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There was once a time I could look at a forest and I could see the trees. I always knew the stream was on the other side and the snowcapped mountain was there. But I had to look through a lot of trees. And now I only see a couple of trees.” Bill McDermott, chief executive of software company SAP, is talking about how the 2015 accident in which he lost an eye has actually sharpened his business vision.
“I go right to the stream and the snowcapped mountain. And I think that I am living proof that vision is not just what you see,” he told CNBC’s “The Brave Ones”.
Speaking in depth about the accident, McDermott described the moment when he fell down the stairs at his brother’s home while carrying a glass of water.
“I wake up from the fall down the stairs. I was knocked unconscious. This large, thick, giant water glass ends up breaking and becoming a part of my anatomy. And the damage that glass that goes through your skin and face can cause is pretty earth-shattering.”
McDermott managed to get out on to the driveway of the house to call for help, in spite of his body wanting to shut down. “And there's a moment where your mind is very interested in protecting you and it basically says, you know, ‘lay down.’ You know, ‘go to sleep. You'll be all right, you’ve done enough’.”
“And then your will steps in and says: ‘No, no, no. You got a wife and kids that you love. You got a lot of friends. You got 85,000, at that time, women and men (employees at SAP) that you care about (and) that care about you. This is not where your story ends’,” he said.
Nine hours of surgery saved McDermott’s life, but it could not save his left eye. “I lost that particular battle. But I won a bigger one. People say, you know, that had to be unbelievable. I think I was in … 11 or 12 surgeries by the time it was all done.”
So keen was McDermott to get back to work that he joined the executive board’s extraordinary meeting little more than two months after the accident, on September 10, 2015. “My accident has given me so much strength, so much resolve, so much passion. And I just feel like that 21-year-old kid bopping around Manhattan. And I just can't wait to get up tomorrow morning, too, and do it all over again.”
The 21-year-old McDermott famously went to Manhattan in a $99 suit, traveling from his home in Amityville, Long Island to an interview at Xerox. The house had flooded that day. “My brother Kevin put me on his shoulder, carried me in the street so I wouldn’t get the (suit) pants wet. And I got out of the car and I told my dad, I guaranteed him I would get my job at Xerox that day.”
Bill McDermott is born to parents Kathleen and Bill, a cable maintainer, in Long Island, New York.
Aged 16, McDermott buys a local delicatessen, taking business from a nearby 7-Eleven.
Joins Xerox as a sales person, after persuading his interviewer to give him the job on the spot.
Assigned to run Xerox Puerto Rico, the company’s poorest-performing region.
Becomes Xerox’s youngest corporate officer, joining its executive board aged 36.
Leaves Xerox to become president of Gartner
After a brief stint at Siebel Systems (acquired by Oracle in 2006), McDermott joins SAP to run its North America operations
Becomes SAP’s joint CEO with Jim Hagemann Snabe
Hagemann Snabe announces he will step down, and McDermott will become sole CEO. SAP’s share price was down 1 percent that day.
McDermott becomes sole CEO of SAP. Share price closes up at $75.53.
McDermott publishes “Winners Dream: Lessons from Corner Store to Corner Office”.
Loses an eye in an accident at his brother’s home
Joins SAP extraordinary board meeting.
SAP shares hit a record high, valuing the business at 115 billion euros ($131.2 billion)
After several meetings, the young McDermott persuaded his interviewer Emerson Fullwood (now retired) to give him the job on the spot, telling him he’d promised his father he’d come home that night with his employee badge in his pocket, a confidence driven by the desire to work.
“I always wanted to be somebody. Starting out young and having lots of little jobs, whether it's working for the town delivering papers, pumping gas, working in an Italian restaurant, pushing shopping carts at Finast Supermarket. I just always had the desire to work. I loved work. And I loved improving my status and being in control of my own destiny. And I always had that spark,” he said.
The jobs he had as a teenager set the stage for the rest of his life as a highly successful salesperson. Aged 11 he had a newspaper route and more than doubled his customers by delivering the papers exactly how people wanted them. “Most people asked for it in the mailbox, but older folks preferred it between the screen and the door,” he wrote in his 2014 autobiography “Winners Dream, A Journey from Corner Store to Corner Office”.
