Real Homework Is Not For Students (part 1 of 3)

Pic Homework Girlii

Most students complain about homework. When my MBA students at the Kellogg School of Management grumble about assignments, I tell them that what they’ve called “homework” from elementary school through graduate school isn’t actually homework. It was merely practice to develop tools for them to learn to do real homework. Real homework is the work you do when no one gives you the assignment, tells you how much work is enough, or establishes a deadline. Ultimately real homework is what you have to do yourself to succeed. Real homework really counts.

Successful businesspeople—entrepreneurs, family business founders and managers, and corporate managers—all do high-quality, appropriate amounts of homework. When they stop short on the homework, they almost always come up short on results. If you’re not sure how to do real homework, take a look at my recent book, Invent Reinvent Thrive (McGraw-Hill 2014), which has many excellent examples of the kind of homework that breeds success. In this three-part blog, I present multiple stories of real homework from the book, grouped by the principle they exemplify best.

Learn From Your Customers Starbucks founder Howard Schultz never even worked in a coffeehouse. He was inspired to start Starbucks by the European coffeehouses he observed when working as a coffeemaker salesman. He studied the stores and their practices carefully and saw how much consumers enjoyed premium coffee in a “third place” between home and work. Everything he learned convinced Shultz to persist in finding investors for Starbucks, even when no one, including coffee experts, seemed interested. Later, when highly successful Starbucks faltered amidst the 2008 recession, Schultz again did his homework, this time visiting stores and observing everything they were doing from the customers’ points of view (and ignoring Wall Street’s and analysts’ gloomy opinions). What he saw convinced him the company had lost touch with its original values—its “soul,” according to an internal memo Schultz wrote that was leaked to the press—and he took steps to recapture that spirit, including closing their thousands of stores for a day to replace equipment and to retrain all store employees. All the homework paid off as Starbucks regained strong growth and stock value.

Learn From Your Competitors Charles Schwab reinvented the stock brokerage industry by doing away with unnecessary product/service bundling and sky-high commissions. By studying the competition from the point of view of customers, Schwab was able to introduce highly valuable features through his namesake firm, including simplified transactions and more affordable pricing. The homework Schwab did with his customers, especially those in Silicon Valley, wound up changing the industry and making Chuck Schwab a billionaire. Early in the new millennium, when the company suffered from mounting competition, Chuck returned as CEO and observed the competitors, copycats who decreased commissions and service offerings at the same time that Schwab & Co. was raising commissions to cover increased numbers of managers. Schwab understood that his company had become the type of firm he’d once outmaneuvered: one that offered overpriced services to justify its bloated structure and workforce. He agreed when I likened this situation to Pogo’s lament: “We have met the enemy and he is us.” Schwab used what he learned to cut costs dramatically, improving the pricing he could offer customers and turning the company around.

***

These are just two of the homework-related principles I’ve observed in my many interactions with successful entrepreneurs, including the ones featured in Invent Reinvent Thrive. In the second and third parts of the post I will present additional lessons, including how homework helps you learn from mentors, previous associates, naysayers, and your team, as well as the importance of applying your homework-based learning across domains.

© Lloyd Shefsky

You May Not Be the Smartest Person in the Room (and That’s Okay)

Success is often interpreted as an indication of intelligence. It brings to mind the lyrics of “If I were a Rich Man” from Fiddler on the Roof: “When you’re rich, they think you really know.” Highly successful entrepreneurs tend to be quite smart. Some have a good sense of self-approval; others less so. It turns out that the quality of self-approval is likely an important factor for success. Being able to gauge your capabilities, including raw intellectual horsepower, and understanding that while you may not be the smartest person in the room, there are things you can do about that, namely, get smarter and/or change rooms. Rather than bemoaning deficits, the most successful entrepreneurs learn to focus on areas in which they do show more aptitude and interest, and to take steps to shore up their capabilities in other areas, whether by building new skills or the right team.

