextual leadership models. And I begin to address it by saying, “Look, you can’t therefore be the same leader all the time. You have to have a wide bandwidth. You have to be able to get wide, as well as deep. Just knowing your subject is not good enough. You have to be able to pivot and move around and hit the bandwidth of the conversations that are occurring, in many cases, chaotically, but certainly adjacently.”
I really bring forward this notion that business, government and civil society are locked together in an equilateral triangle. As a result, you’ve got to move up and down those axes constantly and reinvent yourself as a leader.
To do that, you have to actually find sources of factual information versus just opinion. Opinion is valuable and you need to hear what other people, stakeholders, have to say, but center it on fact and get the facts from the source and go to the sources. In my CEO world, that meant constant travel to the regions, constant travel to the sales offices and the factories, listening to people on the shop floor, listening to people talking to customers, working with governments as partners, not as adversaries. A complete reinvention of the model of intake so you can get a better output and then flux it fast. Embrace the reality of what you’re hearing. Make a choice. Make several scenarios around those choices in case your main choice doesn’t work. Lead the change yourself from the frontline and then build a team around you that can deal with that change, and then repeat and repeat and repeat. That model of leadership is not what’s taught in the business schools. Actually, it’s only taught in real life. And frankly, we’ve now got to impart those messages to people who aspire to be this type of leader. It is definitely a lot of energy, a lot of passion, but a lot of judgment calls based on fact-based inputs.
ADI IGNATIUS:
You mentioned earlier the problem with short-termism, and that’s one symptom of the volatile world we’re living in. You’ve always said CEOs and companies need to pay attention to their broad stakeholder base. But on the other hand, you’re running Dow Chemicals, a company where there’s pressure to deliver quarterly results. I’ve heard CEOs say, “Yeah, you can do both,” and I think our audience might be skeptical that you can do both. How do you manage that balance? It cannot be easy.
ANDREW LIVERIS:
It’s definitely not easy, and it’s definitely not necessarily a new paradigm. I do think CEOs of a bygone era probably had the same version of it, but your very first question spoke to what’s changed. What’s changed is the speed of that and the impatience factor in particular, the financial owner that increasingly wants the short-term reward, dividend share buyback, so that in turn they can deploy the funds in other areas and other opportunities. Said another way, you, the leader of that enterprise, publicly owned, you the board, aren’t the best allocator of capital if all you’re doing is looking at your sector. So that brings into mind the roles that we all have to play in how capital gets allocated and what are the metrics against that capital allocation?
It’s fine to get short-term rewards where you can allocate the capital to a sector that your enterprise is not in, that absolutely is the breakdown and the breaking up of the conglomerate model that worked so effectively last century, I totally understand that. In fact, I exercised that with the putting together of DowDuPont to create three viable, more vertically oriented companies. No problem with that. You absolutely, totally have to do that.
However, when you take money or capital allocation away from the return, five years hence and 10 years hence in your sector, you are abdicating leadership in your sector and over time you will die in that sector. In other words, if you don’t put money against R&D and don’t put money against capital that won’t have a return for some time later, your portfolio allocation being so short term will only last as long as the decisions made by your forebears give you a return.
I inherited a Dow like that. I inherited a Dow that that was making money off yesterday’s inventions but had nothing new coming, and the markets were saying, “You know what? We’ll rent their stock because they will eventually go private, be broken up,” etc.
One has to do both. You have to have a long-term strategy that shows long-term value creation viability to your owners and your stakeholders. Put those programs in place. Put metrics in place that are 1, 2, 3, 5 years, not unlike what private equity does right now, while delivering the 90-day result.
Is that hard to do? Absolutely. What it means is you have to portfolio manage from within. You have to fund the businesses that can actually grow and develop the long-term returns, while letting the short-term businesses that run for the short term bring the cash to fund for the long term while at the same time appeasing the owner’s need for return in the short term.
If that sounds like a lot all at once, it is. Therefore, at the end of the day, this ability to actually allocate capital across the two dimensions, it’s not every board that can do that, and I then have a whole chapter dedicated to the development of boards that can actually do what I just said. Including, by the way, your embedded question, which I know you’re going to get to, which is how to make sustainability a core part of the agenda going forward.
ADI IGNATIUS:
Maybe we should talk about ESG (Environmental, Social, Governance), as a way to get to that topic. ESG is a tricky concept and a tricky metric. There are people in the sustainability camp who think it is all just a bunch of greenwashing, it doesn’t actually measure anything significant. At least in the United States, the right is attacking ESG metrics as overly woke, and that they’re somehow antithetical to successful business. How do we make ESG work in the long-term to really measure what matters and to be an integral part of business, not just a sideshow?