At 15, he got a better-paying job at a supermarket. After waiting in line for an hour to apply, he spotted the manager Jack Kelly, and went right up to him, shaking his hand and saying: “I just want you to know that I waited in line for the last hour to submit my application because I really want to work here,” he wrote. He got paid around $2.30 an hour, and took on extra jobs as a handyman and as a waiter at a fancy Italian restaurant.
Aged 16, he bought the Amityville Country Delicatessen in Long Island for $7,000, getting his first orders on credit and putting in video games to beat off competition from the 7-Eleven down the street, which only let high school kids in four at a time. He won out because he gave customers what they wanted, and the business was successful enough to pay for his college education. “What the little one has to do is figure out what the big one either is structurally unable to do because the rule book says you can't, or they're unwilling to do because they don't have that entrepreneurial spirit,” he told “The Brave Ones”.
Ithink it would have changed the course of history at Xerox if he stayed.” Anne Mulcahy, a former Xerox veteran and previous chair and chief executive of the company, told “The Brave Ones” what might have happened if McDermott fulfilled his dream of becoming CEO of Xerox.
McDermott started his career there as a sales rep in 1983, having gone the extra mile in convincing his future boss that he was the right person for the job. His determination was to be a feature of his career at Xerox, as he explained in a 2014 LinkedIn post. “When I went after my first sales management position, I competed with more experienced applicants. I knew the hiring manager (also my future boss) was ambitious and liked to win.
“So I went into my interview with a 100-day plan that explained the steps I’d take to turn my future sales team into the top new-business sales team in the country. I promised to make us number 1. Apparently, the other applicants didn’t have a plan or a goal. She gave me the job,” he wrote. Another time, McDermott did not make a promotion but went to meet the hiring manager to get feedback so he could improve.
McDermott’s career flew: He became Xerox’s youngest corporate officer aged 36 and worked out a way to scale his success once he’d risen up the ranks. He made documents – the currency of the company – desirable. “The Great Document Hunt” saw his Chicago sales force help customers identify the most important documents in their companies, such as new business proposals or contracts, and then work out which ones caused bottlenecks or reduced productivity, and look at how Xerox could help.
But ultimately, McDermott was too concerned about the future to stay. “The world outside Xerox was changing,” he wrote in “Winners Dream”. “The New Economy, buoyed by the internet, was booming as investors threw millions at anything that smelled of innovation … Was Xerox a stodgy grandparent at a young person’s party? Was I crazy for staying?”
Eventually the corporate culture became too much, and he wanted to be in control of his own company, and his own destiny, and eventually found his personality didn’t fit. “In my thirties, a colleague told me to stop using the word ‘passion’ when I spoke to my teams,” he wrote in a February 2015 LinkedIn post.
“Others insisted my enthusiastic communication style didn’t fit in with our staid culture. I wasn’t trying to stand out — I was just being me. While I did tone it down at times, squelching my expressive nature would have meant abandoning my voice.”
That voice has always been important to McDermott. “My mom, you know, she always told me that the best part of you is you. Just be you and believe in your dreams. Whatever they are, just believe in them,” he told “The Brave Ones”.
So when the opportunity to run technology research company Gartner came along in the year 2000, he made the jump. “And I said, you know what? I think I'll learn more. And I think it's my chance to be president of a publicly traded company that's in a very important space, thought leadership, the voice of IT, if you will. Let's go give this one a whirl.”
Taking his mom’s advice and staying true to his own voice to McDermott means being somewhat of a showman CEO: He has used grand gestures to motivate staff, such as hiring salsa star Gilberto Santa Rosa for a Christmas party when his Puerto Rican colleagues at Xerox improved their sales, and he counts singer Tony Bennett as a friend.
So how would that showmanship work when McDermott joined SAP North America as CEO in 2002, a German business focused on product engineering rather than sales? It’s a question his former Xerox boss Anne Mulcahy asked herself. “You couldn't have picked someone that would've been more, somewhat shocking from a style … I mean, Bill is kind of an out-there kind of guy. I mean, we all wanted him to be wildly successful. But I gotta tell you, we were all saying, ‘Could this possibly work?’” she told “The Brave Ones”.