Below I present several lessons related to understanding your intelligence and how to use it. I illustrate the lessons with stories of entrepreneurs from my recent book Invent Reinvent Thrive (McGraw-Hill, 2014).

Find the right “classroom”—and the right brains to pick. Mike Krasny did both. “I wasn’t one of the smartest kids on the block,” he told me during our interview for the book. “I was not a good student, I was a C student, probably in the lower quartile.” Had Mike continued to use academic grades as the only measure of his talent, he may not have discovered and indulged his deep interest in computers, at a time when most of his peers knew nothing about the field. He took his first computer class in 1971 at the University of Illinois and—though it took him some time to get over the lack of confidence bred largely by his early academic experience—eventually launched computer distributor CDW. As an entrepreneur he learned as much as he could from businesses he admired and the people behind them—including HP, IBM, Microsoft, Intel, Fel-Pro, and Walmart. As head of CDW, he found the right people for his management team, further building the firm’s capabilities. By stepping into the right “classroom” in which to excel and identifying the right brains to pick, the former C-student earned an A+ in creating shareholder value.

Don’t put them on a pedestal. Everyone establishes their own standards for “smart,” generally pointing to someone else whom they consider very smart. It’s fine to have business mentors or others you admire for their intelligence. But some entrepreneurs make the mistake of putting their sources of inspiration on sky-high pedestals, which may diminish their sense of their own capabilities. This was the case with Jim Sinegal, founder of Costco. Prior to starting Costco, Jim worked for Price Club for over two decades, He always revered that company’s founder, Sol Price. “He taught me everything I know,” Sinegal said of Sol. Jim truly believed that Sol was the smartest man he'd ever met, and as a result Jim never presumed to be able to do what Sol had done, even as Costco grew steadily. Of course, at the time Jim launched Costco, Sol’s experience was infinitely greater than Jim’s, who started at Price Club “schlepping mattresses out to the customers’ cars’ rooftops.” Twenty five years later, as Price Club’s second in command, Jim felt Sol remained far smarter and more capable than Jim. It wasn't until years later, after Costco had been operating for a while, when Jim found that Price Club was having problems, that he began to believe in his own capabilities more deeply, and made strategic moves including expanding Costco’s product lines significantly. Ultimately, Jim motivated Costco’s purchase of Price Club. Sol and Jim remained friends until Sol’s death. And while Jim still reveres Sol, the former mentee’s story illustrates that sometimes actual results displace pedestals. Removing his longtime mentor from the pedestal helped Jim make Costco into the $100 billion business it is today.

Recognize your blind-spots, Although he is not an entrepreneur but a leader of a prominent family business, Tom Pritzker’s situation is worth noting. Unlike CDW’s Mike Krasny, Tom was an excellent student, and he rose to become a third-generation leader of the highly successful Pritzker family, which held assets including the Hyatt hotel chain. Tom learned a great deal both within the classroom and outside it, especially from his father, Jay, whom I consider one of the smartest people I’ve known, and Jay’s father, A.N. Observing them helped Tom understand how to find, select, motivate and defer to strong professional managers for the family’s many businesses. But Tom also inherited a large blind-spot: While the previous generations had excellent business acumen and skills, they had failed to prepare for the “cousins stage” of the business; the many protective measures they had implemented—including granting decision-making rights and knowledge about the family business to very few family members—backfired when the business passed into the third generation’s hands. Tom was a smart businessman, but he tried to play the hand he was dealt instead of replacing a few cards. He continued with all that his ancestors had invented, instead of reinventing it to fit the family/business situation. The ensuing legal battles made the highly private Pritzkers front-page news for years. Being the smartest businesspeople in the room had made the family blind to the governance/ownership measures they needed to take. Eventually, Tom recognized the shortcoming and took steps to remedy the problems, but only after significant, undesirable public exposure of family discord.