ANDREW LIVERIS:
The conversation of late has gotten into people yelling at each other, which is wokism or anti-wokism. Businesses and companies like Dow that have been pushing an answer to the question for the last couple of decades, even before my time, really were looking at it from the point of view that I get a license to operate. That license is given to me by society, and the rules of that license are set by governments. So society elects governments. Governments puts in place regulations. I, the enterprise, follow the rules that are set by government for the benefit of society.
That role in environmental management, of course, really brought to the table back in the Nixon era with the Clean Air Act and the establishment of the EPA, Dow really put together an activity that said, “Okay, I need to fulfill compliance, obey the regulation, but now let me be anticipatory. I know the science behind my business. How can I help the EPA and the government agencies that regulate me put in place the better regulation, the smarter regulation?”
That, in essence, became the Clinton era and the development of the sustainability agenda for the government and for companies’ sustainability. What it meant was, the license to operate sustainably by putting in place the rules that had the triple bottom line in mind. Dow was one of the authors of the triple bottom line piece of work, which was you’ve got to actually develop a profit, but you’ve got to have metrics alongside the environment pillar and the social pillar.
What’s happened in this current decade and going forward is ESG has hit the domain of the public and everyone is looking at ESG, and should look at them as separate items, but lumps them together and then simplifies, which is the first thing I say in the book, it’s the first chapter in the book. I basically say, “Stop the simplification by putting it together.” It’s not one acronym, it’s three very different verticals that need regulations across each of the verticals that speak to the values of the 21st century.
The societal license to operate set by governments means governments need to get educated on the new environmental regulations that are required, whether they be in climate change, whether they be in emissions, whether they be on the treatment of land and water and all the things that we care about with the planet.
The S part, which is inclusiveness, societal justice, treating people equally, and inclusiveness, and the value of regulations and inclusiveness. Then governance, both big G and small g governance from the point of view of government regulations and obeying the laws of the land. And small g, which is how boards operate with respect to shareholder and stakeholder duties. And all of those are complexities that need to then be put in place by corporations working with governments to help governments establish the right regulations in a partnership model.
I see examples around the world where that works. They tend to be in more authoritarian regimes, top down, such as Singapore or Korea or Germany. They don’t tend to work as well in market-based capitalist economies like the United States because of the trust model. The trust model is broken because people see it as interest politics, lobbying groups, paying for the right regulations by lobbying your sector and your book.
In my book I say we need to now toss that out and put in place partnership models that collaborate, so we get the right regs for the 21st century on digital, on E, on S, and on G. That builds a sustainability agenda that, in turn for every corporation that complies with it, there are new profit pools that come from it and therefore becomes centric to your strategy.
We need the new rules for this century more than ever, and it’s the lack of those rules that’s creating the disharmony and almost anarchy from society saying, “I just don’t believe government anymore and I don’t believe business leadership anymore.”
ADI IGNATIUS:
That’s really well said. I want to shift to talking about leadership more directly. You write in the book that in the early days at Dow Chemical you were too polite, too accommodating, too reverent toward the company and its long, long legacy, and to your predecessor. That probably is familiar to a lot of people who are listening. How do you balance a desire to be a change agent against respect for the traditions that have created the legacy that brought you to the company in the first place?
ANDREW LIVERIS:
All the training one gets growing through the corporate model is not to be a disruptor. Corporations have become large and were at one point small and innovative, developed the bureaucracies that large companies bring that ultimately enter their demise because small companies, in their space, end up eating their lunch.
The chemical industry was a massive innovator last century, certainly in the first 50 years. Then the last half of the last century, we stopped innovating as a sector because we made a lot of money out of the things that we had innovated and invented for modern America, for the modern world. Pick your favorite area, from plastics to paints to the things that lead to building materials, to pharmaceutical ingredients, all the things that modern life enjoys.
We were making a lot of money and so the people in Dow and companies like Dow, I won’t say got complacent, but knew what success looked like to be promoted. To be promoted, just press repeat, do, repeat. Therefore, what we ended up doing was cloning ourselves. We talked inside boardrooms and meeting rooms to ourselves.
What created the space to allow me to become a candidate and ultimately the CEO was, I actually grew up outside of headquarters. I grew up in the Far East. I ended up becoming an entrepreneur within the big corporate bureaucracy. When the candidacy for the CEO job came, it was a horse race. And I got chosen because I was more of an entrepreneur than my peers. What got me the job, the need for Dow to change its model, unfortunately for me, when I got the model, I said, “Okay, I’m just going to repeat what my predecessor did,” and put in place the team that was around him, and now me. And I ended up putting people in place that had not bought into the change that actually won me the job.
