Reversing Fortunes

When Bill McDermott became the first non-European, sole CEO of SAP, the world’s largest business-software company*, he invited the company’s most tenured developers to lunch. Sitting around a table at SAP’s Walldorf, Germany, headquarters, McDermott asked his guests a simple question: “What do you need from me?”

One answer stood out to McDermott: the seasoned technologists wanted their new chief to follow whatever he believed to be the right strategy. “It did not matter to them where I lived or where I came from,” says McDermott, who spent the first 30 years of his career based in the United States. “What they care about is that I know where I want SAP to go and how to get us there.”

Six months into his new role, McDermott is doing his best to deliver. “We’re reinventing the company on the idea ‘Run simple,’” he says. “Our destiny is to make beautiful software that is easy to consume so SAP can help solve the world’s most sophisticated challenges.”

For the effusive McDermott, “Run simple” is more than a slogan; it’s a rallying cause. Complexity, he insists, is the new enemy of business. To simplify the way its corporate customers do business, SAP is focusing on cloud- and mobile-based products and services, in addition to traditional installations. Adopting an on-demand, Software-as-a-Service business model is a radical deviation for the company that pioneered on-premise, enterprisewide technologies. For more than 40 years, organizations around the world have been installing SAP’s software on their own servers to enhance back-end operations such as accounting, logistics, and human resources. Today, as cloud computing, mobile devices, and the ubiquitous “Internet of Things” continue to change how software is consumed by companies as well as consumers, McDermott insists SAP must lead.

Plowing a new path for an organization steeped in tradition is not easy, but anyone who doubts McDermott’s ability to do so should acquaint themselves with his history. Time and again, he has brought businesses back from the almost-dead. As a teenager, McDermott ran a small delicatessen, turning the once-dormant store into a profitable shop. During his 17 years at Xerox Corporation, he routinely turned underdog teams into top performers. In 2006, the second time McDermott appeared on Selling Power magazine’s cover, he was dubbed “the original turnaround kid” after he resuscitated SAP’s flat-lining North American business. In 2010, as co-CEO of SAP, McDermott and then co-chief Jim Hagemann Snabe jump-started the company’s current transition to the cloud. Today, cloud services are SAP’s fastest growing business.

Time will tell whether McDermott’s strategy will prove to be the right one. His past, however, is proof that he knows how to envision a once-unimaginable future, inspire people to believe that future is possible, and then bring it to fruition.

ROOTS OF REINVENTION
Bill McDermott loves underdogs, perhaps because at one time he was one. Growing up in working-class Long Island, the first child of devoted but financially strapped young parents, McDermott wanted to make things better for his family. He started early, collecting odd jobs the way other kids collected baseball cards. In high school, he worked three hourly wage jobs before convincing the owner of the small deli where he stocked shelves to let him buy the business for a $7,000 loan. Under McDermott’s customer-centric care, the deli became so profitable that he repaid the loan ahead of schedule, shared his earnings with his family, and paid for his own college education. “If I have a dream,” says McDermott, “I will what I want to happen. That’s how it has always been.”

His dream, aside from growing SAP by “running simple,” is to encourage people in all walks of life to become masters of their own fate. That’s why he wrote Winners Dream: A Journey from Corner Store to Corner Office, which Simon & Schuster will publish on October 14, 2014. Although the book is an inspiring salesman-to-CEO story, Winners Dream is also a blueprint for succeeding in business and life.

THE POWER OF REPEATABLE METHODOLOGIES
McDermott’s career trajectory is itself a testament to his belief that successful people do not always invent new solutions for new situations. Instead, they routinely adapt proven habits to resolve problems. McDermott also follows what he calls “repeatable methodologies,” for example, asking employees what they need whenever he starts a new job.

The following six methodologies have guided McDermott from one transformation to another throughout his life, and he believes they can work for anyone.

Methodology #1: Maintain an abundance mentality.
The more daring the target, says McDermott, the higher people rise. “What gives dreamers, winners, and abundance thinkers an advantage is that they are not afraid to go for an opportunity,” he tells Selling Power. “Low expectations and cynicism sap people’s potential, but big numbers get people’s attention and heighten their belief in their ability to achieve the impossible.”

Check out McDermott’s track record of setting audacious goals. In his first year at Xerox in 1983, he was determined to be the company’s number one new-business salesperson in the United States – not just great but the best. He had the same goal for the sales teams he managed. When he took over Xerox’s worst-performing district, he vowed to take it from worst to first. Each of his number one goals was achieved.

Aiming high also improves the odds. “The point of setting audacious goals is that you can almost hit them and still accomplish something amazing,” says McDermott. In the 1990s, when he ran Xerox’s nascent outsourcing and digital-services division, his bosses called his intent to double revenue to $4 billion an impossible dream. When revenue was $200,000 shy of the bull’s-eye, McDermott still declared it a win. “I would rather reach for the stars and hit the moon than reach for the moon and hit nothing.”