Be honest with yourself. Honesty and self-awareness don’t always accompany intelligence, as the Pritzker story illustrates. Tom Stemberg, founder of office-supply giant Staples, provides a nice counter-example. Upon arriving at Harvard, Stemberg found himself somewhat unprepared, in part because he had completed high school in Austria after his mother moved him there following his father’s death. Speaking of Harvard, Stemberg told me, “You had to accept the fact that you’re not only not the smartest person in the room, you may not be in the top ten. You have to get comfortable with that and move forward.”That attitude helped him move forward in a big way, as he sharpened his idea of a large-scale office-supply chain, learning by observing local stationery stores and companies such as United Stationers and Quill, always admitting when he lacked knowledge, but also feeling comfortable when he thought he was right. Stemberg’s healthy self-awareness helped him build Staples into a multibillion-dollar retail chain with over 2000 stores in 26 countries.

***

Intelligence is only one factor in success, and certainly not the most important one in many cases. The “smartest” entrepreneurs may not be the smartest people in the room, but they have found the right space in which to compete (like Krasny), worked hard to be honest with themselves about what they don’t know (like Stemberg), avoided being intimidated by successful peers and mentors (like Sinegal did eventually), and assessed their blind-spots carefully (like the Pritzkers eventually did). I hope you can do the same.

Watch, Listen, Learn: How Entrepreneurs Gain Skills through Observation

“A tolerance for ambiguity” or even the ability to thrive amidst ambiguity is on everyone’s list of key traits for entrepreneurs. So how do successful entrepreneurs develop that trait? One might develop a tolerance for pain by continually enduring pain; but there must be a better way. Successful entrepreneurs don’t just strengthen their tolerance—they reduce the ambiguity. In many instances, founders gain insights and learn best practices by observing people and practices carefully across sectors, applying what they learn to great effect. The entrepreneurs below, all profiled extensively in my book Invent Reinvent Thrive (McGraw-Hill, 2014), are excellent examples of the power of watching and listening. Maxine Clark expanded her vision of a store where people could customize teddy bears into the 400 Build-a-Bear Workshops in existence today. Part of Maxine’s early success was her ability to negotiate leases in malls on behalf of her start-up in an unproven business. To succeed, she used what she’d learned previously as president of mall staple Payless Shoes. “Even though I’d never negotiated a lease before . . . I had listened to our legal department talking about them,” she told me in our interview for the book. “I didn’t have to know everything about them, but I did need to know enough not to be dangerous.” The insights Maxine gained from observing lease negotiations helped Build-a-Bear thrive.

Howard Schultz, founder of Starbucks, used what he’d observed in Europe while working as a coffeemaker salesman to help generate the vision of a coffeehouse with a different kind of atmosphere, one that could become an appealing “third place” between home and work. Even though everyone—including the original owners of the Starbucks Coffee company, who employed Howard in sales—thought his idea for an upscale US coffeehouse was terrible, he persisted, eventually convincing others to invest. Starbucks wouldn’t be the business giant it is today if Howard hadn’t kept believing in his vision, fueled by what he’d observed across the Atlantic.

Mike Krasny, founder of computer distribution giant CDW, also encountered many naysayers. But while he was a self-admitted poor student with no business training, Mike had a skill many other would-be entrepreneurs lacked: learning by observation. Initially, that meant using what he’d learned working in his father’s auto dealership to place his first ad for computer sales. After he launched CDW, he continued to learn by observing, including watching the practices of and listening to advice from leaders of businesses he admired, from computer industry peers (Microsoft, Intel, IBM) to those in other sectors (Fel-Pro, Walmart, Quill). As CDW matured, Mike delegated key functional matters to professional managers, and learned from them and multiple mentors. Listening to his “teachers” helped transform a former C-student into an extraordinary business success.