German software company SAP (originally “Systemanalyse und Programmentwicklung”, or System Analysis and Program Development) was founded by five former IBM employees in 1972. In 1998, it debuted on the NYSE and Bill McDermott joined in 2002 to run SAP North America. He was promoted to co-CEO in 2010, helping the company to four consecutive years of double-digit growth by 2013. He was promoted to CEO in 2014 and the firm is now one of the world’s largest software companies, with more than 350,000 customers in 130 countries.
McDermott was aware of the cultural differences. “When I present to a U.S. audience, I try to inspire them quickly, get them engaged right from the beginning,” he wrote in Harvard Business Review last November. “With a German audience, I need to be more fact based up front and have a more disciplined presentation style to build a case, almost as if I were in a courtroom. I also find that many business cultures appreciate a clearer acknowledgment of problems than U.S. audiences want.”
Adapting to the culture helped SAP’s North American operation back to growth and McDermott was given more markets to oversee, including Asia-Pacific and Latin America, before becoming president of global sales and co-CEO with Jim Hagemann Snabe in 2010 and then sole CEO in 2014. But McDermott - the young deli-owner who won customers from the incumbent 7-Eleven by virtue of being smaller and more nimble - arguably now has the opposite challenge on his hands.
SAP is an organization with more than 85,000 employees in over 130 countries, and its customers are facing an “intense maze of circumstances,” according to its 2016 annual report, meaning that the business must be agile enough to serve them.
Those circumstances include a sense that fund managers have to “adapt or die” when it comes to the digital world as well as the growing complexity of business in general and the impact of artificial intelligence in particular.
“SAP is probably the embodiment of what I would term legacy systems, this old clunky world of ERP (Enterprise Resource Planning software), (a) huge investment but incredibly difficult to change,” says analyst Tom Reuner, a senior vice president of Intelligent Automation and IT Services at HfS Research.
“If I look at the priorities of most buyers of most organizations, they’re looking to … move from (the) concrete world of ERP to (a) much more flexible way of engaging.”
Having a CEO from the U.S. has helped SAP have a more global view, said Reuner, who remembers McDermott when they both worked at Gartner. “A lot of German companies struggled over the years to become more global and almost to shed almost their German DNA and embrace a lot more global mindset. For me, SAP has embraced that, and somebody like Bill, it’s probably his point of reference is more a global one than anything else.”
McDermott started his sole tenure at SAP by shaking up his executive team (standard for an incoming CEO), with the business appointing chief technology officer Bernd Leukert and chief financial officer Luka Mucic (who replaced Werner Brandt after his contract ended in June 2014), before introducing business “suite” SAP S/4 HANA, its most advanced management software.
SAP had been slow to move into the cloud, said Reuner, but after making the shift with acquisitions such as procurement software company Ariba in 2012, the first quarter of 2017 saw it sell more subscriptions than expected, with new cloud bookings increasing by 49 percent to 215 million euros ($244.9 million) and shares hitting a record high.
Now the challenge is all about AI (artificial intelligence), even though it is still nascent, Reuner said. “The people I’m talking to think that AI has the potential to fundamentally rethink or transform those enterprise architectures (such as SAP) … If you make comparisons (with) something like Microsoft, also grappling with their own legacy issues, but they are embracing AI, they have (digital assistant) Cortana, so they are embracing it much more,” he said. While likening Microsoft to SAP is not a one-to-one comparison, both companies are grappling with the future of technology, and Reuner argued that Microsoft is ahead in terms of “embracing the next paradigm.”
Rumors about a possible acquisition of SAP have circulated, Reuner said, including by Microsoft, which held initial merger talks with SAP back in 2004. SAP is an attractive target, he added, given its board-level access to buyers of its products as well as the technology itself. For now, the two might be called “frenemies”, with the two companies long partnering and SAP integrating its Hana platform with Microsoft's Azure in 2016.
McDermott’s achievements at SAP are undeniable, but he still feels a little like the runner up, he told “The Brave Ones”. Is he an underdog or an overachiever? “I love that I was and still feel endlessly like an underdog. Because it keeps you humble to remember where you came from. And it keeps you hungry because if you stopped thinking like an underdog, anything you have achieved can and will be taken away from you if you neglect your responsibility to keep it.”
Writer: Lucy Handley
Design and code: Bryn Bache
Editor: Matt Clinch
Executive Producer, The Brave Ones: Betsy Alexander
Producer, The Brave Ones: Mary Hanan