Methodology #2: Articulate a compelling cause.
Beyond a high monetary goal, McDermott believes a well-articulated reason to achieve sparks the imagination and extends people’s stamina: Be your personal best. Change the world. Make history. “Go for the gold,” he says. Why? “Because no one jumps out of bed in the morning to win the silver.”

When McDermott was SAP’s co-CEO between 2010 and mid-2014, the company changed its mission from helping companies run better to helping the world run better and improve people lives. Explains McDermott, “Truly great organizations contribute something to the world beyond strong financial performance, and people want to work for great organizations.”

A compelling cause, he writes in Winners Dream, is like kerosene: it lights up a work ethic. That is exactly what he claims SAP’s current “Run simple” mission is doing for its employees. “We now have 67,000 people all moving in the same direction.”

Methodology #3: Balance the audacity of a dream with the micromanagement of reality.
McDermott is more than a dreamer and soulful marketer; he also is obsessed with rigorous execution, which means that plans and tactics must bolster bold goals and compelling causes. “Bill is an optimist and a realist,” says EMC’s CEO Joe Tucci, a longtime friend and business associate. “He may see the glass half full, but then he figures out how to fill the rest of it.”

In 2002, when McDermott took over SAP America, he targeted future growth at 10 times the rate that the business had grown in the past. Colleagues said he was crazy, but McDermott fired back with a four-point plan that redirected the dispirited sales force and infused people with confidence. He also enmeshed himself in the sales process, leading weekly calls to dissect the largest pending deals. The level of scrutiny ensured that nothing fell through the cracks, which helped SAP America win more customers and surpass its growth goal. Observes McDermott, “When a vision and strategy are paired with disciplined execution, anything is possible.”

Methodology #4: Hold everyone accountable until the final buzzer.
McDermott vividly recalls the time one of his sales reps announced on the last day of a fourth quarter that he had met his quota and was thus done. “No, you are not,” McDermott insisted. “We are never done!”

As long as there is time left on the clock, McDermott knows there is still a chance to score. It’s a philosophy he inherited from his grandfather, Bobby McDermott, a Hall of Fame pro-basketball player during the 1940s who was known for his last-second, game-winning shots.

In business, McDermott is always ready to shoot. Back in 2009, on the heels of the Great Recession, SAP was poised to miss its revenue targets for yet another quarter. Unwilling to accept that outcome, McDermott and his co-CEO-to-be Hagemann Snabe called an emergency meeting of SAP’s top salespeople and developers. Their goal was to prepare SAP to close 1 billion euros in revenue in the final three months of the year. In Winners Dream, McDermott describes what they did and how the powwow paid off: for the first time since 2001, SAP broke through 1 billion euros in a single quarter. Says McDermott, “It’s never too late to go for a dream.”

Methodology #5: Honor the ecosystem, because everyone matters.
McDermott has always respected the power of ecosystems to grow a business. When he took over the deli as a teenager, he had no cash, but he had built trust with suppliers, so they gave him free groceries until he could afford to pay them back. Years later, when he was going door to door in Manhattan selling Xerox copiers, befriending lobby doormen throughout his territory eased the young salesman’s entrance into buildings – and into the offices of potential customers.

This “everyone matters” methodology scaled at SAP. To help revive its US business, McDermott strengthened ties with SAP’s business partners, such as consulting firms, who sold SAP’s software to their own clients. Today, McDermott knows that non-SAP developers and entrepreneurs will help the company’s newest technological innovation, HANA, succeed. HANA is a revolutionary database that stores, crunches, and accesses data up to 10,000 times faster than traditional databases. Applications that third-party developers are building for HANA are growing the platform faster than SAP could do alone. Observes McDermott, “Only when you build trust, respect, and transparency among employees, customers, partners, and vendors can you win.”

Methodology #6: Always remember that humanity is the highest purpose.
Winning, he believes, is not about a specific end but about how an end is met. Vision, strategy, and execution all pale in comparison to how people are treated. For years, this approach has dictated his decisions. He holds two memories especially dear.

First, as an earnest young sales rep, McDermott dropped his daily routine the minute he heard that his co-worker’s wife had a baby. McDermott hopped in a cab and was the first person at the hospital, flowers in hand. Years later, as CEO of SAP America, when a close co-worker’s father passed away, McDermott rerouted his sales trip and flew from the West Coast to the Midwest, driving another two hours to attend the funeral in a small Minnesota town.

“The true measure of a leader is not only what you accomplish while in office,” he writes in Winners Dream, “but the feelings and memories that linger once you leave.” For McDermott, when methodologies and humanity go hand-in-hand, everyone wins.

* SAP sales estimated by 2017: 22 billion euros (approximately US$28.5 billion)