Jim Sinegal grew discount retail warehouse Costco into over 670 stores representing over $100 billion in annual revenue today. Before launching Costco, Jim worked for Price Club for 23 years, learning a great deal from founder Sol Price. “He taught me everything that I know,” Jim told me during our interview, pointing out how much Price emphasized the need for strong leadership and careful planning. Jim also learned a great deal by observing the brokers who sold products to Price Club, identifying their strengths and weaknesses. That knowledge enabled Jim to work as a highly successful broker himself. After he left Price Club, his plan to open Costco went on hold due to a recession. While waiting for economic conditions to improve sufficiently to launch his own business, he worked as a broker. His listening paid off, enabling him to be ready to open Costco when economic conditions improved.

David Axelrod, former campaign manager and senior advisor for President Barack Obama and current director of the University of Chicago’s Institute of Politics, exemplifies the theme of learning by observation. David learned a great deal as a young journalist, first with a small Greenwich Village newspaper (The Villager) during college then as a Chicago Tribune reporter. He paid especially close attention to the political campaigns he covered, particularly the strategies of the media consultants for three Chicago mayoral candidates. A dinner with Bill Zimmerman, media consultant for one of those candidates (Harold Washington), gave David further insights into campaign-management skills/strategies, and soon he was able to make the leap from journalism to campaign director, eventually making history by helping the US’s first African American president get elected.

***

While it’s easy to think of entrepreneurs as all about action, the best ones are both observers and doers, learning from watching and listening to others, then putting their new-found knowledge into action. That means sometimes the best course at any stage of a business—from pre-launch to maturity—is stepping back to see what you can learn from people, practices, and other companies, then formulating new ideas and strategies for success. As it says on one of my favorite T-shirts:

“Silent” and “Listen” have the same letters. Coincidence?

So listen up and learn what you need to reinvent and get ahead.

Reinventing Tinker Tailor Soldier Spy

Someone recently said to me, “the concept of reinvention of you or your business is fine in certain occupations, industries and businesses, but it could not be applied across the board.” I strongly disagreed and for a somewhat ironic example, took the title of John le Carre’s famous book, Tinker, Tailor, Soldier, Spy, and applied reinvention to each of those businesses. Tinker In my recent book, In my book Invent Reinvent Thrive (McGraw Hill, 2014), I tell the story of Sam Popiel and his famous invention, the Pocket Fisherman. Sam was on one of his excursions to a practice fishing farm, where he would tinker with his invention until he solved the pending problem. That day he also tinkered with the price that he would charge for the Pocket Fisherman. As a result, he brought millions of additional dollars to the bottom line. The methodology for reinventing his business through this tinkering process is a fascinating, fun-filled story.

Tailor Tom Stemberg, the founder of staples and subsequently a venture capitalist who has invested in companies such as Lululemon and a chain of cleaning stores. While those businesses were more like tailors, the best stories of Tom’s career relate to Staples and especially his use of good homework to overcome naysayers.

Soldier One of the people I interviewed for my book was Nir Barkat, currently the mayor of Jerusalem but previously an entrepreneur and venture capitalist. Prior to all of that Nir was a soldier in the Israel Defense Forces. The story -- how he was wounded as his commanding officer, standing next to Nir, was killed during military activities -- is an exciting read. More important is how Nir took the lessons from the military training and activities and applied them to every phase of his continually reinvented life. He is proof that a soldiers reinvention of himself and later in his businesses can be a remarkably successful and profitable journey.

I was fascinated to read, earlier this year, of a soldier reinventing himself as an entrepreneur as a result of reading my earlier book, Entrepreneurs Are Made Not Born. Civilian Warriors, is a book written by Erik Prince, the founder of Blackwater, a private company that conducted military operations in Iraq. In it, Erik said that Entrepreneurs Are Made Not Born inspired his own entrepreneurship.