I quickly corrected that mistake. But it was really a lesson that maybe should have been obvious. It was a very instructive lesson for me. Because it enabled me later, when big crises came like the global financial crisis, like the Kuwaiti withdrawing on us in the middle of our Rohm and Haas deal, like the activist attack. It enabled me to do something which maybe I wasn’t trained to do before I became CEO, which is to move myself out of the job intellectually, emotionally, see what was needed in the job, and then change me in the job.
Changing yourself in the job, especially if you’re doing well, is one of the hardest things to do. And I certainly benchmark the very best people like Lou Gerstner and others that I talk about in the book. That skill is something that I really drill down on in the book.
Frankly, when I mentor younger CEOs, I really counsel them, “Step out of your role, look at your role and say what’s needed to win your role, not just get comfortable in the role.”
ADI IGNATIUS:
That’s great. I’m going to go to a couple viewer questions. This is from Brian in Pennsylvania in the US. It’s really getting back to our conversation about short-termism. What cannot be rushed in business? How do we push back on short-termism, especially in understanding customers better, so that we can build services and products to reflect a sound strategy rather than the whim of the moment.
ANDREW LIVERIS:
We have so many examples around us that are so topical. One is the energy transition. We have had fits and starts to the transition over three or four administrations. I would like to think that this administration has put in place a framework that won’t be tossed out with the next administration. But it’s that very lack of certainty from government policy that is stopping business from taking the risks it needs to take.
To put in place new technologies, the patience model, you just have to look at the Chinese and their dominance of the renewables space, in terms of technology development. How did we miss factories? And how did we miss solar cells? We missed it all because no one was willing to partner with government to come up with the right framework for a long-term investment in the R&D.
Actually, if you study innovation in America, our most innovative eras as a nation, World War I, World War II, and NASA came because of government top-downing the rules of the road. In two cases to defend the nation and obviously protect freedom. In the third, to put a man on the moon.
We need an era of constancy of purpose as a nation. And the energy transition is a great example of that. How do we have affordable transitions, so we minimize the impact of fossil fuels while not crushing the economy? I think this is a great example of where short-term results can be very toxic against long-term thinking.
There are many other examples. One is the new China. We are one more time making the mistake of looking at China as something that we can deal with by sitting in Washington and dealing with it from there. A relationship-centric culture like China is based on turning up, showing up, and then being consistent with purpose, and allowing the win-win versus the win-loss.
We’re giving too many examples to China that we want a relationship based on win-lose versus win-win. To put in place a win-win relationship with the new China needs a whole new paradigm of thinking about what constitutes a win for China, and not a loss for the United States?
In the book I talk about that from the point of view of corporations. Are we indeed global corporations with headquarters in America? Or are we American corporations operating globally? We better make that decision soon as it relates to China, because China’s establishing its own playbook, and we haven’t yet as a nation embraced it.
ADI IGNATIUS:
Here is a question from Rahul, from Pune, India. As you’re trying to lead and manage this disruption, how do you go about personal and organizational goal setting while trying to keep pace with the disruptive forces?
ANDREW LIVERIS:
I have really thought about that a lot, especially as I’ve always been a mentor coach. I was mentored and coached, so I saw the value of that. This ability to run what I call an integrated life versus a balanced life. I think the word balance is a bad word, because it implies a seesaw and either/or.
To answer your question, Rahul, think of life as four buckets, four pails. You’ve got enough water to fill two buckets to the brim. Those pails are called self, family, friends, and work or professional. Now you’re at your stages of life where you’re filling the water in those buckets, and you’re making a conscious choice where to put most of the water.
Do you divide it equally across all four at all times? Or do you do as I did, really prioritize along the way based on the stage of life you’re at? Depending on where you are in your career and your stage of life, your partner, and whether your partner is full-time employed outside of the home, these are choices one has to make and make them consciously, knowing that you’re making trade-offs at all times.
Of course, in the Zoom world and the digital world we can now do work in a very different environment. That embraces home life a lot more, but that brings its own challenges as well.
At all times I thought of what the most important things to me are, and I listed those. And I kept that list in my left-hand drawer, so to speak. And in times when I had to tilt the water in one direction way more than the other, I knew it was temporary. I said, “Okay, for a while, like these crises at Dow, I’m going to be full-time at work, and my family’s not going to see me. And forget time for myself and friends.”
It’s okay to make those temporary adjustments, as long as you’ve got your long-term priority goals in mind at all times. Some people call that your North Star, your values, and your priorities all have to come together.
ADI IGNATIUS:
I want to ask you about the Brisbane Olympics. It’s a long ways away, but you’re already heading the organizing committee. How do you start to think about that? Do you already have a sense of what you want the games to be, how you want people to perceive the city and its identity? Are there some early thoughts you could share?
ANDREW LIVERIS:
It’s a great privilege to be asked to lead your country’s third Olympics. For a country the size of Australia, to say it’s now going to be host to three Olympics since the modern Olympics were born is quite something.