Spy Recent news events show that the spy agencies, from the CIA to the NSA, are constantly being reinvented. I do not have any personal knowledge about the spy business. Besides, even if I did and told you, I would have to kill you. :)

A Place In-between, Commentary by Lloyd Shefsky

Brigid Sweeney, in her insightful article, "Please Don't Call Them Stores: Modern Retailers Aim to be Hangouts,” appearing in Crain’s Chicago Business, provides local examples of how retailers are focusing on providing "a place in-between" and customer entertainment, such as including experiential happenings. Nowhere is the importance of a place in-between laid out more clearly than in the story of Starbucks, both at its inception and later, during its reinvention in 2008. Even when I first met Howard Schultz and interviewed him for my first book, Entrepreneurs Are Made Not Born, I referred to Starbucks as a club, much like the bar on "Cheers," where the opening song proclaimed "a place where everybody knows your name," reminiscent of the way Starbucks taught baristas to know frequent customers’ names and even their favorite beverages. In my latest book Invent Reinvent Thrive (McGraw Hill, 2014) I explain how Howard's clear understanding of that essence of the business (what he refers to as "the company’s soul”) enabled him to avoid the near catastrophe in 2008.

Similarly, in Invent Reinvent Thrive, I tell the stories of Jim Sinegal, founder Costco, and Maxine Clark, founder of Build-a-Bear, both of whom believed in customer entertainment and experiential events in their retail businesses, much as those mentioned in Brigid Sweeney 's article.

As I said in Invent Reinvent Thrive, “Jim Sinegal decided he’d better reinvent Costco, at least partially from time to time, lest his stores…become uninteresting. He decided to add new items periodically. He constantly reminded himself and his colleagues, ‘There’s no annuity [here]. You’ve got to continually add stuff that’s new and exciting. Otherwise you become boring.’” Likewise, I quote Maxine Clark in Invent Reinvent Thrive: “At the May Company, she was fortunate enough to make a presentation to Stanley Goodman, May’s chairman. He told her that ‘retailing is entertainment and the store is a stage. When the customers have fun, they spend more money.’ His words made an indelible impression on Maxine.”

Brigid is right on!

Reinvention in Family Enterprises to Stay Relevant Into the Future

The interview with Ford Motor Company Chairman, William Clay Ford, Jr, in the October 2014 McKinsey Quarterly, describes the sort of reinvention family enterprises need to stay relevant into the future. Bill Ford gets it. While his great grandfather, Henry Ford, may have invented their family business with its then unique method of mass assembly of cars, the company has been reinvented numerous times under the guidance of successive family leaders, which is why it continues as one of our great, successful and enduring family (controlled) businesses. Numerous more recent reinventions are directly attributable to the influence and leadership of Bill Ford. Now, he suggests that Ford redefine its mindset to be a "mobility" company, which is broader than only cars and trucks. Bill's prediction of driverless Fords within a decade may be accurate, but the Ford company's continuous reinvention will require a driver, with leadership like Bill's, for the company to continue as a successful family business. Here is the interview from the October 2014 McKinsey Quarterly:

William Clay Ford Jr. is known for taking the long view. The great-grandson of Henry Ford and the executive chairman of Ford Motor Company, Bill Ford was an early advocate for sustainability at the company, which earned the number-one spot on Interbrand's list of Best Global Green Brands in 2014 and also has been improving its competitive position. But to navigate through the coming years, Ford must travel in uncharted territory. Today's automakers confront developments that will affect the industry for decades: swelling megacities, self-driving vehicles, new technology challengers, and digitally connected cars—among others.

In September 2014, Ford sat down with Hans-Werner Kaas, a director in McKinsey's Detroit office and a leader of the firm's Automotive & Assembly Practice, and shared his views on disruptive trends throughout the automotive industry, his perspectives on leadership, and the opportunities he sees for the city of Detroit. The interview took place in Ford's office at the company's headquarters, in Dearborn, Michigan.

The Quarterly: There are a lot of forces converging in the auto industry right now, including urbanization in emerging markets, powertrain electrification, emissions concerns, and trends toward active safety systems, semiautonomous driving, and vehicle connectivity. Is it an understatement to call this an interesting time?