The country is passionate and loves sport as I’m sure you’re all noticing with the Women’s World Cup down there, which is amazingly successful and bringing out a lot of people, new spectators. Passion around sports is an Australian statement.
My passion for my home country, because it gave me the start that led to my career, has never waned. I’ve always been an Australian, as well as an American, as well as actually a Greek from my roots. And I’ve tried to be very true to that.
When I was asked to lead the Olympics, I actually asked exactly the question that’s being asked of me, which is, “What are we creating here?” Is it a two-by-two-week sporting event, Olympics and Paralympics, or is it a legacy?
And then when you talk to the IOC about what they call the new norms, the new norms are all about economic and legacy of the community kind. In the case of Australia, that speaks to the S part of ES&G, as much as the E part. Not only a clean and green games, climate positive, but also inclusive. Inclusive of all our First Nations people, Indigenous Australians, a culture of 60,000 years. And legacies economically: what can we do to stimulate the economy of Southeast Queensland before and after the games?
We call it the ten-plus-ten model. It’s a business proposition. It’s the long-term answer. It’s the question I’ve been asked on short-term versus long-term examples. The Olympics are a great example. We’ve been given 10 years to plan that. We have the first three years of exactly that, planning it. We’ll get around to things that people will see as the obvious icons of the Olympics, mascot and opening ceremonies and volunteers and merchandise. We’ll get around to that in year four or so.
We’re benchmarking in Los Angeles and Paris to see what they’re doing along these pillars, and really putting together this whole holistic plan, and what we want to happen as a result of this is the wellbeing of the people of Australia and the people of Southeast Queensland and Brisbane to be elevated. For Brisbane, it’s a second-tier city. Not many second-tier cities get the games. We’re going to elevate Brisbane and the brand to the world stage, and we’re not going to lose that advantage.
I’m really thinking about that. And those of you who have been to Australia know what I’m about to say; those of you haven’t been, please come. We’re a lifestyle superpower. The country just has the balance between work and life right. It’s a very wealthy country, so it can afford that, and the citizens in the main all benefit from it, with some exceptions, and I mentioned First Nations.
We are a lifestyle superpower, beautiful country, beautiful locations across the regions, from the Gold Coast to Brisbane to the Sunshine Coast, some of the best beaches and aesthetics in the world, rainforests, etc. We’re going to put on a show that really shows Brisbane and the region as a place to live and come and visit at a minimum.
ADI IGNATIUS:
I know we’re running out of time, but I do want to get to this audience question from Donna in Alabama in the US. You had mentioned win-win specifically in the context of China, but I think that’s a value for you more broadly in terms of business and collaboration. How do we all make the mental pivot to a win-win mindset when we’re educated in business school and elsewhere very differently?
ANDREW LIVERIS:
It’s a great question, Donna, and I’m so happy it’s come at the backend and almost the close of the show. Because I start and finish the book with optimism. And then I really say, “Why this book?” I could have written an autobiography. I’m not sure anyone would’ve bought it, but anyway, it would’ve pleased me to write my story.
But I really wrote the book with your question in mind. I see so much divergence, as I said at the beginning. The convergence has to begin and end with this notion that change has to happen through, first, conversations; second, debates; third, decisions; and fourth, come out of a bottom-up mindset that we haven’t seen for a while.
In the book, I call it community-centered and regionally-centered. I think the global world order has been challenged now to a point where we all have mistrusted it. You mentioned China in your question, and distrust of governments. So we need a new type of business leader, a new type of political leader, and we need it from the demographic of the next generation, to embrace that and say, “I’m going to go and serve to create this sense of optimism and solution mindset, this new convergence, this new collaboration model.” Let’s lay down our arms, and our arms can be words on social media, and let’s get into the room around the table and find the solution mindset that leads to better answers for everybody in society, not just for parts of society.
In the book, I say, “I put a call to business to take that lead.” I see that, by the way. There are a lot of CEOs out there now who are taking that lead. They’re getting hacked and chopped up in this wokism debate, which is nonsense. Some of our political candidates make fodder out of it. I think we should have the courage to stand tall and say, “We have to be optimistic on a solution that is inclusive and that has new ways of getting to answers on how to get economic prosperity for all, and how to do it in the context of a Milton Friedman model, but where democracy and capitalism are together, not going through a divorce.” And for that, I need people like you to step up and be at the table.
Define the 21st century playbook. I hope this book serves as a foundation for it, and I certainly won’t stop talking about it, but I need amplification from people like yourself.
ADI IGNATIUS:
That’s fantastic, Andrew. Thank you for joining us. A lot of really inspiring ideas and really good sense of balance, so thanks for being the guest on our show today.
ANDREW LIVERIS:
Thank you. Thank you very much, Adi.
0 comments:
Post a Comment