Bill Ford: The pace of change is accelerating and I love it. I think it's the most interesting time in my 35 years at Ford. It used to be that the auto industry, and the car itself, were part of a self-contained ecosystem. If there were breakthroughs, they were developed within the industry. It was a much more controlled environment and not nearly as dynamic as today's. In fact, I think we ended up being rather insular as an industry, and on balance it was not a good thing.

That's all been turned on its head; we now have disruption coming from every angle, from the potential ways we fuel our vehicles to the ownership model. We have a whole generation that just wants access to vehicles as opposed to ownership—for example, through services such as Uber, Zipcar, and RelayRides. Even the dealership model is changing, with Tesla selling directly to consumers.

In terms of connectivity, so much of the technology is being developed outside the auto industry. Whether it's vehicle-to-vehicle and vehicle-to-infrastructure communication, semiautonomous and fully autonomous driving, or connecting to the cloud—these are all major trends coming at us fast and furiously.

The Quarterly: How do the changes, and especially their disruptive nature and simultaneous appearance, affect automakers?

Bill Ford: The reality is that we will not own, or develop, most of these technologies. So we have to be a thoughtful integrator of other peoples' technologies and understand where we add value. Because if we're not careful, we could become like some mobile-handset makers, where all the value is added by someone else.

One way to distinguish ourselves will be in how we present these technologies to customers, so that they find them appealing and not intimidating. There will be a lot of new technologies that help enhance the driving and safety experience, but some people won't be comfortable with them—they don't want their data uploaded in the cloud, for example. So we'll need to have levels of opt-in/opt-out in our offerings.

Ultimately, we can make the driving experience safer, more intuitive, and more fun. Actually, "fun" isn't something that people talk about when they talk about all this technology. But fun is something that should always be a part of the driving equation.

The Quarterly: Speaking of fun, semiautonomous cars are an increasingly important development today, heading toward self-driving cars in the future. Will that affect our love affair with the car?

Bill Ford: Well, I think we are already seeing a different type of love affair. When I was a child, people could work on their own cars easily. They would wax them in their driveways. It was a very personal, hands-on relationship. That's evolved over the last 15 years or so as more technology has come into vehicles and cars have gotten more sophisticated. But the fun of driving is still there. And as we look forward to autonomous driving, it certainly—if done correctly—can have profound safety implications. The elderly wouldn't have to give up their driver's licenses as early as they do today. Drunk driving could be a thing of the past. There are a lot of really positive things that come with it, and I'm excited by it. Still, I am also a little bit nostalgic, because I love to drive. I even like a manual transmission, though I may be a throwback.

The Quarterly: When should we expect those transformations to happen?

Bill Ford: There are a lot of bold, singular predictions. I take a more relaxed and holistic view. I think a lot of the required elements will go into vehicles over the next two, three, or perhaps five years. Yet by the time we actually get to full autonomy, it will almost feel like an anticlimax because we'll have been 95 percent of the way there already. That last 5 percent, though, will be interesting, and no one really can predict when it will happen. We'll need a lot more certainty than we have today before cars can be fully autonomous, and we'll need redundancies in these systems.

There are elements already in place. I recently drove up to northern Michigan on Interstate Highway 75. I put on the adaptive cruise control, comfortable knowing that if the car in front of me decelerated quickly, my car would act immediately to keep the gap I'd set. I found that a really useful tool. We'll keep adding more of these features, so that the final steps to full autonomy will feel almost uneventful. I think the technology will be ready before society and lawmakers are.

The Quarterly: How will connectivity affect the equation? Will there be a battle between our mobile devices and what is embedded in the vehicle?

Bill Ford: It's true that people want to bring their lives—in the form of their phones and their iPads and whatever else they carry—into vehicles in a seamless way. And that's happening to some extent now. But we can't distract the driver with too much going on. Those are the kinds of things we're thinking through and must think through as an industry. It's the same with vehicle-to-vehicle communication: it doesn't do any good if Ford vehicles can talk only to other Fords. Even though we have a lot of competitive issues, we have to have a standard, and that's something we are working on as an industry.

I think all vehicles have to be part of an integrated network, and every form of transportation has to be talking to the others, so that we can optimize our way of moving around. For example, very soon our cars will be able—through sensors and technology—to be notified when a parking space opens up and then to pre-reserve it for us and have us billed directly, through an app. Things like this will start to redefine what urban mobility means.

The Quarterly: What's the right balance between individual mobility and more holistic transportation systems, especially in light of accelerating urbanization and the development of megacities?

Bill Ford: I talked about this a few years ago at a TED conference,1 where I used the phrase "global gridlock," which is exactly where we're headed. It's a fallacy to look at the GDP growth in emerging markets and say, "Wow, isn't this great?" and then to extrapolate some absurd number of vehicle sales ten years out, with no thought of "Really? Where are these cars going to go?" The roads already are impassable in some emerging markets, and they don't have the proper infrastructure. You're not going to put two cars in every garage in Mumbai, for example, even if residents there can afford it. Given how disproportionately quickly the world is urbanizing, we are going to hit the limits of our ability to provide mobility unless we adopt a very different profile going forward.

It's already happening. In most cities, if people have a car, they love their car and hate everybody else's. And they are paying a fortune to just keep the car. In many cases, they have to pay a fee to get into a city center or can only go in on odd or even days, depending on the license plate. Lots of cities are trying to deal with this in different fashions, but those aren't long-term solutions. Those are Band-Aids. Today, 30 percent of all fuel burned in cities comes from cars looking for a parking spot. And that's not only fuel. That's time, that's aggravation.

When I gave my TED talk, people were shocked. They said, "Wait a minute. What I just heard you say is you're going to be, potentially, selling fewer cars in the future." And I told them that's exactly what's going to happen unless we start doing something differently and redefine ourselves as a mobility company and not just as a car and truck manufacturer.

The Quarterly: What does it mean to be a mobility company?

Bill Ford: The role of a traditional automaker changes dramatically. We become a piece of the mobility ecosystem. In this new world, we need to figure out what we have to own and what we don't and to be a great integrator of technologies and services. We need to figure out who are friends, who are foes, and how do we turn our foes into friends.

I was speaking at a conference, several years ago, where I met Scott Griffith, then-CEO of Zipcar, which was relatively new at the time. I told Scott that I'd love to talk to him, and he said to me, "Didn't you hear my talk about taking cars off the road?" And I said, "Yes, but it's going to happen with or without us, and I'd like to have it happen with us." So we've now gone together to over 250 college campuses—Ford and Zipcar—and it's been a great partnership because students are influenced by what they drive in Zipcar, so when they leave school, we become a car of choice. It's a win–win.

The Quarterly: Do you regard new or nontraditional players—such as Tesla, Google, or Apple —as welcome disruptors, partners, or foes?

Bill Ford: We have to make them all our friends at some point, and they may not all start out that way. But we need to be exceptionally curious as a company. We have to know how to interact with those companies because they speak a different language; they're on a different cadence. They often have a different customer experience. Another big challenge is just keeping abreast of who these players are. The disruptors are being disrupted themselves on a regular basis. We need to be accessible, so that all these companies feel comfortable approaching us. It's not a muscle that we've developed over the years, but we are doing that now and we need to continue to do it.

The Quarterly: How do you foster curiosity and accessibility while also focusing on your core business?

Bill Ford: There's an interesting balance that has to take place, because we need to be open to and excited by the disruption happening everywhere. But we can't be distracted by it, because we have a daily business to run. We have to deliver a quality product, which requires attention to detail; we have to meet all the regulatory requirements. And so what Mark Fields2 and I are talking about is the appropriate level of distraction. I think companies and their leadership need to understand the intensity of the disruption that's taking place in our industry. We need to have an initial point of view on these disruptions. We need at least enough knowledge internally to be able to interact with these companies externally. I'm sure these very questions that we're grappling with are being grappled with throughout our industry. But I think our family ownership and the way we're organized allow us to take a longer view.

The Quarterly: You have been both an executive chairman and a CEO. What are the benefits of separating the roles?

Bill Ford: I've actually had three jobs. I've been nonexecutive chairman, I've been CEO, and then I've been executive chairman, so I've really lived the spectrum. And I love this construct because it allows me to use my knowledge of this company to think about where it can and should go in the future in a way that I could never do as CEO.

Just by definition, Mark's share of mind has to be more focused on the immediate pressures of being a CEO and running the day-to-day business. A problem arises this morning; it's got to be solved immediately. Still, this separation has to be a partnership. I can't be off in an ivory tower with a stack of books thinking about the future, and Mark can't be completely disengaged from what I'm doing. We spend a lot of time just talking and making sure we're on the same page and moving forward in lockstep, although at times concentrating on different issues.

The Quarterly: How do you view a leader's role with respect to engaging the company on broader societal issues?

Bill Ford: I think you've got several roles. You have to be an advocate for positive societal change within your company. I've pushed the environmental movement for 35 years within Ford. I met with tremendous resistance, both within the industry and my company; even the environmental community initially thought I was a wolf in sheep's clothing. But I continued pushing.

Leaders also have an important role in their communities. People are very busy, and we can all find reasons not to get involved, but our communities need us. As leaders, we have, hopefully, some brain power, we have connections, we have resources. And we should bring those to bear to make our communities better places—whether that's schools or hospitals or helping with social issues like homelessness and hunger. Find the thing that resonates most—but whatever it is, do it and set the example. And, usually, what comes back to you in terms of goodwill is ten times what you put into it.

The Quarterly: What is your outlook for the community of Detroit?

Bill Ford: I remember the 1967 riots in Detroit. I was ten years old, and I remember the city in flames. We had many years of decline: population decline, economic decline. And now—it seems strange to say as we sit here today with the city in bankruptcy—I've never been more optimistic. The economic equation taking place in this city is unlike anything I've seen, whether it's start-ups coming into the city, established companies moving back to the city, or young people wanting to live in the city. I believe that when we do exit bankruptcy, there's something to build on now. Lots and lots of work to do still, but I'm the most hopeful I've been in my adult lifetime.

About the authors: This interview was conducted by Hans-Werner Kaas, a director in McKinsey's Detroit office, and Thomas Fleming, a former member of McKinsey Publishing

Yelling "Fire" in a Crowded Family

The recent WSJ article, “"How Do You Fire a Family Member?"” by Veronica Dagher, made some useful suggestions, e.g., have private conversations with the problematic family member ("PFM") and don'’t create any scenes in front of non-family employees. The article had an intentional limitation, as it was focused on events after-the-fact, i.e., after whatever might precipitate a firing. I would urge that such problems can be avoided, or at least minimized, with proper preparation, i.e., taking the right steps before-the-fact. A few such steps are:

1. Establish standards and rules of behavior. If all family employees are fully apprised, before they are hired, of the expectations and the consequences of errant behavior, it reduces the likelihood of there being PFMs, as well as the occurrence of adverse reactions. Similarly others—namely, non-employee family members and non-family employees—who are often affected by PFM problems, will be more accepting of outcomes if informed in advance of expectations and consequences of misbehavior.
2. Develop the infrastructure and procedures to help prevent family member employees becoming PFMs and to deal with problems at the first signs of trouble and continually thereafter. This may include internal assistance from non-family executives, who should be trained to deal effectively, and where appropriate, outside coaches and consultants.
3. Establish procedures, up front, for dealing with problems when they arise, to assure actual and perceived fairness and to reduce embarrassment.

The above is but a partial list, intended as examples.

Some may feel that doing the right things before-the-fact may constitute a waste of precious time and money. In the long run, however, they help prevent and reduce otherwise exorbitant costs of solving problems. And those costs are no’t just monetary. They include negative impacts on non-family employees, with resulting inefficiencies and loss of good people, as well as complications in and even destruction of family relationships.